The market for mergers and acquisitions (M&A) in the healthcare industry seems to be going through consistent change. In the last couple of years, M&A’s in the healthcare segment are booming.
Recently, private equity investor Advent International confirmed that it has entered into a definitive agreement to acquire a significant stake in Suven Pharmaceuticals. According to KaufmanHall’s M&A Quarterly Activity Report, although the start was slow, the revenue from the M&A activity in the sector in the second quarter of 2022 hit a record high of$19.2 Billion.
Due to a relatively healthy balance sheet and the desire for companies to consolidate their strength in certain areas or specialties making them either look at M&As or asset acquisitions. The recent momentum points out that these M&A activities will continue to heighten in 2023.
M&A Spree among Indian Players
Several leading Indian pharmaceutical companies like Biocon, Mankind, Lupin, Zydus Lifesciences, Torrent, Marksans Pharma, and Gland Pharma acquired brands to consolidate their growth in 2022. Experts told Financial Express.com that companies like Dr. Reddy’s and Cipla would be looking at branded domestic assets or deals in Emerging Markets. Meanwhile, companies like Sun Pharma would be looking at assets abroad. Reportedly, Aurobindo also has plans to look into some deals.
Last week, Sun Pharmaceutical Industries Ltd agreed to buy Concert Pharmaceuticals Inc. for $576 million to access the US company’s experimental drugs for treating skin diseases, including patchy hair loss. Reportedly, with an existing strong specialty business in the US, this move can strengthen Sun Pharma’s global dermatology franchise.
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Indian companies are now acquiring strategic small assets and brands for relatively smaller valuations that fit their business growth plans without straining their balance sheets as happened in the past. According to Bhavesh Shah, Managing Director – Consumer & Healthcare Banking, Equirus told Financial Express.com, M&A in the Indian Pharma space, so far in 2022, was essentially two-pronged: API and CDMO space and branded formulations segment with focused therapy areas.
“In the Healthcare space, it has been primarily dominant in the hospitals,” he added.
In India, generic injectable maker Gland Pharma had an interesting year. Several buyout firms including Advent International, Baring Private Equity Asia, Bain Capital, Blackstone, Carlyle and KKR have been approached to buy Fosun-owned Gland Pharma. Reportedly, if the deal becomes a success, then it will be India’s biggest pharma deal. Currently, Fosun owns a 57.86 per cent stake in the Indian generic injectable maker. With the acquisition, Gland pharma may also get access to global companies like AstraZeneca, Sanofi, Mylan, and Organon. On 29 November 2022, Gland Pharma acquired French Contract Development & Manufacturing Organisation (CDMO) Cenexi Group, for an equity value not exceeding 20 million euros or nearly ₹1,000 crore to expand its contract development and manufacturing business in Europe.
According to recent reports, Gland Pharma will fully acquire Cenexi. As India’s economy expands and matures, we are seeing trends towards consolidation in all healthcare and pharma verticals. M&A is being used to bolt-on and embed novel technologies, data assets, and scientific advancement within existing operations. Companies are looking to create a platform to create a strong entry barrier and establish themselves as an end-to-end service provider. Technology is playing an essential role in driving differentiation,” Sraboni Haralalka, Co-Founder and Executive Director, Wodehouse Capital Advisors Pvt Ltd. told Financial Express.com.
Haralaka also maintained that larger companies are looking to acquire start-ups with strong tech to create a strong moat as well as take data-driven decisions. According to VCCEdge, a data and intelligence platform, India’s healthcare firms spent $4.32 billion during January to June of 2022 on mergers and acquisitions (M&A), compared to $2.02 billion in the same period last year.
Lupin acquired two inhalation medicines, Brovana (arformoterol tartrate) Inhalation Solution and Xopenex HFA (levalbuterol tartrate) Inhalation Aerosol from US based Sunovion, owned by Sumitomo Pharma of Japan, for $75 million. Dr. Reddy’s Laboratories had acquired a portfolio of branded and generic injectable products from USA-based Eton Pharmaceuticals, for $50 million.
Sun Pharmaceutical acquired the Uractiv portfolio (food supplements including minerals, vitamins and adjuvants; cosmetics and medical devices used for maintaining urinary tract health) from Fiterman Pharma in Romania. In 2022, Aurobindo Pharma made two acquisitions- the domestic formulations business of Veritaz to enter domestic biosimilar business in March and 51% stake in GLS Pharma, which has a cancer drug making facility in Hyderabad. According to Varun Khanna, Co-Founder, Fast&Up told Financial Express.com, a lot of mergers and acquisitions in the pharma space have been happening at much larger scales, where turnovers are in four or five-digit crore rupees.