The landscape of multinational pharmaceutical companies in India is undergoing significant changes, characterized by dwindling drug portfolios, consolidation in the formulations sector, and the desire of some Indian promoters to exit the market. These factors are currently driving an increase in deal-making activities within the domestic pharmaceutical sector.
Mergers and acquisitions within the pharmaceutical industry are expected to experience a significant surge as promoters of highly leveraged companies seek to exit. This trend is driven by mounting compliance costs and pricing pressures in both the domestic and US markets.
Indian strategic buyers are increasingly making acquisitions within their home market, while private equity giants like KKR, Carlyle, and Advent are intensifying their efforts by establishing platforms in high-growth domestic formulations and active pharmaceutical ingredient (API) businesses. Recent deals such as JB Chemicals and Suven Pharma exemplify this trend. Industry experts predict that the surge in private equity activity, which began just before the pandemic, will continue to accelerate over the next few years.
Promoters are choosing to cash out due to factors such as escalating price controls, heightened regulatory scrutiny in the US, and diminishing opportunities in the lucrative Para IV segment. These challenges have created a challenging business environment, as noted by Sujay Shetty, Global Health Industries Advisory Leader at PwC India.
Interestingly, some of these same factors played a role in the significant sale of pharmaceutical giant Ranbaxy by the Singh family back in 2008. Led by Malvinder Singh, Ranbaxy’s promoters decided to divest their entire family stake, nearly 35%, to Japan’s Daiichi Sankyo for Rs 10,000 crore, making it one of the largest deals in the Indian pharma industry.
In the present day, the promoters of Cipla, India’s third-largest pharmaceutical company, are contemplating the sale of the family’s stake, with the second generation showing little interest in continuing to manage the business. In recent developments, Mumbai-based Glenmark Pharma announced the divestment of 75% of its subsidiary, Glenmark Life Sciences, to Ahmedabad-based conglomerate Nirma for Rs 5,652 crore. Additionally, US-based Viatris (formerly Mylan) is divesting its active pharmaceutical ingredients and women’s healthcare businesses in India, with a combined value of $1.2 billion (nearly Rs 10,000 crore), as part of a global divestment worth $3.6 billion.
Furthermore, prominent domestic players are increasingly focusing on India as an attractive diversification strategy, given the challenges faced by the US generics market due to significant price erosion. Consequently, several deals have been struck where Indian companies have acquired high-growth brands from local sellers at appealing valuations. For instance, Mankind Pharma acquired Panacea’s domestic formulations business last year, while three years ago, Dr. Reddy’s acquired certain brands from Wockhardt, and Torrent Pharmaceuticals purchased Unichem’s branded formulations assets in 2017.
This represents a notable shift from a decade ago when foreign firms like Abbott, Daiichi Sankyo, and Sanofi made headlines with substantial acquisitions of domestic companies such as Piramal Healthcare, Ranbaxy, and Shantha Biotec, respectively.