European and US investors will turn to India for acquisitions, report says

Mergers and acquisitions in the pharma sector more buoyant than other industries

Even as economic weakness continues to hamper industrial growth in Europe and the US, investors from these countries are set to look to India for mergers and acquisitions, says a new report. The pharmaceutical sector is set to see a good number of acquisitions in 2013–14, according to Savan Godiawala, Senior Director at global financial consultancy firm Deloitte Touche Tohmatsu.

This view has been reinforced by another agency. Global deal tracking firm Mergermarket says that M&A activity in the Asia-Pacific region declined 26.1% in the first quarter of 2013, and the drop was even sharper in India where deal activity declined by more than 83% from US$17.2bn to $2.9bn amid concerns about the country’s economy.

The only silver lining was the value of M&A deals in the pharma space, which more than trebled from the first quarter of 2012, making it the biggest contributor to Indian M&As by value in the period January to March 2013.

Mylan’s offer for two of Strides Arcolab’s subsidiaries was the largest deal this quarter and at $1.6bn, accounted for 55.1% of the aggregate deal value in India, the report said.

However, according to consultancy firm Deloitte, the Indian government’s thought process to link patented drug prices to the country’s per capita income in relation to certain developed markets is set to result in delayed patented drug entry into India.

According to the company’s 2013 global life sciences outlook, the debate over compulsory licensing remains a contentious issue in India. Innovator drug majors are also likely to face several challenges such as margin pressure from pharma generics and complex regulatory policies, the agency has said.

India has witnessed a spate of such challenges recently. In April, India’s Supreme Court rejected Swiss pharma giant Novartis’s plea for patent protection on cancer drug Glivec, while in March India’s Intellectual Property Appellate Board upheld a compulsory licence granted to domestic firm Natco Pharma, allowing it to produce cheaper generic versions of Nexavar, a patented drug of Bayer Corporation used for treating liver and kidney cancers.

However, Deloitte has said that despite challenges, the outlook for 2013 is promising. ‘There is an inherent demand for healthcare products and services due to India’s large patient base and increasing awareness of wellness by its growing population,’ it said in a report.

Moreover, since both the government and private sectors are increasing their initiatives to improve health and enhance medical coverage to rural and low-tier cities, the outlook is bright, the agency added.

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