Pharma Merger & Acquisitions: Are the transactions overpriced??

Indian Pharma Market in 2015 witnessed an increase in M&A activities, with the values of deals reaching $3.6 billion. Of M&A - Public informationthis, outward deals contributed to $2 billion, significantly due to consolidation of generic market in US Pharma Market. The biggest outbound deal was acquisition of Gavis Pharma & Novel Labs by Indian major Lupin Pharma for $800 million.

In these transactions, Lupin’s US subsidiary balance sheet wasn’t enough to justify such big financial transactions, so Lupin took debt in the US market in the foreign currency, and gave corporate guarantee backed by the parent company based in India.

This route enabled Indian pharma companies to take a low cost foreign currency loans and avoid the risk of business movement.

The other notable deal was acquisition of Invagen Pharma & Exelan Pharma by Cipla in US for $550 million in Sept 2015.

Both the transactions were much more than the expected valuations.

IPM also witnessed another such deal in past between global giant Abbott acquisition of Piramal domestic formulation business at 9 times revenue of nearly Rs 2000 Crs in year 2010. The acquired brands were more than 400, among long list of brands with revenue of less than Rs 5 Crs even. Reason is simple and evident – Abbott was desperate to lead the position of being No. -1 player in IPM.

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Nirbhay Patel

Business Manager - Sanofi India
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