Live Markets »News & Advice»Company News»Company News Details
Company News Details

Drug makers eye M&As to tap markets at home and away

Sushmi Dey/New Delhi 03 Oct 12 | 12:16 AM

Amid concern multinational companies may buy out Indian drug makers and dominate the pharmaceutical industry here, analysts say it is time domestic companies considered acquisitions and alliances, both at home and abroad.

Helped by strong finances, many have already started treading this path. Almost all major domestic drug makers -—from Sun Pharma and Dr Reddy’s Labs to Lupin and Glenmark — aspire to establish their presence in foreign markets. The reason: A patent cliff and generic competition in the generic segment in the US, the primary market for Indian companies. Also, analysts say the product portfolio and therapy coverage of Indian companies have gaps. And, so far, these companies haven’t been able to record significant presence in emerging markets.

Related Stories

    No Related Stories Found
Widgets Magazine

“The slowdown in the number of products going out of patent has already started and, therefore, the number of foreign generic launches would also fall in the coming years," says Anjan Sen, director, Deloitte India. “Till domestic companies are able to introduce their own molecules, they would have to look for growth in these markets through acquisitions and alliances."

A recent report by IDFC Securities stated there were significant inorganic growth opportunities for Indian drug makers, and these would help them expand their product offerings. “Indian players have relatively narrower US portfolios, compared to global generics, in terms of therapy coverage and portfolio size. They also have limited presence in most emerging markets. Therefore, we see significant inorganic growth opportunities to fill in these portfolio gaps," the report added.

Some companies have already started down this road. For instance, Sun Pharma’s acquisition of Taro enabled it to penetrate the lucrative dermatology segment, while Lupin has been able to secure a strong foothold in Japan through its Kyown acquisitions.

Share price and market cap calculations are from a July 2012 report of IDFC Securities Research (All figures in Rs cr, unless otherwise stated)
Company Share
price (Rs) 
cash over
Net (cash)/
Net debt:
FY14E (x)
spend in last
10 years ($ bn)
funds for
Cipla 316 25,400 8,900 1,600 1,700 -2,400 -0.24 0.1 12,300
Dr Reddy’s  1,649 27,900 11,800 1,760 3,300 -1,400 -0.16 0.8 9,800
Lupin 539 24,000 10,000 1,280 1,000 600 0.10 0.3 5,600
Ranbaxy# 490 20,600 12,200 1,650 2,400 600 0.09 0.5 6,200
Sun Pharma 635 65,800 10,900 2,920 3,600 -7,800 -0.42 0.5 26,300
*Assuming leverage at higher of 3x FY14E Ebitda and 1xnet gearing;
#CY12-13E estimates
Source: IDFC Securities Research

Indian companies are also scouting for buyout targets in the domestic space, as this is expected to strengthen their presence through strategic brand acquisitions in target therapies. In a recent interaction with Business Standard, Lupin Chief Financial Officer Ramesh Swaminathan had said the company was scouting for acquisition targets in India to diversify into new therapeutic segments. According to Praful Bohra, senior analyst, Nirmal Bang, now, drug makers have increasingly started considering niche therapy segments and are trying to establish themselves with their own products. For instance, companies like Lupin and Glenmark are focusing more on oral contraceptives and dermatology products in the US.

Of late, Dr Reddy’s Labs and Lupin have built their own sales force in the US and are selling branded generics under their brand names.

Sources say Cipla and Wockhardt, too, are working towards this. “This enables the company to create its own identity, and this is good for the branded fanchisee model," said Bohra. Apart from acquisitions with reasonable valuations, companies are also eyeing alliances, especially for sales and distribution, says Sen.

Widgets Magazine


Company Price Gain (%)
Coal India292.053.25
Bharti Airtel400.751.47


Currently No Poll Available.

Online Portfolio

You can create Online Portfolio here using the below button.

Widgets Magazine