Large merger and acquisitions back in Indian pharma
November, 07th 2017
The Rs 3600 crore acquisition of Unichem's domestic business by Torrent Pharma has brought the mojo back into India pharma's merger and acquisition scene, which was eluding large deals in the past few years.
Concerns related to the US market, which contributes major revenues for most of the leading firms, increasing regulatory concerns and price controls in the domestic market were forcing drug majors to be cautious in jumping into big deals. The struggle of leader Sun Pharma to digest its biggest acquisition, Ranbaxy Laboratories, also made drug firms cautious in executing large M&As.
Sun and Ranbaxy had merged in February 2015 in a cashless share transaction worth $3.2 billion, after an year of announcing the deal. Thereafter Indian pharma was not witnessing any large mergers.
Indian drug firms' domestic business was always an attraction for multinationals to get a footprint in India. In the largest ever transaction so far, Ajay Piramal had sold his formulation business to Abbott for nearly Rs18,000 crore in 2010. Three years later, Strides Arcolab had sold its subsidiary to Mylan for about Rs 10,000 crore. In the same year, Torrent made a Rs 2000 crore acquisition of some attractive local brands belonging to Elder Pharma.
A recent data from Grant Thornton Advisory says there were only 27 M&A deals in pharma and healthcare sector so far in 2017, valued at $719 million, compared to 54 deals valued at $4.7 billion in calendar year 2016. (After this report, Lupin acquired Symbiomix Therapeutics for $150 million and now the Rs 3600 crore Torrent-Unichem deal happened).
Two of the largest acquisitions so far this year were Piramal Enterprises' buyout of Mallinckrodt's certain drugs for $171 million and Aurobindo Pharma's acquisition of Portuguese firm Generis Farmaceutica $142.5 million. Leading drug firms like Sun Pharma, Lupin, Zydus Cadila, Aurobindo etc. are searching for acquisitions in the specialty segment in the US market and brands or firms like Unichem in the domestic market, say investment bankers. Most of the leading firms are sitting on cash, but scrutiny is intense now due to experiences in the past. High valuations are also a roadblock in many deals, they say.