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Deal nudge to consolidation

Mumbai, April 7: Analysts expect further consolidation in the domestic pharma sector after the Sun Pharma-Ranbaxy deal.

The acquisitions, so far, in the industry mainly involved overseas players buying domestic entities.

Acquisitions by foreigners include the sale of the domestic formulation business of Piramal Healthcare to Abbott Laboratories in 2010 and Shanta Biotechnics to Sanofi-Aventis in 2009. Last year, US-based Mylan Laboratories acquired Agila Specialities from Strides Arcolab for $1.75 billion.

However, the acquisition of Ranbaxy, which has a foreign parent, by local rival Sun Pharma is a break from the trend.

Domestic companies are now looking to join the hunt as they seek to drive growth both in India and the US and are eyeing companies that can fill in for some of their product gaps.

One such instance is Ahmedabad-based Torrent Pharmaceuticals, which bought the formulation business of Elder Pharmaceuticals Ltd for Rs 2,004 crore in December.

Torrent gained access to 30 brands in women’s healthcare, pain management, wound care and nutraceuticals therapeutic segments that include Shelcal, Chymoral, Eldervit, Formic and Carnisure.

However, overseas players are likely to dominate the Deal Street as they face a depleting pipeline of new products and competition from generic players.

Avinash Gupta, senior director & leader (financial advisory) at Deloitte, told The Telegraph that India would continue to remain an “inward” market and there could be more cases of mergers and acquisitions.

Growth key with new government

An analyst with a domestic brokerage pointed out that overseas players would also be watching the policies of the next government that came to power.

A reform-oriented Centre could see consolidation continuing in the industry, the analyst said.

According to a CII-PwC report, the domestic pharmaceutical market saw its growth slowing to 9.8 per cent in 2013 from 16.6 per cent in 2012.

The slowdown was a result of the new drug pricing policy and the regulatory interventions over the last one year. The slowdown came despite the value of the domestic market rising to Rs 72,069 crore in 2013 from Rs 65,654 crore in 2012.

The number of products launched in India also came down to around 1,700 in 2012 from around 1,900 in 2010.

 
 
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