The Hindu Business Line : Drug companies’ appetite for acquisitions getting refined

Mumbai, July 13 Are domestic drug companies seeing a refinement in their appetite for overseas acquisitions, with big-ticket transactions making way for focused, “easy-to-digest” deals?

The appetite of drug companies for large acquisitions has not changed, but with fewer pickings available globally, acquisition targets are getting sharply defined, observe pharma industry representatives.

Consolidation is here to stay, especially since the valuation of companies is getting corrected over the last several months, an industry-watcher said.

However, as merger and acquisition strategies of Indian companies gain sophistication, they are making acquisitions for very specific objectives like entering a sub-segment, acquiring patents, acquiring a brand or its distribution, says Mr Kumar Kandaswami, Senior Director with consultant firm Deloitte Touche Tohmatsu.

Big acquisitions will not go out of fashion, but companies will find easy-to-digest, focused transactions valuable and may not always look at acquisitions in a conventional manner of biting big, he points out.

Earlier this month, for instance, Glenmark acquired seven brands in Poland and Piramal Healthcare acquired global rights on the Haemaccel brand of blood plasma products from Germany’s PlasmaSelect AG.

But Glenmark has never looked at big acquisitions, counters Glenmark’s Managing Director and Chief Executive, Mr Glenn Saldanha.

The acquisition of brands in Poland gives the company a wider scale of operation in Europe, besides a break into the Polish market touted to be the largest market in Central and East Europe.

Piramal Healthcare (the erstwhile Nicholas Piramal) too, has a strategy different from other generic drug makers, points out a pharma company official. It is focussed on custom manufacturing products for overseas clients and to grow its strengths in the segment, the company has made well defined acquisitions, as opposed to big-ticket deals, he said.

‘Not new phenomenon’

Another drug-company representative points out, that in the past too, companies have sought to buy specific technology, brands or patents that fit in with their strategy, to get a foot-hold in a particular segment, or to get proximity to customers in a specific geography.

At present, Ranbaxy is adjusting to its new dispensation, post the buy-out by Japanese company Daiichi Sankyo; Dr Reddy’s is still digesting Germany’s Betapharm deal and Sun Pharma has to sort out its acquisition hitches with Israel’s Taro. But when that process is done, these companies are most likely to be still on the look-out for good acquisition targets; mid-sized companies like Lupin are also known to be scouting for an acquisition opportunity, in Europe. So the appetite has not changed, only there are fewer targets on offer, the industry-hand said.

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