The New Year has renewed a strong buzz of mergers and acquisitions (M&As) in the domestic Pharmaceutical and Healthcare sector after a lull of three years. The speculation on deals, both inbound as well as outbound, is gaining momentum this year, with Big Pharmaceutical — flush with cash — realigning focus on emerging markets as it needs to fill in the gaps left by patent expiries of blockbuster drugs. The domestic industry, with a comfortable cash flow, may also seek an inorganic route for growth.
The announcement of drug pricing policy in December, which provides the long-awaited clarity on the sector, will also serve as a driver.
Says Ram Bhushan Kanumuri, director, head of M&A, Barclays India, "We believe certain events like resolution of the long-awaited pricing policy will re-rate the sector. Limited clarity on this has impacted inbound interest in the recent past. Inbound activity has been muted in last two-three years, but we see that picking up with recent revival of dialogue. As we approach the end of the biggest-ever patent expiration year in the US, we believe players will once again realign focus on emerging markets like India".
Barclays recently advised Claris Life sciences on its $250-million joint venture with Otsuka and Mitsui's for IV solutions in India and emerging markets.
Globally, Big Pharma is believed to be on an aggressive buying spree as it scouts for ways to augment revenues and a sluggish drug portfolio. "We continue to see an increasing level of dialogue with foreign clients on Indian assets. We see some momentum from foreign players who are either keen to consolidate domestically or looking to enter India. For international majors, there is a greater focus on ability to derive synergies, minimise product overlaps and leverage Indian products and platform for international markets.
On outbound, generic cliff, pricing pressures and learning from competition, driving scale through M&As is encouraging a shift in the strategies of Indian players who are increasingly becoming aggressive on offshore opportunities," he added.
The flurry in M&A activity expected this year follows a trend of a couple of deals which kicked off in late 2012. In their pursuit of growth, domestic players also are expanding their footprint outside India. Recent examples include Sun Pharma's acquisition of DUSA in US, Cipla's majority stake acquisition in Cipla Medpro in Africa, and Dr Reddy's acquisition of Octo Plus in Europe.
Source: Times of India 12th January, 2014