Multinational pharmaceutical companies’ buyout strategy in India is being shifted slowly from companies to popular over-the-counter (OTC) brands. The new entrant in the buyout market for OTC brands is one of the largest European players — Boehringer Ingelheim GmbH (BI).
According to senior officials of the company, the $ 17-billion German drug maker is scouting for acquiring major OTC brands, and has already started early stages of discussions with Indian drug makers. According to industry estimates, the OTC drug market in India is worth $1.5-2 billion and is growing at 15-16 per cent per annum.
“We are evaluating various options, including brand buyouts, to establish a strong presence in the OTC space. We are in discussions with a few companies,” said Sharad Tyagi, managing director of Boehringer Ingelheim India.
He, however, refused to disclose any details. “We have not fixed any target, but looking at what are available in the market. We are interested in areas of consumer health care and pain management.”
Tyagi made it clear that BI is never interested in company buyouts in India. “BI does not believe in buying growth by buying turnover, which is evident from the fact that there have been no large, expensive acquisitions.”
Under prescription medicine, BI sells drugs of therapeutic areas, including cardiovascular, neurology and metabolic disorders (type 2 diabetes). BI’s animal health business is currently focused on equine feed supplements and poultry vaccines. BI has a total team of about 500 persons In India, including 400 sales persons. Since 2004, Zydus Cadila has been manufacturing and marketing BI’s products in India under a 10-year pact.
For the last couple of years, multinational corporations (MNCs) have been keen on OTC drugs of Indian companies. Krishna Kumar, partner-life sciences at Ernst and Young, said: “The MNC interest in pharma OTC is simply an extension of their interest in branded generics and the domestic consumption theme.”
Last year, in one of the largest deals, JB Chemicals and Pharmaceuticals Ltd signed a Rs 939-crore deal to sell its OTC business in Russia and CIS (Commonwealth of Independent States, a grouping of former Soviet republics) countries to Johnson and Johnson arm Cilag GmbH International.
“OTC products entail expensive brand-building through ‘direct-to-consumer’ promotion as in FMCG (fast-moving consumer goods) products. Building strong brands is a long-drawn and expensive process, which is why there is significant interest in acquiring established brands. The other reason is to gain access to a sales or distribution channel,” Kumar added.
Aventis Pharma Ltd, a unit of France’s Sanofi SA, acquired Universal Medicare’s nutraceuticals business, including popular cod liver oil capsules Seacod, for Rs 500 crore last year.
However, the buyers are worried over the difficulty to find stand-alone OTC players in India of scale. Most of the leading OTC products are held within large pharmaceutical or consumer healthcare companies, barring a few situations here and there, say experts.