M&A and Partnerships in Pharma

Indian scenario

Ganesh Nayak,  Executive Director Zydus Cadila India

India's growing respect and legal / regulatory framework for IPR, favourable economic policies resulting into attractive investment destination and availability of huge talent pool for sustaining and growing operations is making India an attractive destination for multinationals now.

Where do the current partnering opportunities lie for Pharma and biotech?

Partnering opportunities exist across all segments of the Industry, namely, drug discovery, development, clinical trials, data management (IT), manufacturing and marketing.

With more multinational companies showing interest, the M&A activity in India is expected to go up in the near future. What does this mean for the Indian pharma sector? Do you think was long overdue?

Historically, Indian pharma companies have been founded and managed by owner-entrepeneurs. Consequently, Indian pharma companies are cost-conscious and responsive organisations. The growth trajectory of the Indian pharma companies began with establishment of Indian Patents Act 1970. However, most companies remained essentially domestic players till 1990.

Thereafter, the Indian Economy started opening up, and the industry made efforts to integrate with its global counterpart. Increased M&A activity is the consequence.

Indian pharma companies have acquired companies abroad and Multinationals have made acquisitions in India. To the Indian pharma companies, this brings an opportunity to play on a much bigger turf, and learn to acquire skills to play on a much wider turf.

The acquired organisations will expect to see quantum jump in the volume of activities, since most acquirers would like to leverage the cost advantage to supply to global markets. The acquirers would have to learn to ‘quickly digest the acquisitions’ and operate in different, challenging and rapidly changing environments.

With smaller firms being targeted, where does this leave the big pharma acquisitions that were so rampant not so long ago?

Large or small, companies are valued for their strategic worth. There has been a healthy debate on ‘sense’ of Big Bang Acquisitions in Pharma Industry for a while. Big Bang acquisitions are difficult to digest. Going forward, wisdom shall prevail. However, as of now, many large pharma companies have made their intent public by announcing that they would stay away from Big acquisitions.

India, along with other developing countries in the Asia-Pacific region, holds huge potential for drug makers. Do you think market is finally getting ready for major players?

Certainly. With signing of the WTO, and larger part of population agreeing to honour IPR, markets in Asia Pacific are ready to be a pert in global play. Apart from India and China, countries like Indonesia and Bangladesh have large population bases, varied disease profiles and, now, growing potential to pay.

Compared to their European and American counterparts, Indian firms are considered to be undervalued. Do you think this is one of the major factors in bringing multinationals to India?

Valuation is one consideration. Indian pharma companies are undervalued and that makes them interesting targets. Acquirers are prepared to pay higher multiples for undervalued assets with huge strategic upside. In addition, what makes India an attractive destination for multinationals now, is, her growing respect—and legal / regulatory framework—for IPR, favourable economic policies resulting into attractive investment destination and availability of huge talent pool for sustaining and growing operations.

From and Indian biotech / pharma company’s point-of-view, what is better, a partnership or an acquisition?

Partnering is always a better option from Indian perspective.

Has the global recession had any effect on this trend?

The ‘Health Care Costs’ feature as the top most concern for most governments in developed world. When their economies are heading southward, healthcare costs have become all the more important. Therefore, recession would only accelerate the need for more efficient players in the healthcare industry, so that, inclusive care can be provided to a wider section of population at lower costs.

Author Bio

Ganesh Nayak

Ganesh Nayak is the Executive Director of Zydus Cadila, spearheads the domestic and international operations of the group. He also oversees the Joint Venture Companies , API and Consumer Products Business. Nayak joined the group in 1977. With an experience of more than 32 years, he has contributed significantly to the Zydus Cadila's growth over the years.