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More global buys by pharma cos likely

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P.T. Jyothi Datta

Mumbai, July 21

IN the last 10-odd months, the Indian pharma industry has possibly seen the single largest number of global transactions in its 50-year history.

But the appetite of domestic drug companies has only been whetted and more global acquisitions are on the anvil, say analysts tracking the segment.

"There's been a considerable gain of momentum in the past couple of years in the area of acquisitions, and according to our market analysis, the trend will continue for some time. We should witness a significantly large number of acquisitions in regulated markets and Europe," said Mr Anand Dikshit, Director (Corporate Finance), Rabo India Finance.

Even a casual observer of the pharma sector can't help but notice the pattern.

In July 2005, Nicholas Piramal acquired 17 per cent in Canadian biotech research company, Biosyntech; pharma packaging company Bilcare acquired US clinical and pharma research company, Proclinical Inc; in June 2005, Torrent acquired Heumann Pharma, a generic drug company with Pfizer.

Last month Matrix undertook one of the pharma industry's largest acquisition deals when it acquired Belgian firm, Docpharma, and late last year Hikal bought 50 per cent in Danish marketing company, Marsing.

But crossing the border is not a survival strategy being adopted by domestic pharma companies in the wake of the product patent regime, said Mr D.G. Shah of the Indian Pharmaceutical Alliance.

"Last year there were about 23 global consolidations and six of them were by Indian companies. The appetite has been whetted and Indian companies will go for larger opportunities," he added.

According to Mr Utkarsh Palnitkar, Ernst & Young's Industry Leader (Health Sciences), the reasons behind the acquisitions are varied in an industry undergoing change both in India and abroad.

They could vary from shoring up the product pipeline to cost reduction to avoidance of replication of research spend, etc.

"From an Indian perspective, it has become important to reach critical mass if one is to remain competitive. Acquisitions overseas, especially in complementary therapeutic segments, provide faster access to key markets."

Moreover, obtaining regulatory approvals for new products is much easier as well, he added.

Also, with 70-plus facilities in India that meet US regulatory standards, domestic companies will have to justify such investments and this could add to the consolidation pressure, according to Mr Alok Gupta, Yes Bank's Country Head (Life Sciences and Biotechnology).

According to the analysts, integration will not be a stumbling block as Indian companies have grown domestically through acquisitions.

Yes Bank's Mr Gupta said that there could be an issue for first-timers. "But for larger companies, where there has been a precedent, integration should not be a problem."

(This article was published in the Business Line print edition dated July 22, 2005)
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