GSK, Teva in talks to buy Micro Labs' India business

Multinational drug majors, who are leaving no stone unturned in their efforts to strengthen their India presence, are back in the buyout market, scouting for the next big M&A opportunity.

Pharma giant Glaxosmithkline (GSK) and generic player Teva Pharma, are in separate discussions to acquire the domestic business of Bangalore-based Micro Labs. Micro Labs’ domestic sales are about Rs 1,100 crore. Investment banking sources said Micro Labs promoters had asked Nomura to help find suitors.

According to sources, though both players are interested, a valuation mismatch may play spoilsport. Though company promoter Dilip Surana is looking for a valuation of seven-eight times sales, which would be about Rs 8,800 crore, the potential buyers are unwilling to pay such a premium.

According to experts, Micro Labs is a good buyout target due to its strong domestic presence across speciality segments. It has a strong presence in cardiology, neurology, neuro psychiatry, orthopaedics, gynaecology and diabetics. The privately held company has a revenue of about Rs 2,800 crore.

However, Dilip Surana, chairman & MD, Micro Labs, has denied any sale plan. He said, “These is purely market speculation and is totally baseless. We have no plans, as such, to sell our formulation units.” Spokespersons from GSK and Teva said the companies did not want to comment on speculation. An email sent to Nomura did not elicit any response.

According to a recent PwC report, the Indian pharma industry is expected to touch $74 billion in sales by 2020.

Micro Labs, founded by G C Surana, is now under the leadership of Dilip Surana and director Anand Surana. With a strong focus in India, the company has presence in more than 30 countries and has 3,300 product registrations in various stages, according to the company website. The company has a team of 3,500 medical representatives. It is ranked among the top 20 in India, with a market share of 1.8 per cent, according to IMS December 2011.

According to an E&Y report, the aggregate disclosed deal value of M&As in the pharmaceutical sector surged from a meagre $1.2 billion in FY10 to $4 billion in FY11, reflecting a jump of more than 230 per cent. “Global pharmaceutical companies are no longer looking at acquisitions merely as a tool to achieve cost optimisation, but as a means to grow through portfolio expansion as they face the mounting pressure of several drugs going off patent in mature markets,” the report added.