Anjan Sen, Director, Strategy & Operations, Deloitte India
B&E: With the growing health care market in India, Reckitt Benckiser recently bought Paras Pharmaceuticals for about $726 million. What is the scope of such deals in pharma sector in India?
Anjan Sen (AS): The market is currently worth roughly $12.6 billion and is growing at 14+% CAGR. If it keeps on its current growth path, it will achieve $22 billion by 2015. India is set to overtake Brazil and become the 10th biggest pharma market by value worldwide in 2012. The gap between volume and value figures (India is 3rd by volume and 11th by value) should be reduced through governmental intervention (regulations, pricing controls, et al). Post the recent deals, it is felt that valuations are very high in India and M&A activity may slow down unless true synergies can be obtained through acquisition.
The key trends and macro factors driving M&A activity in the pharma industry include the patent cliff ($160 billion sales drop expected in 2012 alone), increased cost pressures and corresponding demand for generics, and access, i.e. favourable government regulations in India. Through partnership or acquisition, pharma companies can strengthen core capabilities in R&D, manufacturing, marketing, and distribution. These trends point towards continued deals in the India pharma sector; however, it must also be noted that valuations are peaking and there is likely going to be a slowdown in the pace of M&A activity, unless more prospect target companies emerge.
B&E: The Indian pharmaceutical industry forms around 8% of world pharmaceutical production. The trend of Indian companies being increasingly targeted by multinationals (MNCs) for both collaborative agreements and acquisitions has been picking up over a couple of years. Does the sector environment favour consolidations in coming years?
AS: It is likely there will be more focus on product asset acquisition rather than corporates. As opposed to M&A, alliances or strategic partnerships are expected to increase in order to leverage core competency strengths in R&D, manufacturing, marketing and distribution.
A reverse trend will emerge, where Indian pharma companies will continue to acquire abroad. Currently, around $2 billion has been spent by Indian entities abroad and this trend is expected to continue with management willingness to globalize and leverage partners’ strengths in foreign markets.
It must also be noted that regulations are key and must continue efforts to make the market investment friendly, through increased focus on investment (FDI) allowances, transparency and patent/IP protection. Enhanced spending on infrastructure development and improved access through mass insurance schemes are also factors supporting collaborative agreements in the sector going forward.
Anjan Sen (AS): The market is currently worth roughly $12.6 billion and is growing at 14+% CAGR. If it keeps on its current growth path, it will achieve $22 billion by 2015. India is set to overtake Brazil and become the 10th biggest pharma market by value worldwide in 2012. The gap between volume and value figures (India is 3rd by volume and 11th by value) should be reduced through governmental intervention (regulations, pricing controls, et al). Post the recent deals, it is felt that valuations are very high in India and M&A activity may slow down unless true synergies can be obtained through acquisition.
The key trends and macro factors driving M&A activity in the pharma industry include the patent cliff ($160 billion sales drop expected in 2012 alone), increased cost pressures and corresponding demand for generics, and access, i.e. favourable government regulations in India. Through partnership or acquisition, pharma companies can strengthen core capabilities in R&D, manufacturing, marketing, and distribution. These trends point towards continued deals in the India pharma sector; however, it must also be noted that valuations are peaking and there is likely going to be a slowdown in the pace of M&A activity, unless more prospect target companies emerge.
B&E: The Indian pharmaceutical industry forms around 8% of world pharmaceutical production. The trend of Indian companies being increasingly targeted by multinationals (MNCs) for both collaborative agreements and acquisitions has been picking up over a couple of years. Does the sector environment favour consolidations in coming years?
AS: It is likely there will be more focus on product asset acquisition rather than corporates. As opposed to M&A, alliances or strategic partnerships are expected to increase in order to leverage core competency strengths in R&D, manufacturing, marketing and distribution.
A reverse trend will emerge, where Indian pharma companies will continue to acquire abroad. Currently, around $2 billion has been spent by Indian entities abroad and this trend is expected to continue with management willingness to globalize and leverage partners’ strengths in foreign markets.
It must also be noted that regulations are key and must continue efforts to make the market investment friendly, through increased focus on investment (FDI) allowances, transparency and patent/IP protection. Enhanced spending on infrastructure development and improved access through mass insurance schemes are also factors supporting collaborative agreements in the sector going forward.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
