|
| Piramal deal will give Abbott India size |
| Ram Prasad Sahu / Mumbai May 22, 2010, 00:37 IST |
|
Abbott expects the Indian subsidiary to quadruple its sales to Rs 11,200 cr by 2020.
US-based pharmaceutical multinational Abbott expects its 69 per cent-owned Indian subsidiary to quadruple its sales to Rs 11,200 crore by 2020, riding on the growth prospects of the branded formulations business of Piramal Healthcare.
The US giant’s acquisition of the fourth largest Indian formulations company by volume for Rs 17,000 crore would catapult it to the number one formulation player in the domestic market, with a market share of seven per cent.
The acquisition, which adds 350 brands to Abbott India’s portfolio, is the fifth major deal in the Indian pharma space, the others being Daiichi Sankyo-Ranbaxy, Matrix-Mylan, Fresenius-Dabur Pharma and Hospira-Orchid Chemicals.
Why the deal?
As part of its strategy to move beyond the proprietary or patented drugs business, Abbott recently set up the Established Product Business globally. The business is spearheading the pharma giant’s penetration into emerging market regions. This is the second acquisition for the company over the past year and follows the $6.2-billion deal for the branded generics portfolio of Solvay Pharmaceuticals, which gave it access to the European market. The deal gave the company control of Solvay’s Indian business and added a fifth to its consolidated sales of about Rs 1,000 crore.
Says Sanjay Singh, associate director, corporate finance, KPMG India, “With its regulated markets business growing at two to four per cent and a drying pipeline of patented products, the company is diversifying its risk by betting on branded pharma sales in emerging markets, such as India, which is growing at 13-15 per cent (annually).”
The India foray
Analysts say Abbot would be able to leverage the combined sales force of 7,000 and gain access to tier-3 towns where it was not present. The deal not only gives it 18-20 per cent volume growth but also size. Says an analyst, “With a seven per cent market share (Abbot was languishing at 18, with 2.3 per cent market share and Solvay was at 35th position in the formulation sales pecking order before the deal), a per cent gain in the Rs 40,000-crore Indian market will add Rs 400 crore to your top line. The leveraging potential is immense.”
In addition to the formulation business, the US-based company will also be able to benefit from the introduction of patented products in the country. Analysts say with the share of patented products expected to increase from seven to nine per cent in 2015, the deal would position Abbott to take advantage of both its core and new business. “The new diversified business model of spreading its risk from cash-intensive, R&D-based, innovator drugs to the robust cash flow-generating branded generics will help Abbott in the long term,” says an analyst.
The company is also utilising its presence in the country by outsourcing drug manufacturing and marketing it though its centres worldwide. Recently, it entered into a licensing agreement with Zydus Cadila to market 24 products in 15 emerging markets, with an option to add another 40. Its India focus can also be gauged by the fact that the company had agreed to buy Wockhardt’s nutrition business for Rs 620 crore before legal problems stalled this.
Analysts say Indian pharma could see more mergers and acquisitions: deals are stuck as promoters aren’t happy with what is being offered to them. “Indian promoters know their generic business commands a premium for multinational players. While they are facing pressure on the domestic and international market as Piramal Healthcare was, it is a matter of time before some more sell out,” says one.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
