Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: form 3cd :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: due date for vat payment :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: VAT RATES :: empanelment :: VAT Audit :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: cpt
Mergers and Acquisitions »
 Indian chemical industry: Will M&A be a game changer?
 Samsung to continue seeking mergers and acquisitions
 Deals of the day-Mergers and acquisitions May 18, 2017,
 Forced mergers, sacking on cards as RBI gets tough with misfiring big banks
 Why India Inc is on an M&A spree, preferring inorganic growth to investing in fresh projects and capacities
 Banking consolidation 2nd wave: FinMin sees room for 3-4 more PSB mergers
 Ministry of Corporate Affairs (MCA) notifies the provisions of cross-border mergers and acquisitions
  GAVS Tech eyes to double revenue from mergers & acquisitions
 ACC, Ambuja Cements evaluating merger
 News Corp VCCircle Mergers & Acquisitions Summit 2017
 A new merger control philosophy

What's driving mergers and acquisitions in pharma industry?
October, 01st 2015

The popular saying ‘United we stand, divided we fall’ is a popular phrase which signifies various aspects of coming together for a common goal or a purpose. This has been a recurring feature for the global pharmaceutical industry as well. As pressures on drug manufacturing, research and development and regulatory aspects have been on the rise because of the competitive business environment in the last decade, the pharmaceutical industry worldwide growth has reached a saturation point.

Avenues for growth have become limited because of declining prescriptions of branded drugs and advent of generic drug products. Further governments of North America and Europe are forced to squeeze their healthcare budgets to the larger masses with cost effective generic products. Branded drug products of the larger pharmaceutical companies face price increases to cover up for the declining margins. All these factors contribute to the rising merger and acquisition phenomenon in the pharmaceutical industry.

Analysts believe that merger and acquisitions are not able to create the value as desired for the merged organisation as they are perceived as source of disruption for the ongoing research and development programmes as well as other critical initiatives. However, the overall benefits of the merger and acquisition strategy supersedes the disruptions at all points. According to analysts, the mergers are critical for the long terms benefits of the pharmaceutical industry and for their short and long term survival. The global pharmaceutical landscape is like a big ocean where the larger fish eats the smaller fish for its survival. In an identical manner, the ecosystem of the pharmaceutical industry works as well.

Indeed, most of the pharmaceutical companies which have stayed in the top 20 between 1995 and 2005 have been involved in mega mergers. Analysts classify ‘mega mergers’ as deal value and size crossing $ 10 billion. The real impact of mega-mergers can be analysed from the years 1995-2011, where all deal size greater than $ 10 billion can be been considered as the forces shaping the pharmaceutical landscape.

Rashmi Pant Rashmi Pant According to analyst calculations, mega-mergers enhance overall shareholder value and contribute in aggregate terms to the large share of revenue in the total merger to an extent of nearly 40 percent in the existing product portfolios and to nearly 20 percent in the new product portfolio. Post the merger of the companies, there is an increase in the economic profit of the merged company and a lean cost structure. It has been observed that the economic profit of the merged company continues to rise at a steady pace in the range of nearly 50 percent post 2 years of the merger.

Most of the merger deals in the phase of 1995-2005 have been aimed at consolidation and growth orientation. The consolidation deals have been always been focused towards profit in the long term for the acquiring company on account of overlaps with the acquired company. The growth oriented deals have been focused at newer markets and have created newer companies have always contributed to lesser economic growth primarily because they have been investment oriented and have been under the pressures of the creation of a ‘new’ strategy.

Some significant examples of consolidation oriented merger and acquisition deals was the Pfizer acquisition of Warner-Lambert which was announced in 1999 which gave significant mileage to its shareholders. All mergers have not been necessarily profitable for big companies like Pfizer. This is evident in the Pfizer Wyeth merger. The Wyeth portfolio contributed insufficient incremental on-market revenue growth and new-product launches to offset patent expiration could not yield the much expected revenue growth.

Some mergers create a new company, while others involve moving into new markets (example, Sanofi and Genzyme deal) or geographies (like in case of Takeda and Nycomed).

Another example of a profitable consolidation is the takeover of Genentech by Roche. Genentech remained a standalone unit with a 4 percent annual growth rate even after the complete takeover. Genentech before its acquisition by Roche had a significant research and development focus and maintained a rich phase III clinical trial pipeline.

Recent trends: No more the $ 10 billion factor
Figure 1: M&A deal sizes in 2012-2013 Figure 1: M&A deal sizes in 2012-2013 In the current scenario, mega-mergers are aiming to create a new growth platform, but they are also more expensive for acquirers and generate lower cost synergies given limited operational overlaps compared with consolidation deals. Figure 1 shows the deal sizes in merger and acquisitions in pharmaceutical, biotech, medical devices and other areas, across the world in the years 2012-2013.

Smaller deal sizes mark the global pharma merger and acquisition market particularly in the range of $ 10 million-US $ 100 million. The geographies which dominate this deal size value fall mainly in the North America and Western Europe. North America (31-33) and Western Europe (25-32) have a nearly equivalent deals size number in key deal size ranges of $ 100 million- $ 1 billion and $ 10 million – $ 100 million. China appears as a significant geography with 47 merger and acquisition deals announced in 2013 for the deal size range of $ 10 million – $ 100 million which is also higher than both North America and Western Europe in the same deal size. North America, Western Europe and CEE are featured in the geographies where the deal size is not disclosed post the announcement of the merger.

Growth rates of the overall pharmaceutical merger and acquisition market in 2013 has been nearly 35 percent and the market drivers for these have been the large volume of small deals in the deal size range of less than $ 10 million which have grown at the rate of 56 percent in 2013 (over 2012). China and CEE contribute as emerging geographies to the ‘evergreen’ merger and acquisition markets in the small size and unknown deal size categories.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
E-catalogue online catalogue E-brochure online brochure online product catalogue online product catalogue e-catalogue Indi

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions