M&A in contract research space gaining momentum

Unlike primary investments such as private equity deals, the value of transactions in mergers and acquistions is not available in most cases

India's contract research sector has reported an uptick in mergers and acquisitions (M&A) in the past year.

According to Venture Intelligence, there were eight M&A transactions involving pure-play contract research firms between January 2014 and May this year, compared with only five deals in three years prior to 2014.

Unlike primary investments such as PE deals, the value of transactions in M&A is not available in most cases. Two deals for which values are available are Inogent-GVK Biosciences' buyout of Dai-Ichi's 6.12 per cent voting rights for Rs 8.97 crore in July 2014 and Sristek Clinical Research Solutions-Indovation Technologies deal in October 2014 for Rs 10 crore.

Sequoia Capital India-backed GVK Bio was also a buyer domestically, acquiring Chennai-based Vanta Bioscience, which offers toxicology evaluation services for pharmaceutical, biotech, food supplements sectors.

While GVK has been a buyer, recent months have witnessed two large business groups - Max India and Fortis Hospitals - sell off their contract-research arms.

According to Venture Intelligence data, Max Neeman Medical International was acquired by Canada-based JSS Medical Research Inc. Fortis Clinical Research was sold to Chennai-based Quest Life Sciences, the data showed.

Among inbound deals from the US, Parexel International Corp acquired the assets of Chandigarh-based Quantum Solutions India, while Par Pharmaceuticals acquired Chennai-based Ethics Biolabs. An intra-Hyderabad deal witnessed Indovation Technologies buying out Sristek Clinical Research Solutions, while venture-backed Karmic Lifesciences was sold to Ahmedabad-based Cliantha Research.

The clinical trials sector went through bad phase in the end of last decade, a phase that continued till the first few years of this decade.

According to T S Jaishankar, managing director of Quest Life Sciences, the sector would see notable growth in the near future.

"The industry faced a challenge earlier since there were a lot of negative reports from the media and protests from the non-government organisations about the quality standards of the clinical trials. However, the health ministry and the Drug Controller General of India have taken proper steps to put the standards in place to bring back the industry," he said.

Regulatory clearances, which used to take six months from the date of filing, have now started to come within two months. He added that India, which has the advantage of availability of good doctors, vast pool of patients and disease profile, has regulatory systems in place on par with the international standards. This is expected to boost the sector once again and would lead to more consolidation, with top players looking to expand operations acquiring smaller firms.