Mergers and Acquisitions in Pharmaceutical Sector

By: EconomyWatch   Date: 16 July 2010

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There are several causes of mergers and acquisitions in the global pharmaceutical industry. Among them are the absence of proper research and development facilities, gradual expiry of patents and competition within specific pharmaceutical genres. The high profile product recalls have also played a major role in the continuing mergers and acquisitions in the industry.

Mergers and Acquisitions in Indian Pharmaceutical Sector

In the Indian pharmaceutical market there are a number of companies that have entered into merger and acquisition agreements in the context of the global market scenario. These companies would be selling off the non-core business divisions like Over-the-Counter. This is expected to further the consolidation in the mid-tier as far as the pharmaceutical industry in Europe is concerned.

The sheer number of companies acquiring parts of other companies has shown that the Indian pharmaceutical industry is ready to be a dominant force in this scenario. In the recent times Nicholas Piramal has taken the ownership of 17% of Biosyntech that is a major pharmaceutical packing organization in Canada.

Torrent has got the ownership of Heumann Pharma, a general drug making company and, formerly, a subsidiary of Pfizer. Matrix has acquired Docpharma, a major pharmaceutical company of Belgium. Sun Pharmaceutical Industries is set to make acquisitions in pharmaceutical companies in the US and has set aside $450 million to execute these plans. In Bengaluru, Strides Arcolab has aimed at acquiring 70 percent in a pharmaceutical facility in Italy that is worth $10 million.

Mergers and Acquisitions in European and Asian Pharmaceutical Sector

As per several financial experts, the mergers and acquisitions in the pharmaceutical industry of Europe and India are meant to go on. In the Indian pharmaceutical scenario the mergers and acquisitions are supposed to go on a medium term. Factors like the execution of new patent regimen and companies dealing in specific pharmaceutical products are supposed to be the main driving factors behind the expected continuance of mergers and acquisitions in the Indian pharmaceutical market.

Opportunities for Pharmaceutical Companies

There are a number of opportunities for the major pharmaceutical products and services providers in the Indian pharmaceutical sector as the price controls have been relaxed and there have been significant changes in the medicinal requirements of the Indians. The manufacturing base in India is also strong enough to support the major international pharmaceutical companies from the performance perspective.

This may be said as the Indian pharmaceutical market is varied as well as economical. It is expected that in the coming years the Indian pharmaceutical companies would be executing more mergers and acquisitions. It is expected that the regulated pharmaceutical markets in the United States and Europe would be the main areas of operation.

In the recent years the Indian pharmaceutical companies have been venturing into mergers and acquisitions so that they can gain access to the big names of the international pharmaceutical scenario.

Patterns of Mergers and Acquisitions in Pharmaceutical Sector

One of the major features of the mergers and acquisitions in the pharmaceutical sector of the Asia-Pacific region has been the integration of the local pharmaceutical companies. This has happened especially in India and China. Acquisition has made it convenient for a number of companies to do business in various pharmaceutical markets.

Previously the pharmaceutical markets of Europe were closed to the companies of other countries due to the difference in language. There were also other problems for companies like the trade barriers for instance.

Figures of Mergers and Acquisitions in Pharmaceutical Sector

As per the figures of mergers and acquisitions in pharmaceutical sector, from the year 2004, there have been more mergers and acquisitions in the pharmaceutical sector in the Asia-Pacific region compared to North America. The combined financial value of the mergers and acquisitions in Asia-Pacific region has been greater than North America.

One of the major merger and acquisition deals in the Asia-Pacific region in the recent years has been the merger of Fujisawa and Yamanouchi in Japan. This deal was worth $7.9 billion. In the same period the Asia-Pacific region has experienced the highest percentage of growth in the mergers and acquisitions in pharmaceutical sector.

In the same period the rate of growth in the Asia-Pacific region has been 37%. In Western Europe the rate of growth has been 11% and in North America it has been 20%. The pharmaceutical market in Eastern Europe has not experienced any increase in the rate of mergers and acquisitions.

Mergers and Acquisitions in Global Pharmaceutical Sector

Since the year 2004 there has been an increase in the mergers and acquisitions in the global pharmaceutical sector. This was reflective of the increase in the mergers and acquisitions in other industries at the same period. There was 20% increase in the number of deals, which stood at 1,808. There were eight deals with the value of more than $1 billion. This was three more than 2003.

The total financial value of the deals was $112 billion and this was an increase of 53%. However, these figures do not include the acquisition of Aventis by Sanofi-Synthelabo that was worth $60 billion. This is the biggest acquisition in the pharmaceutical industry after the merger of Pharmacia and Pfizer in 2002.

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