All opinions are my own.

Tuesday, May 25, 2010

Microscopic Examination of Indian Pharmaceutical Acquisitions by Multinational Companies

Brand companies establishing beachhead in India is a logical choice as they see access to market to growing at 10+ percent. India is source of revenue and profit replenishment for the multinationals. End result of such acquisitions is going to higher drug prices for the masses or government intervention. It would be interesting to see what develops.

There is an underlying question about the sales of Indian pharmaceuticals companies. Why?

Since 2005 Indian companies have challenged the multinationals and have forced a landscape change. Why are the companies being sold now when they have created very successful franchises? One could say the price was too good to refuse. May be, but has anyone considered another reason i.e. lack of succession in the entrepreneur families or letting the trained managers run and grow the companies to compete with the brand companies.

Singh family (Ranbaxy) allegedly had family feud and they brought in Dr. Brian Tempest to cool the storm. However, under Singh family regime there were lapses as manifested by US FDA’s actions. Were the lapses beyond control to fix? Under these circumstances Singh family got an offer they could not refuse. Could that be the case with Piramal family?

Consolidation within India i.e. one successful company buying other pharmaceutical company is not in the culture. Thus unless there is strong succession planning, we will see repeats of Matrix Labs, Ranbaxy, Shantha Biotech and Piramal Healthcare.

If the entrepreneur families do not pass the baton to trained professionals, I believe Indian pharmaceuticals, API (active pharmaceutical ingredient) companies, formulators and other associated with the pharmaceuticals could be selling out to MNCs. It will be a case of take your money and run.