Proposal of Acquisition of Unichem by Cipla. This was presented by us in a competition hosted by IIT. Won us the 2nd prize.

1. Team Name – Doubting Thomases
Great Lakes Institute of Management
Member 1 -Puja Khemka
puja.khemka@greatlakes.edu.in
Member 2-Arun Koundinya
arun.seshadri@greatlakes.edu.in

2. How Pharmaceutical Sector
works
Major
Major Inputs
Products/Services
23%
APIs/Bulk
Chemicals Government
Drugs
and Private
Healthcare
Institutions End
Pharmaceutical User
Labor
Formulations
73% Retailers
RnD CRAMS

3. Snapshot of Pharma industry
Market Size Global
• $ 825 Billion growing @ 4 to 6 %
CAGR Global
• Forecasted to be 3-6% through 2013.
India‟s Share
• India is the 3rd largest producer of Pharmaceuticals having 10% of the global
share.
CAGR India
• Pharmaceutical Industry largest contributor to the Indian economy. Still growing @
10 to 11%

4. Porter‟s Five Forces
Biotechnology –
threat to Synthetic
Pharma Products
Availability of
substitutes -
Low
Suppliers can do
forward integration. Brand Identity
Suppliers exists but it is in the
availability high hands of
influencers
Supplier Competitive Buyers
Power: Power:
Rivalry - High Medium
Medium
Entry
Top five players
have taken only
Barriers:
20% of market Low/Medium Due to supportive
share government
policies.

5. Cipla Limited
• Chemical, Industrial and Pharmaceutical Laboratories, better known as
Cipla, was founded in 1935.
• Manufactures diversified range of pharmaceutical and personal care
products.
• In addition to its strong presence in the Indian market, the company
generates nearly 55% of it‟s turnover from exports to various emerging
and regulated markets.
• Commands an important position in the Indian pharmaceutical industry
by its efforts in manufacturing cost-effective drugs (antiretroviral drugs)
for HIV-AIDS.
• USP – Inexpensive Generics
• Current market share is approximately 5%

6. Cipla Products
Sales Value (in Cr)
Tablets n Capsules 3981.31
Bulk Drugs 897.8
Injections/Sterile Solutions 680.29
Aerosols 617.48
Liquids 512.5
Creams 134.04
Others 86.78
Export Incentives 80.95
Other services 31.03
Sale of services 27.01
Scrap 25.54

7. STP – Cipla Ltd
Segment HIV/AIDS, cancer, arthritis, respiratory, cardiovascular disease
Flavors and fragrances, OTC, prescription products, pesticides,
Target Group agrochemicals
Positioning Developing life saving drugs
SWOT Analysis – Cipla Ltd
1. Has developed good positive image by providing support to cancer
patients by issuing drugs at low cost
2. Imminent commencement of the Fixed-Dose combination for
treatment of uncomplicated malaria to tackle the 200+ million cases
globally
3. Initiation of „No Touch Breast Scan‟ a step forward in the screening
technology in India.
Strength 4. A foremost player in anti-infective and anti-asthmatic formulations.
1. Strong competition from international and domestic giants means
limited market share
Weakness 2. Had faced problems during negative campaign by AHF
1. Can venture into Alzheimer‟s disease medication
2. Increased investment in the budding markets, to push expansion in
Opportunity the global economy
1. Constant price rises in India
2. Depreciation of Indian Rupee as compared to US Dollar - Fluctuations
Threats in currency exchange rates

8. GAP Analysis of Cipla
LOCATION: African market is the major market,
followed by US. It has also discovered Europe as a
high potential market
PRODUCT: Growth in domestic formulation is 12% - far
below the industry average
RESEARCH: It‟s APIs are still about to reap benefits
and are expected to grow after a few years

9. Unichem Labs
• Unichem Laboratories Ltd, a mid sized Pharma company, was founded in
1944. It operates in the business of formulations and manufacture of Active
Pharmaceutical Ingredients.
• Has presence in over 20 countries and good distribution network and
marketing alliances in Europe and Latin America.
• Has launched more than 27 products in various therapeutic segments and
predominately supplies APIs for lifestyle, anti-allergic, anti-asthmatic and
anti-ulcerative segments.
• The Company is virtually debt free with a small D/E ratio of 0.06 (as on
March 2012)

10. Unichem Products
Sales Value (in Cr)
Formulation Caps/Tabs 624.2517
Bulk drugs n chemicals 100.5365
eyemides, ointment n powders 38.7377
Formulation (Syrups - Liquid) 18.9301
Injections 16.6358
Other Fiscal Benefits 5.1832
Sundries 4.095

11. Unichem SWOT Analysis
SWOT Analysis
1. Low cost of production.
2. Five Unichem Brands in Top 300 Indian Pharma brands.
3. Presence across diversified therapeutic classes.
4. Large pool of installed capacities.
5. Efficient technologies for large number of Generics.
Strength 6. Increasing liberalization of government policies.
1. Very low key R&D.
2. High dependence on few key products.
Weakness
1. New Therapy approaches
2. Growing incomes and growing attention to health.
Opportunity
1. High Cost of discovering new products and fewer discoveries.
2. High cost of sales and marketing.
Threats 3. Competition, particularly from generic products

12. Mission and Vision
CIPLA Ltd
• Mission - “To provide excellent quality health care facilities at
reasonable cost”
• Vision – To build a healthier and hence, better, world.
Unichem Labs
• Mission - “To be a caring pharmaceutical company helping to
enhance health through quality products”
• Vision - "To be a global pharmaceutical company with
increasing focus on innovative research and developed
markets."

13. Synergy Valuation
All Cash Transaction In Crores
Current Value of Cipla 30,282.17
Current Value of UniChem 1,707.09
Purchase Price 2,005.15
Annual Interest Expense 200.51
Total Merger Value 38,480.94
Post Merger EPS 22.04
Share for Share Exchange In Crores
Share Exchange Ratio 0.59
New Shares issued by Buyer 5.32
Total Shares Outstanding 85.61
Total Merger Value 38,480.94
Post Merger EPS 21.19
Synergy generated due to merger 6,491.69

14. EPS EPS - Combined
Entity
1
60.00 45.00
40.00
40.00
35.00
5 20.00 2 30.00
25.00
- 20.00
15.00
10.00
5.00
4 3 -
Mar ' 12 Mar ' 13 Mar ' 14 Mar ' 15 Mar ' 16
Merged Entity All Cash Transaction
Share Transaction
Cipla

15. Acquisition Options
Tender Tender Share for
Offer for offer for Share
Rs.212.75 Rs.222 Offer Attempt
• LBO • LBO • Issue Hostile
• Debt
• Debt 5.32 Takeover
crore
shares

16. Synergy Opportunities
• Raw materials – Backward Integration as well as
horizontal Integration
• Low Debt/Equity Ratio of Unichem
• Strong Subsidiary in European Market – Niche
Generics
• Rich US pipeline - Unichem Pharmaceuticals (USA)
Inc. – several ANDA in pipeline
• Presence across diversified therapeutic classes