If we go back few years, Indian Pharma companies were making acquisitions to expand manufacturing capabilities and to also increase their portfolio of generic drugs, which are copycat versions of branded medicines. However, in the past couple of years, the focus has shifted from acquisitions to buying companies, assets or products in the specialty, complex generics or branded space as these acquisitions have the potential for much higher returns.
Major drug makers of India are trying to build a pipeline of differentiated high-value as well as high-margin products in the specialty and complex generics space by increasing investments in R&D and through acquisitions, as the growth rate in the bread and butter generic drugs business is slowing due to pricing pressure in the US which is the biggest market for most companies.
Largest drug maker of the country, Sun Pharma, has been the frontrunner in making strategic acquisitions in these segments. In the year 2016, Sun Pharma acquired as many as 14 branded drugs from Novartis for the Japanese market for US$ 293 million, bought US-based Ocular Technologies for an upfront payment of US$ 40 million along with branded cancer drug Odomzo from Novartis for an upfront payment of US$ 175 million.
Other leading pharma companies such as Lupin, Dr. Reddys and Cipla have also indicated that they will watch out for strategic M&A opportunities in differentiated products and drug delivery systems.
According to the market experts, a large chunk of M&A deals in the pharmaceutical sector next year will continue to be outbound, mainly in the regulated markets such as US, Europe and Japan, along with some in emerging markets, while domestic deals are likely to be in the area of over-the-counter products and active pharmaceutical ingredients (APIs). On the other hand, inbound acquisitions will be few, although Chinese firms are showing interest.
Apart from M&As, the companies will also focus on alliances or joint ventures for biosimilars, as some of Indian companies that are building biosimilars portfolio will look for a marketing front end in developed markets. Meanwhile, the healthcare space of the country, including hospitals and diagnostics clinics, will continue to garner interest from the private equity players next year but investors will be more cautious regarding the quality of the asset or sustainability of the business in which they are investing, experts further added.
Multibagger Pharma Companies
For your investment options, you may keep an eye on the following Multibagger stocks identified by Dynamic Levels.
- Neuland Lab
- Piramal Enterprises
- RPG Life
- Shilpa Medicare
blog comments powered by Disqus
These pharma stocks have been carefully handpicked by the Research analysts of Dynamic Levels based on their strong fundamentals.