The Hindu Business Line : Aurobindo’s buy to enable access to Italian market

Aurobindo Pharma’s acquisition of intellectual property and marketing authorisations in Italy from generic drug maker TAD will give it access to more than 70 ready-to-market products. Although Thomson Financial quoted figures under $10 million as the deal size, no financial details for the deal were available officially. This strategic acquisition will not only fast-track Aurobindo’s entry into the Italian generic market but also positively contribute to its consolidated earnings as the products enjoy higher margins.

Italy is one of the top five generic markets in Europe and recorded annual sales of $809 million in 2007. Aurobindo has already filed 22 products for registration in Italy and during the integration process, the company will shift the manufacture of TAD’s products to their Indian facilities. Once this is done over the next four-five months, manufacturing costs will be reduced further, again enhancing margins. Aurobindo has also acquired over-the-counter brands Mapooro and Carmiooro (both food supplements) from TAD as a part of this deal. TAD’s marketing team is also a part of the acquisition which will help Aurobindo quickly build front-end presence in a new market like Italy. Italy being late to open up its generics market, the price erosion has not been as swift as in other places. But the landscape may change as Italy’s Antitrust Authority has asked the Government to allow greater market access to low priced generics by introducing legislation. Helped by these moves, the Italian generic market is seen to double in value in 2008 as eight blockbuster drugs were expected to become off-patent in 2007, increasing market opportunities for the leading generic players.

However, Aurobindo will have to compete with Teva, Sandoz and Merck Generics (acquired by Mylan), which have strong positions in the generic market.

Slovenia’s top pharmaceutical firm Krka bought German generic drugs producer TAD Pharma from the business group PHW. Aurobindo’s buy-out of the IPR and marketing authorisations appears to be a part of a restructuring of TAD’s pharma business in Italy.

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