3. Introduction
O India ranks 3rd worldwide by volume of
production and 14th by value
O India accounts for 10% of world’s
production by volume and 1.5% by value
O India continues its growth trajectory
facilitated by a dynamic position and a
global trend towards consolidation
O M&A has become important tool for
inorganic growth in Indian Pharma
4. Contd..
O A strong and growing domestic market, a
robust pipeline of generic drugs and an
ability to service developed markets
abroad have suddenly made Indian
pharma companies most sought-after in
the M&A space
O The story started in a small way in 2006
with the $736 million Matrix-Mylan deal
5. What are MNCs looking for?
O Presence of strong portfolio of brands which are
ranked amongst the top in their respective segments
O Strong generics portfolio with presence in high
growth/ high margin therapeutic categories like CV,
CNS, Oncology and anti diabetes
O Availability of infrastructure to cater to regulated
markets. This will enable them to act as a
manufacturing base to meet the demand for
regulated markets
O Presence in niche segments like vaccines, biotech,
nutraceuticals, OTC etc which has substantial
growth potential both in India as well as globally
7. Reasons for M&A
O Patent cliff: The total value
of patents expiring between
2010 and 2015 is expected
to reach US $100 Billion
O Expanding market is one of
the strategies to maintain
the flow of revenue
O India with high population
and growing market, is
attracting MNCs to invest in
India
8. 2010 2011
Product 2009 sales Product 2009 sales
($mn) ($mn)
Aricept 3,991 Lipitor 12,535
Cozaar 3,561 Advair 7,794
Effexor XR 3,182 Zyprexa 4,916
Taxolere 3,034 Levaquin 2,648
Protonix 2,052 Xalatan 1,737
Flomax 1,970 Concerta 1,326
Arimidex 1,921 Femara 1,292
Gemzar 1,363 Xeloda 1,160
NovoSeven 1,320 Avelox 1020
Coreg 253 Caduet 548
Total 22,647 Total 34,976
Year of first available generics; Source: Ken Kaitin, Tufts University, R&D
Productivity conference, May 5, 2011
10. Industry Leaders in lost revenues
due to 2010-13 patent expirations
US $ Billions
29.2
12.9 11.3
9.5 8.8 7.2 4.7 4.6 4 3.3
11.
12. Reasons for M&A(contd..)
O High cost of R&D and decreased R&D
productivity(Poor returns)
O High valuation of Indian firms (Premium Value)
O Increase in market share
O Change in mindset of promoters
O Generic competition
O High profile product recalls
13. Reasons for M&A(contd..)
O Manufacturing prowess and cost
competitiveness of Indian companies
(highest no of USFDA approved plants
outside US)
O Geographical expansion
O Emerging markets- future growth driver
O Overcome barriers to entry
O Product/Brand extension
19. Indian pharma scenario in 2020
Area Size in CAGR over 10 Estimated size in 2020
2010 years
Base Aggressiv Base Aggressive
growt e growth valuation valuation
h
Total US $ 12bn 15% 20% US $ 49bn US $ 74 bn
domesti
c market
Rural US $ 2 bn 15% 20% US $ 8bn US $ 12 bn
market
OTC US $ 18% 20% US $ 11 bn US $ 13 bn
market 1.8bn
Vaccine US $ 524 10% 13% US $ 1.4 bn US $ 1.8 bn
market mn Source: PwC Analysis
22. Reasons for M&A(contd..)
O High premium offered by MNCs
Target Acquirer Deal value($mn) DV/Revenue
s
Paras Reckitt Benckiser 720.9 8.12X
Solvay Abbott 66.88 6.4X
Piramal Abbott 3,720 8.47X
Aventis Hoechst GmbH 91.5 3.96X
Shantha Sanofi Pasteur 625.2 8.7X
Pfizer India Pfizer 169.5 3.25X
Novartis India Novartis AG 75.57 2.5X
Ranbaxy Daiichi Sankyo 4,538.6 6X
Dabur Fresenius Kabi 220 3.73X
Source: Datamonitor
AG
23. Reasons for M&A(contd..)
O High profile product recalls: MNCs now
focusing on pharmerging markets
Drug Company Reasons
Vioxx Merck Cardiovascular side effects
Avandia GSK Cardiovascular side effects
Meridia Abbott Cardiovascular side effects
24. Reasons for M&A(contd..)
O Highest number of US FDA approved
plants outside US
FDA approved plants
120+
55
27 25 10 8 5
Source: Taking wings, Ernst &
Young, 2009
25. Reasons for M&A(contd..)
O Cost efficiency: India rates higher than
other countries on cost efficiency
Percentage overall indexed
manufacturing cost (US FDA
approved plants)
150
Cost index
100
100 80
50 35
0
US Europe India
Source: Taking wings, Ernst &
Young, 2009
28. Recent M&A Deals(Inbound)
Date Target Acquirer Deal value($mn)
May 2010 Piramal Abbott 3,720
June 2008 Ranbaxy Daiichi Sankyo 4,538.6
Mar 2009 Matrix Mylan 736.0
Dec 2010 Paras Reckitt 720.9
Benckiser
July 2009 Shantha Sanofi Aventis 625.18
Dec 2009 Orchid Hospira 400.0
Apr 2008 Dabur Frenesius kabi 220.0
Source: Datamonitor
29. M&A by Indian companies
O Not a one way street
O Indian companies are not only looking to
sell but they are also active buyers
wherein they are looking to augment their
capabilities by expanding their
footprints, entering into new geographies
or diversifying their business model or
moving up the value chain
O Several cash rich domestic companies are
looking at hitherto unexplored markets like
Japan, Australia and East Asia
30. Drivers of acquisition by
Indian companies
O Enhancing revenue through global presence
O Better market access
O Widening product portfolios
O Strengthening R&D capabilities
O Strengthening distribution network
O Increasing efficiencies through leveraging
economies of scale
O Gaining access to new technologies
O Establishing a new area in pharma value
chain
31. Some M&A Deals(Outbound)
S. N. Company (Acquirer) Company (Target) For Amount
1 Biocon Axicorp (German) $ 30 million
2 Dr. Reddy's Labs Trigenesis Therapeutics (USA) $ 11 million
3 Wockhardt Esparma (German) $ 11million
4 Wockhardt C P Pharmaceuticals (UK) Rs 83 crore
5 Wockhardt Negma Laboratories (France) $ 265 million
6 Wockhardt Morton Grove Pharma (USA) $ 38 million
7 Zydus Cadilla Alpharma (France) EUR 5.5 million
8 Ranbaxy RPG Aventis (France) $ 70 million
9 Nicholas Piramal Biosyntech (Canada) $ 4.85mn
10 Sun Pharma Taro (Israel) $ 500mn
11 Cadilla Healthcare Quimica E Farmaceutica Nikkh -
32. The Big Deal
Abbott + Piramal
At $3.72 bn (Rs 17,500 crore), it’s the second largest
pharma deal in India, after the Rs 19,780 cr Daiichi-
Ranbaxy deal in 2008
What it means for Abbott?
• Rights to 350 brands and trademarks of
generics, including Phensedyl cough syrup
• Market share close to 7%
• Strong presence in India(growth rate 13-17%)
• Complete product portfolio
33. The Big Deal
Abbott + Piramal
O The Piramal group has agreed that for
eight years after the deal's closing, it will
not enter the business of generic
pharmaceutical products in India, or make
or market them in emerging markets
O Abbott became market leader with the
acquisition of Piramal with appox. 7%
market share
36. The Big Deal
Abbott + Piramal
Piramal Overview
O A leader in the Indian branded generics
market
O Strong brand equity and presence in key
areas: antibiotics, respiratory,
cardiovascular, pain and neuroscience
O ~350 branded generic products
O Significant local footprint – largest sales force
in India
O One of the largest formulation plants in India
37. The Big Deal
Abbott + Piramal
ABBOTT STRATEGY
• Abbott will become no 1 in
India, with ~ 20% annual
Further growth over next several
diversify years
sources of • Piramal to add >$500MM in
pharmaceutical 2011 sales in India; total
growth Abbott pharma sales
expected to exceed $2.5BN
by 2020 in India
38. The Big Deal
Abbott + Piramal
ABBOTT STRATEGY
• India is one of the
world’s fastest-growing
Expand markets; expected to
presence in more than double by
2015
high-growth • Piramal has the largest
emerging sales force in India;
markets unique model with
dedicated people in high-
growth rural areas
39. The Big Deal
Abbott + Piramal
• Piramal portfolio has ~350
leading branded generics
Establish a in multiple therapeutic
leading areas
• Solvay, Zydus and
presence in Piramal give Abbott critical
branded mass and a
generics comprehensive leading
portfolio of branded
generics
40. The Big Deal
Abbott + Piramal
• Expect ~20% Piramal
sales growth over the
Deliver next five years
sustained • Expect transaction to be
double-digit neutral to EPS over the
EPS growth next several
years, accretive
thereafter
41. The Big Deal
Abbott + Piramal
“ Globally, there is a new way of selling
patented drugs, which we would not have
been able to do on our own. So as part of
future strategy, we took this decision.
Also, at almost 9.5 times the sales, its in the
best interest of our shareholders”
Ajay Piramal
Chairman, Piramal Group
42. Future
O India will break into top 5 pharma markets by
2020
O Increasing spending on healthcare will drive
the MNCs to look for Indian presence
O Indian companies do not have the capital and
expertise required for new drug development
O At the same time, from the standpoint of the
MNCs, with the drying up of R&D productivity
in the U.S. and developed markets and their
search for other sources of innovation
,acquisitions are a cost-effective way to bring
in a portfolio of branded generics
43. Future
O With the availability of 100 per cent FDI through
automatic route, Indian companies may witness
takeovers by foreign firms
O There has been a gradual shift in thinking of Indian
promoters who are now more open to exploring
strategic options for their companies which has
enabled increased M&A activity in this sector
O The new patent regime, challenges faced by
generic companies in regulated markets and the
robust valuation being offered by MNCs are some
of the key factors which have resulted in this
changed mindset of both MNCs as well as Indian
promoters
44. Future
O These are interesting times for the Indian
pharmaceuticals industry which offers
diverse opportunities with substantial
growth potential to both domestic as well
as global pharma companies
O This will result in increased M&A activity in
this sector as companies are prompted to
evaluate their business models and re-
align themselves to create value for their
stakeholders