US generic drug maker Mylan Inc on Tuesday got the Cabinet nod to acquire Strides Arcolab’s injectible unit, Agila Specialities.
Last week, the $1.8-billion deal had received the approval of the Foreign Investment Promotion Board (FIPB), following Prime Minister Manmohan Singh’s intervention.
The Mylan-Strides transaction, the third-largest acquisition deal in the pharmaceutical sector, could come as a relief for the government, which is struggling to narrow the current account deficit by making way for foreign direct investment (FDI). The deal would bring in the much-needed foreign exchange.
The Pennsylvania-based company had announced the deal on February 28. However, it was awaiting clearances for almost six months, after the Department of Industrial Policy and Promotion (DIPP) raised concerns over buyouts of brownfield facilities in the sector by multinational companies.
In a recent meeting on FDI with the ministries concerned, the prime minister discussed issues and concerns related to allowing FDI in brownfield pharma, and asked FIPB to expedite clearance of proposals after evaluating the safeguards.
Though 100 per cent FDI was allowed through the automatic route in the pharma sector, in November, the government had made FDI in brownfield, or existing pharma companies, stricter by putting it under the FIPB scrutiny and moving it out of the automatic approval route. It was also made mandatory that such proposals will have to get the Competition Commission of India (CCI)’s clearance.
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 US-based Abbott, respectively.
In the Mylan-Strides case, the industry ministry had opposed the acquisition. It feared supplies and prices of some critical cancer medicines manufactured by Agila Specialities might be impacted if the company was acquired by the multinational. The proposed Mylan-Strides deal was approved by CCI on June 20 as the competition watchdog ruled out the possibilities of any adverse effect on competition because of the takeover..
