Pharma overseas buys top $400 mn

Sun Pharma, which last Tuesday emerged the highest bidder for acquiring the assets of Able Labs in the US with $23 million, may provide the perfect topping to a year in which Indian pharma companies have already notched up overseas acquisitions worth an all-time high of $400 million. In 2004 the corresponding figure was $155 million.

Analysts say Indian companies are leveraging their cost competitiveness in sourcing bulk drugs and easy access to funds like never before. The aim is to tap overseas markets, expand the geographical reach and enhance the intellectual property portfolio needed to survive in the post-patent era.

"The high price-earnings values of pharma companies and cost arbitrage opportunity are behind this strong performance," said Sanjiv Kaul, ChrysCapital managing director.

With Indian stock markets at an all time high, the market capitalisation of Indian firms has shot through the roof, increasing the leverage of their equity.

The total worth of overseas acquisitions for this year has been buoyed by the single biggest overseas acquisition ever by an Indian pharma company, that of Docpharma in Belgium by Matrix Laboratories.

Dr Reddy's takeover of Roche's API (active pharmaceutical ingredients) unit in Mexico and Ranbaxy's acquisition of Spanish Efarmes SA were also notable.
 

SHOPPING ABROAD
2005
Acquirer	Target	Sum ($ mn)
Dr Reddy's	Roche's Mexican API unit	59.00
Nicholas Piramal	Avecia Pharma	16.25
Jubilant	Trinity	12.30
Torrent	Heumann	30.00
Matrix Labs	DocPharma	263.00
Ranbaxy	Efarmes Sa	18.00
Dishman	Synprotec	3.48
Strides Arcolab	Strides Latina	16.00
TOTAL		418.03
2004
Hikal	Marsing	5.90
	Psi Supply	16.50
Wockhardt	Epharma	13.30
Dr Reddy's	Tirgenesis	11.00
Glenmark	Labs Kilinger	5.20
Zydus Cadila	French formulation unit of Apharma	9.41
Ranbaxy	RPG Aventis	80.00
TOTAL		155.31

Even smaller companies like Jubilant Organosys, Torrent and Dishman Pharma pierced the national boundaries this year. "Indian companies now have global ambitions. Some of them have reached a scale where they have to grow inorganically to keep pace with rivals," said D S Brar, chairman, GVK Biosciences.

WestBridge Capital Partners' managing director, Sandeep Singhal, views this an attempt by Indian companies as "a move to the next level".

Acquisitions also provide the shortest route to market access. A front end (marketing) in the West and back end (manufacturing bulk drugs and formulations or research) in India make good business sense.

Moreover, as Kaul points out, "'size matters in the generics industry, which is like any other commodity space." In a rapidly consolidating industry, the companies that do not attain the critical size will be left behind.