Mylan's $1.8-billion deal gets a green signal

Following a recent intervention by Prime Minister Manmohan Singh, the Foreign Investment Promotion Board (FIPB) is learnt to have cleared the long-pending $1.8-billion investment proposal by US generic drug maker Mylan Inc, to acquire Strides Arcolab’s injectible unit, Agila Specialities.

FIPB has also approved many other pending proposals for foreign investment (FDI) in existing  pharmaceutical projects. These include a major transaction between private equity fund Actis and Indore-based Symbiotec Pharmalab, which plans to sell a 25 per cent stake for around Rs 330 crore.

The Mylan-Strides transaction, the third largest acquisition in the sector, comes as the government struggles to narrow the current account deficit by making more way for FDI. The deal would bring in much-needed foreign exchange. The Pennsylvania-based company had initially announced the proposed deal on February 28.

OTHER APPROVALS

• Economic Affairs Secretary Arvind Mayaram (pictured), who heads the Foreign Investment Promotion Board, said all pending pharmaceutical investment proposals related with brownfield (old) projects had been cleared
• Lotus Surgical Specialties, and  Actis and Indore based-Symbiotec Pharmalab, which plans to sell a 25 per cent stake for around Rs 330 crore, were the other proposals cleared

However, the department of industrial policy and promotion raised concerns over buyouts of existing facilities in the sector by multinational companies. Recently, in a meeting with all the ministries concerned on FDI, the PM discussed these issues and concerns and asked FIPB to expedite clearance of pending proposals at the earliest, after evaluating all safeguards.

Up to 100 per cent FDI was earlier allowed through the automatic route in the pharma sector. In November last year, the government had made FDI in existing pharma companies stricter by putting it under FIPB scrutiny and moving it out of the automatic approval route. It was also made mandatory that such proposals would have to seek clearance from the Competition Commission of India (CCI).

This came in the wake of a spate of acquisitions of domestic drug units by multinationals, mainly during 2008-2010. Ranbaxy and Piramal Healthcare’s domestic formulation businesses were acquired by Japan’s Daiichi Sankyo and American drug maker Abbott, respectively. FIPB also considered six other pharma proposals on Tuesday, including one by Jubilant Pharma Pte Ltd, Singapore.

In the case of Mylan-Strides, the industry ministry had opposed the acquisition. It feared supplies and prices of some critical cancer medicines manufactured by Agila Specialities might get impacted if the company was acquired by the multinational. However, CCI approved the deal on June 20, with the competition watchdog ruling out possibility of an adverse effect on competition because of the takeover.

The FIPB also considered six other pharma proposals on Tuesday, including one by Jubilant Pharma Pte Ltd, Singapore.