This report highlights the structure, regulatory framework, top market players etc. of the Indian Pharmaceutical Industry and presents a review of major Mergers and Acquisitions in Indian pharmaceutical industry and the reasons of the said mergers and acquisitions.

1. MERGERS AND ACQUISITIONS IN
PHARMACEUTICAL SECTOR
Prepared by:
Anjali Mehra
ICSI, New Delhi

2. INDIAN
PHARMACEUTICAL
INDUSTRY

3. Introduction
 Pharmaceutical industry in India is ranked 3rd in
volume terms and 14th in value terms globally.
 It is highly fragmented with more than 20,000
registered units.
 It meets around 70% of the country‟s demand for
bulk drugs, drug intermediates, pharmaceutical
formulations (patented & generic
drugs), chemicals, tablets, capsules, orals and
injectables.
 The Indian pharmaceutical industry traditionally
relied on “reverse engineering” i.e. product
copying, through which vast profits were made.

4. Contd….
 The pharmaceutical sector consists primarily of
three types of players: bulk drugs producers, pure
formulators, or integrated firms (which produce both
bulk drugs and market formulations).
 Pharmaceutical companies deals in:
 Generic Drugs (produced & distributed without
patent)
 Brand Medications (produced & sold by the co.
that holds patent for the drug), and
 Medical Devices

5. Growth
 Indian pharmaceutical industry is estimated to be
worth US$4.5 billion, growing at about 8 to 9 per
cent annually.
 It is predicted that the Indian pharmaceuticals
market will grow to US$55 billion in 2020; and if
aggressive growth strategies are implemented, it has
further potential to reach US$70 billion by 2020.

6. Ranbaxy Labs
, 7,686.59
Cipla , 6,977.50
Dr. Reddy‟s Labs
, 6,686.30
Lupin
, 5,364.37
Aurobindo Pharma
, 4,284.63
Cadila Health
, 3,152.20
Jubilant Life
, 2,641.07
Wockhardt
, 2,560.16
IPCA Labs
, 2,352.59
GlaxoSmithKline
, 2,345.88
Top Pharmaceutical Companies in India by Net
Sales (2011-12)
Net Sales in Rs. cr

7. Major Pharmaceutical
Regulatory Bodies in India
 Department of Chemicals & Petrochemicals:-
Responsible for the
policy, planning, development, and regulation of the
chemical, petrochemical & pharmaceutical
industries in India.
 Central Drugs Standard and Control Organization:-
Control the quality of drugs imported into the
country, approval of new drugs proposed to be

8. Contd….
 National Pharmaceutical Pricing Authority:-
Established to fix/revise the prices of controlled bulk
drugs & formulations and to enforce prices &
availability of the medicines in the country.

9. FDI Policy
 FDI, up to 100 per cent, under the automatic
route, is allowed for green field investments in the
pharmaceuticals sector.
 FDI, up to 100 per cent, is permitted for brown field
investment (i.e. investments in existing
companies), in the pharmaceutical sector, under the
government approval route.

10. Pharma Pricing Policy
 Under this policy, 348 essential medicines will come
under the Govt. price control.
 The Group of Ministers finalised market based
weighted average prices for all the drugs, which
have a market share of more than 1%.
 The weighted average price of products having over
1% market share would be taken as the maximum
retail price.

11. Mergers & Acquisitions in
Pharmaceutical Sector

12. Merger and Acquisition
 „Merger‟ refers to a combination of two or more
companies into a single company whereby the assets
and liabilities of one are vested in the other, with the
effect that the former enterprise loses its identity.
 „Acquisition‟ means an act of acquiring effective
control by one company over assets or management
of another company without any combination of
companies. In this, two or more companies may
remain independent and enjoy separate legal
entities, but there may be a change in control of the
companies.

13. Regulations governing M&As in India
 The Companies Act, 1956 (Section 391-394)
 The SEBI (Substantial Acquisition of Shares &
Takeovers) Regulations, 2011
 The Foreign Exchange Management
Regulation, 2000
 The Income Tax Act, 1961
 The Competition Act, 2002 (Section
5, 6, 20, 29, 30, & 31)

14.  Mergers & Acquisitions in the pharmaceutical
sectors have grown considerably in the past few
years.
 Large pharmaceutical companies enter into
transactions so as to maintain their market share and
to reduce competition with other new generation
drugs.
 Now, it is important to pay particular attention to
whether such mergers are creating barriers to
generic entry or causing potential harm to
innovation.

15. M&As Deals (Outbound)
Company (Acquirer) Company (Target) For Amount
Biocon Axicorp (German) $30 million
Dr. Reddy‟s Labs Trigenesis Therapeutics (USA) $11million
Wockhardt Esparma (German) $11million
Wockhardt C. P. Pharmaceuticals (UK) $17.9 million
Wockhardt Negma Laboratories (France) $265 million
Wockhardt Morton Grove Pharma (USA) $38 million
Zydus Cadila Alpharma (France) Euros 5.5 million
Ranbaxy RPG Aventis (France) $70 million
Nicholas Piramal Biosyntech (Canada) $4.85 million
Sun Pharma Taro (Israel) $500 million
Cadila Healthcare Quimica e Farmaceutica Nikkho $26 million

16. M&As Deals (Inbound)
Company (Acquirer) Company (Target) For Amount
Daiichi Sankyo (Japan) Ranbaxy (India) $4.2 billion
Abbott (USA) Piramal (India) $3.72 billion
Sanofi Aventis Shantha (India) $783 million
Mylan (USA) Matrix (India) $736 million
Reckitt Benckiser Paras (India) $724 million
Hospira Orchid (India) $400 million
Fresenius Kabi (German) Dabur Pharma (India) $219 million
Abbott (USA) Wockhardt (India) $22.5 million

17. Reasons for M&As
 Absence of proper R&D facilities
 Increase in market share
 Generic competition
 Growing Indian population
 Increase in chronic diseases
 Gradual expiry of patents
 Product/Brand extension etc.

18. Daiichi-Ranbaxy Deal
 Largest in the India
 8th in largest in the global
generic pharmaceuticals
 Serving in over 125 Countries
 Ground operations in 49
countries & Manufacturing in 11
countries
 Strong R&D Base
 2nd largest in Japan
 22nd Largest in the world
 Operations in 50 countries
 Producer of high quality
drugs
15th Largest drug maker in the
world
Market Capitalization–$30 Billion
Low cost production

19. The Deal
 Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on
11th June, 2008.
 It made an open offer to the Ranbaxy shareholders
for another 20%.
 Picked up another 9.12% through preferential
allotment.
 It was an all cash transaction.
 Size of the deal: approx. US$ 4.6 Billion.
 As per the deal, total value of Ranbaxy was US$ 8.5
billion.

20. Strategic Objectives Behind The Deal
 Presence in emerging markets for Daiichi-Sankyo.
 Entry into non-proprietary drugs for Daiichi-Sankyo
(Product Extension). To develop new drugs to fill
the gaps and take advantage of Ranbaxy‟s strong
areas.
 The acquisition of Ranbaxy by Daiichi represents a
major entry for the Japanese firm into the high
growth business areas of generic drug. The
acquisition shows that global pharma companies are
making efforts to cope up with strong generic drug
makers.

21. Conclusion
 Consolidation in Indian pharmaceutical industry
could lead to increase in prices of drugs, reduce
availability of drugs in domestic market etc.
 Due to such effects of increasing consolidation, it
would be the consumer who would suffer the most.
Therefore, the law should specifically empower and
require the antitrust enforcement agencies to review
& respond to concerns arising from combinations in
the pharmaceutical industry.

22.  It is also important to assess the impact of
combinations on innovations as M&As in
innovations markets may pose a threat for
subsequent entry of new products by stifling
competition at the R&D and product development
stage.