Yet again the Indian advantage of a rich pool of English-speaking personnel at low cost proved to be a gold digging opportunity for the Indian pharmaceutical and bio-pharma industry.
This year, Indian pharma majors went on a shopping spree, acquiring foreign majors and sealing out-licensing deals abroad. Foreign majors too plunged into the Indian market through mergers and partnerships.
In fact, the investment between April and October alone stood at $103 million. The highlight of the year has been the Indian interest in the global generics market leading them to successfully create their own space in Europe and now eyeing the US.
Utkarsh Palnitkar, partner, transaction advisory services, Ernst & Young explains, "Gaining a presence in Europe is imperative for Indian pharma majors to leverage their competitive advantage. Acquisitions in the US have been fewer given the relatively higher valuations."
One of the biggest overseas acquisitions was Dr Reddy's buyout of Germany's fourth largest drug company, Betapharm for Rs 2,250 crore (Rs 22.50 billion) followed by Ranbaxy's acquisition of Romanian pharma company, Terapia for Rs 1,145 crore (Rs 11.45 billion).
Other prominent acquisitions that hurtled Indian presence in Europe to another level included Wockhardt's acquisition of Ireland's Pinewood Laboratories, Matrix Labs acquiring Belgium's Docpharma and Dishman Pharma's buyout of Britain's Synprotec Limited.
Slated to experience a growth between $85 billion and $95 billion by 2009, the global generics market offers tremendous potential for Indian companies.
In keeping with the general industry trend, Indian pharma attracted huge FDI, especially in contract research and manufacturing space, largely due to the amendment to the Patents Act in 2005. The amendment reinstilled the MNCs' confidence in the domestic pharma industry since it provides protection to their intellectual property rights.
Reporting a year-on-year growth of 7.2 per cent, the Indian pharma industry is ranked 13 in terms of value and fourth in terms of volume. Towards the end of the year, two major deals that came through were the Advinus-Merck deal and Shantha-Merieux deal.
In its first research-based collaboration in India, the US-based Merck & Co entered into a drug discovery and clinical collaboration with Advinus Therapeutics, the Tata-backed drug research and contract services company.
Under the terms of agreement, Advinus will receive an upfront payment and could potentially receive milestone payments up to $74.5 million for each target included in the collaboration.
In another deal, French biotech major Merieux Alliance picked up a 60 per cent stake in Hyderabad-based vaccine company, Shantha Biotechnics. Rekha Khanna, MD, BioMerieux India, says, "When Merieux Alliance was looking at which direction to grow in, in terms of presence, India was the obvious choice. We decided to invest in Shantha since there was a lot of synergy in our activities."
The coming year promises to uphold the acquisition spree. Hitesh Gajaria, partner, BSR & Co, KPMG predicts, "Many global generics players will look at India as a key component of their value chain for manufacturing and at the same time, Indian players will continue their acquisition spree to consolidate and increase their presence in the global generics market."
Since legal hassles are major barriers in the Indian pharma growth in the US, companies will adopt business strategies based upon co-optitive approach for drug discovery to strategic sourcing to divesting of manufacturing assets with a buyback business.
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