Pharma Street splits not unusual

Indian pharmaceutical companies, much sought partners for global majors due to the low cost factor, have seen quite a few deals fall apart in the recent past.

Apart from the Pfizer-Biocon marketing alliance, some research & development (R&D) pacts also got terminated. According to experts, Indian companies’ inability to achieve certain milestones in a specified time frame could be why.

This year, US drug maker Eli Lilly and Indian counterpart Jubilant Life Sciences had called off their partnership to develop molecules across oncology, diabetes and cardiovascular segments.

After terminating the deal, Jubilant bought out Lilly’s stake in the 50-50 joint venture, Vanthys Pharmaceuticals.

Anjan Sen, director, strategy & operations, Deloitte India, said, “We have seen quite a few R&D deals being called off in recent times, understandable considering the risks associated with any R&D activity and the high attrition level associated with the research on new molecules.”

According to media reports, Eli Lilly and Zydus Cadila may call off their three-year alliance in the area of cardiovascular diseases.

By the agreement, Cadila was supposed to receive a payment of up to $300 million in various stages.

Hitesh Sharma, partner-life sciences, Ernst & Young, says: “The deals are structured on certain milestones, to be achieved in specified time-frames.

Each party will evaluate in various stages and decide whether to go further or not.”

In 2008, Eli Lilly and Glenmark had called off their year-old partnership in the area of osteo arthritis. In October 2007, they’d entered a $260-mn deal, whereby Lilly acquired the rights to the molecule GRC 6211.

Apart from the typical delay in R&D, recent inbound acquisitions also played a key role in breaking partnerships. Last year, US drug maker Merck & Co had called off its two-year research alliance with Ranbaxy.

The deal was meant for discovery of anti-infective medicines. According to experts, a conflict of interest between Merck and Ranbaxy’s acquirer, Daiichi Sankyo, could have triggered the move.

UNHAPPY ALLIANCES Pharma deals that landed into problems and were terminated
Year of deal	Year of split	MNC	Indian Co	Area	Deal size ($ mn)
2007	2008	Eli Lilly	Glenmark	Arthritis	260
2008	2011	Merck	Ranbaxy	Anti-infective	100
2009	2012	Eli Lilly	Jubilant Life	Oncology	—
2010	2012	Pfizer	Biocon	Diabetes	360
Source: Companies