M & A CritiqueParenteral Drugs (India) Limited has acquired Fresenius Kabi India Private Limited wholly to sell its only manufacturing unit at Goa owned by the subsidiary – Goa Formulations Limited (GFL) for Rs 200 crore. Fresenius Kabi India Private Limited is 100% subsidiary of Fresenius Kabi AG Germany. Fresenius Kabi India Private Limited incorporated in the year 1995.
Parenteral Drugs (India) Limited (PDIL) is one of the leading and fastest growing healthcare company in the country. PDIL is involved in research, production, and manufacturing of pharmaceutical products viz. intravenous infusion, tablets, capsules, liquids syrups, injections etc. PDIL has dedicated itself to the manufacturing of the best quality vital life-saving drugs at the lowest possible cost.
To grow its reach and manufacturing power, Parenteral Drugs (India) Limited has acquired Formulations Limited
PDIL manufactures products under four categories.
- SOLID & LIQUID ORALS
- I. V. FLUIDS
- ONCOLOGY
- CRITICAL CARE
Parenteral Drugs has manufacturing facilities in India – Madhya Pradesh, Himachal Pradesh, Punjab and Goa and in Overseas – Mauritius, Nairobi, and Kazakhstan.
Parenteral Drugs have total 10 subsidiaries — 8 Indian and 2 overseas. Out of these, six are wholly owned subsidiaries. Also in recent years it had entered into joint venture agreement with M/s. Piramal Healthcare Ltd and M/s. Taurus Export Processing Zone Ltd., a Kenya-based pharmaceutical Company
Goa Formulation Limited is a wholly owned subsidiary of Parenteral Drugs from July 31, 2008. Goa Formulation Limited is engaged in trading and manufacturing drugs including Intravenous Fluids the Company was incorporated in 2005 and is based in Mumbai, India.
Fresenius Kabi is a leading international healthcare company focusing on products for the therapy and care of critically and chronically ill patients. Fresenius Kabi develops, produce and market pharmaceuticals and medical devices. The product portfolio comprises a comprehensive range of I.V. generic drugs, infusion therapies and clinical nutrition products as well as the medical devices for administering these products. Within transfusion technologies, Fresenius Kabi offers products for whole blood collection and processing as well as for transfusion medicine and cell therapies.
Strategy
Parenteral Drugs (India) Limited incorporated Goa Formulation Limited with a motive to expand its business in the Southern area. Goa Formulation Limited made PAT of Rs. 6.3 million and turnover of Rs 200 millions highest as compared to any other subsidiary. It has sold the business for Rs 2000millions which are about ten times turnover of the whole company. In fact market cap of the whole company along with all its subsidiaries is just under Rs 2500 million. So there is huge value creation for the listed parent company as it will be able to retire huge debt created by its subsidiaries and in its own books.
Opportunities for Fresenius Kabi India Private Limited (FKIPL)
Fresenius Kabi India Private Limited is a step down subsidiary of Fresenius Kabi Oncology Limited, entered into a contract for R&D and manufacturing agreement with Fresenius Kabi, Germany and disinvested entire shareholding in Fresenius Kabi Oncology Plc, UK to Fresenius Kabi, Germany and also entered into distribution agreement with Fresenius Kabi India Pvt. Ltd. for selling and marketing their products in India.
The promoters of PDIL promoted GFL for setting up a manufacturing capacity for IVF in Goa so as to cater to the southern market of India. By acquiring the manufacturing unit of Goa Formulation Limited the company will be able to meet the requirements of the above agreement with Fresenius Kabi Oncology Limited and with the readily available infrastructure they will optimize the cost.
Pharmaceutical industry in India
The Pharmaceutical industry in India is the world’s third-largest in terms of volume and stands 14th in terms of value. according to Department of Pharmaceuticals.
The number of purely Indian pharma companies is fairly low. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India thanks to the availability of cheap labour in India. In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at approximately 10% per year. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India, more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies Growth in other fields notwithstanding, generics are still a large part of the picture. London research company Global Insight estimates that India’s share of the global generics market will have risen from 4% to 33% by 2007.
India is fast becoming a global hub for all pharmaceutical manufacturing and research, and Indian generics today constitute nearly a fifth of global supplies. India tops the world in exporting generic medicines worth US $ 11 billion. Generics are expected to continue to dominate the market while patent-protected products are likely to constitute 10 per cent of the market till 2015, as per a McKinsey report. The Indian pharma industry is expected to witness robust growth, with an increasingly middle-class population, improvements in medical infrastructure and the establishment of IP rights.
At present FDI permitted up 100% for the manufacture of drugs and pharmaceuticals provided the activity does not attract compulsory licensing or involve the use of recombinant DNA technology and specific cell/tissue targeted formulations.
After some major investment by foreign companies, the government may soon take a decision on foreign direct investment in the pharma sector at 49% of the 100% allowed now. The government to allow 49% foreign investment through the automatic route and the remaining 51% is approved on a case-by-case basis through the Foreign Investment Promotion Board.
Conclusion
One more deal where Indian Pharma Company is getting acquired by an MNC. No doubt immediately it creates substantial value for its stakeholders but the social concern in terms increased cost for health care needs to be addressed.
