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Mergers & Acquisitions in Pharmaceutical Industry.pptx

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MERGERS & ACQUISITIONS IN PHARMACEUTICAL INDUSTRY
INTRODUCTION Pharmaceutical industryin India is ranked 3rd in volume terms and 14th in value terms globally. Indian pharmaceutical industryis estimated to be worth US $ 4.5 billion, growing at about 8 to 9 per cent annually. Medical devices Brand Medications Generic Drugs Traditionally relied on reverse engineering
TYPES OF MERGERS & ACQUISITIONS Acquisitions Mergers Friendly Hostile Horizontal Congeneric Conglomerate Vertical
MERGERS & ACQUISITIONS DEALS (OUTBOUND) Company (Acquirer) Company (Target) For Amount Biocon Axicorp (German) $30 million Dr. Reddys Labs Trigenesis Therapeutics (USA) $11 million Wockhardt Esparma (German) $11 million Wockhardt C.P Pharmaceuticals (UK) $17.9 million Wockhardt Negma Laboratories (France) $265 million Wockhardt Morton Grove Pharma (USA) $38 million Zydus Cadila Alpharma (France) Euros 5.5 million Ranbaxy RPG Aventis (France) $70 million Nicholas Piramal Biosyntech (Canada) $4.85 million Sun Pharma Taro (Israel) $500 million Cadila Healthcare Quimica e Farmaceutica Nikkho $26 million
MERGERS & ACQUISITIONS DEALS (INBOUND) Company (Acquirer) Company (Target) For Amount Daiichi Sankyo (Japan) Ranbaxy (India) $ 4.2 Billion Abbott (USA) Piramal (India) $ 3.72 Billion Sanofi Aventis Shantha (India) $ 783 Million Mylan (USA) Matrix (India) $ 736 Million Reckit Benckiser Paras (India) $ 724 Million Hospira Orchid (India) $ 400 Million Fresenius Kabi (German) Dabur Pharma (India) $ 219 Million Abbott (USA) Wockhardt (India) $ 22.5 Million
REASONS FOR MAKING MERGERS AND ACQUISITIONS To acquire complementary products, in order to broaden the line. To acquire new markets or distribution cha nnels. To acquire technology, to complement or replace the currently used one. Lack of R&D productivity. Expiring patents. Generic Competitions LAW REGARDING MERGERS AND ACQUISITIONS The Companies Act, 2013 (Section 391-394) The SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 The Income Tax Act, 1961 The Competition Act, 2002 (Section 5, 6, 20, 29, 30, & 31)
MAJOR MERGERS & ACQUI SITIONS OF PHARMACEUTICAL INDUSTRY MAJOR DEALS PFIZER WYETH DEAL RANBAXY DAICHII SANKYO PIRAMAL ABBOTT DEAL
P FIZE R WY ETH DEA L On 26 Jan 2009 Pfizer acquired Wyeth at $68 billion. Pfizer mission "To become a premier bio pharmaceutical company in the world". REASON OF ACQUISITION Patent expiration- Lipitor (atorvastatin). Norvasc (amlodipine) lost patent exc lusivity The Zyrtec (cetirizine) franchise indicated for a llergic rhinitis. Sildenafil (Viagra) - Erectile dysfunction treatment IMPACT OF DEAL ON PFIZER AND WYETH Wyeth will expand Pfizers presence in non-prescription pharmaceutical markets. Pfizers diversification into therapeutic protein and vaccine markets. the merger will crucia lly a llow Pfizer to retain its status as the industry's biggest selling company. The combined Pfizer-Wyeth entity would derive around 89% Of prescription pharmaceutical revenues from small molecules, 7%from therapeutic proteins and 5% from vacci nes. Pfizer-Wyeth will initially have a negligible presence in the high-growth monoclonal antibodies market also It would diversify Pfizer into vacci nes a nd injectable bio logic medicines by adding Wyeths big- selling Prevnar vacci ne for childhood infections a nd Enbrel rheumatoid a rthritis treatment
RA NBAXY DAICH l l SANKYO DEA L Ranbaxy Laboratories on June-11, 2008 said it was giving up-control to Daiichi Sankyo, the No. 3 Japanese pharmaceutical company. REASON OF ACQUISITION Ranbaxy under FDA scrutiny As a culmination of this problem, Ranbaxy faced a ban in September 2008 Daiichi Sankyo, at the other end has suffered a heavy increasing selling, general and administrative (SGA) expenses to the tune of 10% from 2006 levels to $3128.9 million IMPACT OF ACQUISITION ON RANBAXY AND DAIICHI Daichii can effectively use Ranbaxy Low-cost manufacturing infrastructure and supply chain strengths Strength in proprietary medicine complements Ranbaxys leadership in the generics segment and acquired a broader product base Ranbaxy could bypass a lot of European and U.S. companies that are finding it difficult to enter the Japanese market, where safety and testing requirements are a lot higher. This deal will make the combined company the 15th largest pharma company in the world
PIRA MAL-ABBOTT DEA L Abbott acquired Piramal at May 2010 IMPACT OF DEAL ON PlRAMAL AND ABBOTT Piramal portfolio has 350 leading branded generics Establish a in multiple therapeutic leading areas, presence in Piramal give Abbott critical branded mass and a generics comprehensive leading portfolio of branded generics.
IMPACT OF MERGERS AND ACQUISITIONS ON PHAR MACEUTICAL MARKET Indian pharmaceutical market is changing under the light of the below three aspects Cost effective manufacturing being implemented by developed economies Growing importance of emerging markets Changing significance of lndias domestic market Positive Impact of M&A on pharmaceutical market Improve global competitiveness Move up the value chain Creation a nd entry to new markets Increase their product portfolio Acquire assets (including research and contract manufacturing firms, in order to boost their outsourcing capabilities) and new products Negative Impact Indian firms face some challenges such as decreasing profits in the generics market, competitive threats from big pharmaceutical MNEs fierce competition from Chinese and Eastern European manufacturers.
IMPACT OF MERGERS AND ACQUISITIONS ON R&D DEVELOPMENT One of the most obvious reasons to merge or acquire is a shortfall in the R&D pipeline This was the position Glaxo faced in 1995 when Zantac, the world's best-ever selling drug at the time was coming to the end of its lifespan. Following its timely acquisition of Welcome ,the company renewed its pipeline to create a substantia l and innovative asset To diversity of knowledge from successful! industry resulting innovation new drug Negative impact R&D seems to be especially vulnerable to the negative impact of mergers and acquisitions. For example, comparing data from Pfizers pipeline updates(which are posted on its website every 6 months) before the Wyeth merger in February 2008, and in February 2011,reveals that 40% of the compounds (not including those from Wyeth) have been in Phase II development for more than 3 years
Mergers & Acquisitions and New Molecular Entity Drugs When research-based pharmaceutical companies perform mergers and acquisitions Sales Revenue Increase Funds of Research Increase Productivity Increase New Products Come Into Market
IMPACT OF MERGERS AND ACQUISITIONS ON WOR KERSOR EMPLOYEES In the event when a new resulting company is efficient businesswise, it would require less number of people to perform the sa me task. Under such circumstances , the company would attempt to downsize the labor force. When Daichii Sankyo acquiresRanbaxy many employee have loosed their jobs Positive I mpact One is through an increase in the scale factor, which in turn will reduce the total cost of production of the merging firms, which will result in the better performance Mergers a nd acquisitions may give monopoly power to the merging firms in the market and this will give them powers to increase the 'mark-up' which again lead to high prices and ultimately to high profits Negative Impact Sometimes mergers will reduce the performance of the merging firms if it acquires loss-making firms and are notable to derive the expected synergies IMPACT OF MERGERS AND ACQUISITIONS ONPERFORMANCE
PRODUCT DIVERSIFICATION AND MERGERS & ACQUISITIONS Product Diversification through Consolidation Firms may opt for mergers in order to reduce the risk a nd uncertainty. If a firm is more diversified, then there is greater possibility of obtaining sta ble return. Any losses in one particular market ca n be offset by profit in some other market.Therapeutic categories a nd thereby not only reduce risks, but also expand their market size. Pfizer Wyeth deal
CONCLUSION The key principle behind buying strong company is to c reate sha reholder value over a nd a bove that of the sum of the two companies To create a more competitive, cost-efficient company 75% of large mergers fail to create share holder value greater tha n industry averages Productivity drops 50% following the a nnouncement of a merger. Employee satisfaction drops 14% following mergers.

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Mergers & Acquisitions in Pharmaceutical Industry.pptx

  • 2. INTRODUCTION Pharmaceutical industryin India is ranked 3rd in volume terms and 14th in value terms globally. Indian pharmaceutical industryis estimated to be worth US $ 4.5 billion, growing at about 8 to 9 per cent annually. Medical devices Brand Medications Generic Drugs Traditionally relied on reverse engineering
  • 3. TYPES OF MERGERS & ACQUISITIONS Acquisitions Mergers Friendly Hostile Horizontal Congeneric Conglomerate Vertical
  • 4. MERGERS & ACQUISITIONS DEALS (OUTBOUND) Company (Acquirer) Company (Target) For Amount Biocon Axicorp (German) $30 million Dr. Reddys Labs Trigenesis Therapeutics (USA) $11 million Wockhardt Esparma (German) $11 million Wockhardt C.P Pharmaceuticals (UK) $17.9 million Wockhardt Negma Laboratories (France) $265 million Wockhardt Morton Grove Pharma (USA) $38 million Zydus Cadila Alpharma (France) Euros 5.5 million Ranbaxy RPG Aventis (France) $70 million Nicholas Piramal Biosyntech (Canada) $4.85 million Sun Pharma Taro (Israel) $500 million Cadila Healthcare Quimica e Farmaceutica Nikkho $26 million
  • 5. MERGERS & ACQUISITIONS DEALS (INBOUND) Company (Acquirer) Company (Target) For Amount Daiichi Sankyo (Japan) Ranbaxy (India) $ 4.2 Billion Abbott (USA) Piramal (India) $ 3.72 Billion Sanofi Aventis Shantha (India) $ 783 Million Mylan (USA) Matrix (India) $ 736 Million Reckit Benckiser Paras (India) $ 724 Million Hospira Orchid (India) $ 400 Million Fresenius Kabi (German) Dabur Pharma (India) $ 219 Million Abbott (USA) Wockhardt (India) $ 22.5 Million
  • 6. REASONS FOR MAKING MERGERS AND ACQUISITIONS To acquire complementary products, in order to broaden the line. To acquire new markets or distribution cha nnels. To acquire technology, to complement or replace the currently used one. Lack of R&D productivity. Expiring patents. Generic Competitions LAW REGARDING MERGERS AND ACQUISITIONS The Companies Act, 2013 (Section 391-394) The SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 The Income Tax Act, 1961 The Competition Act, 2002 (Section 5, 6, 20, 29, 30, & 31)
  • 7. MAJOR MERGERS & ACQUI SITIONS OF PHARMACEUTICAL INDUSTRY MAJOR DEALS PFIZER WYETH DEAL RANBAXY DAICHII SANKYO PIRAMAL ABBOTT DEAL
  • 8. P FIZE R WY ETH DEA L On 26 Jan 2009 Pfizer acquired Wyeth at $68 billion. Pfizer mission "To become a premier bio pharmaceutical company in the world". REASON OF ACQUISITION Patent expiration- Lipitor (atorvastatin). Norvasc (amlodipine) lost patent exc lusivity The Zyrtec (cetirizine) franchise indicated for a llergic rhinitis. Sildenafil (Viagra) - Erectile dysfunction treatment IMPACT OF DEAL ON PFIZER AND WYETH Wyeth will expand Pfizers presence in non-prescription pharmaceutical markets. Pfizers diversification into therapeutic protein and vaccine markets. the merger will crucia lly a llow Pfizer to retain its status as the industry's biggest selling company. The combined Pfizer-Wyeth entity would derive around 89% Of prescription pharmaceutical revenues from small molecules, 7%from therapeutic proteins and 5% from vacci nes. Pfizer-Wyeth will initially have a negligible presence in the high-growth monoclonal antibodies market also It would diversify Pfizer into vacci nes a nd injectable bio logic medicines by adding Wyeths big- selling Prevnar vacci ne for childhood infections a nd Enbrel rheumatoid a rthritis treatment
  • 9. RA NBAXY DAICH l l SANKYO DEA L Ranbaxy Laboratories on June-11, 2008 said it was giving up-control to Daiichi Sankyo, the No. 3 Japanese pharmaceutical company. REASON OF ACQUISITION Ranbaxy under FDA scrutiny As a culmination of this problem, Ranbaxy faced a ban in September 2008 Daiichi Sankyo, at the other end has suffered a heavy increasing selling, general and administrative (SGA) expenses to the tune of 10% from 2006 levels to $3128.9 million IMPACT OF ACQUISITION ON RANBAXY AND DAIICHI Daichii can effectively use Ranbaxy Low-cost manufacturing infrastructure and supply chain strengths Strength in proprietary medicine complements Ranbaxys leadership in the generics segment and acquired a broader product base Ranbaxy could bypass a lot of European and U.S. companies that are finding it difficult to enter the Japanese market, where safety and testing requirements are a lot higher. This deal will make the combined company the 15th largest pharma company in the world
  • 10. PIRA MAL-ABBOTT DEA L Abbott acquired Piramal at May 2010 IMPACT OF DEAL ON PlRAMAL AND ABBOTT Piramal portfolio has 350 leading branded generics Establish a in multiple therapeutic leading areas, presence in Piramal give Abbott critical branded mass and a generics comprehensive leading portfolio of branded generics.
  • 11. IMPACT OF MERGERS AND ACQUISITIONS ON PHAR MACEUTICAL MARKET Indian pharmaceutical market is changing under the light of the below three aspects Cost effective manufacturing being implemented by developed economies Growing importance of emerging markets Changing significance of lndias domestic market Positive Impact of M&A on pharmaceutical market Improve global competitiveness Move up the value chain Creation a nd entry to new markets Increase their product portfolio Acquire assets (including research and contract manufacturing firms, in order to boost their outsourcing capabilities) and new products Negative Impact Indian firms face some challenges such as decreasing profits in the generics market, competitive threats from big pharmaceutical MNEs fierce competition from Chinese and Eastern European manufacturers.
  • 12. IMPACT OF MERGERS AND ACQUISITIONS ON R&D DEVELOPMENT One of the most obvious reasons to merge or acquire is a shortfall in the R&D pipeline This was the position Glaxo faced in 1995 when Zantac, the world's best-ever selling drug at the time was coming to the end of its lifespan. Following its timely acquisition of Welcome ,the company renewed its pipeline to create a substantia l and innovative asset To diversity of knowledge from successful! industry resulting innovation new drug Negative impact R&D seems to be especially vulnerable to the negative impact of mergers and acquisitions. For example, comparing data from Pfizers pipeline updates(which are posted on its website every 6 months) before the Wyeth merger in February 2008, and in February 2011,reveals that 40% of the compounds (not including those from Wyeth) have been in Phase II development for more than 3 years
  • 13. Mergers & Acquisitions and New Molecular Entity Drugs When research-based pharmaceutical companies perform mergers and acquisitions Sales Revenue Increase Funds of Research Increase Productivity Increase New Products Come Into Market
  • 14. IMPACT OF MERGERS AND ACQUISITIONS ON WOR KERSOR EMPLOYEES In the event when a new resulting company is efficient businesswise, it would require less number of people to perform the sa me task. Under such circumstances , the company would attempt to downsize the labor force. When Daichii Sankyo acquiresRanbaxy many employee have loosed their jobs Positive I mpact One is through an increase in the scale factor, which in turn will reduce the total cost of production of the merging firms, which will result in the better performance Mergers a nd acquisitions may give monopoly power to the merging firms in the market and this will give them powers to increase the 'mark-up' which again lead to high prices and ultimately to high profits Negative Impact Sometimes mergers will reduce the performance of the merging firms if it acquires loss-making firms and are notable to derive the expected synergies IMPACT OF MERGERS AND ACQUISITIONS ONPERFORMANCE
  • 15. PRODUCT DIVERSIFICATION AND MERGERS & ACQUISITIONS Product Diversification through Consolidation Firms may opt for mergers in order to reduce the risk a nd uncertainty. If a firm is more diversified, then there is greater possibility of obtaining sta ble return. Any losses in one particular market ca n be offset by profit in some other market.Therapeutic categories a nd thereby not only reduce risks, but also expand their market size. Pfizer Wyeth deal
  • 16. CONCLUSION The key principle behind buying strong company is to c reate sha reholder value over a nd a bove that of the sum of the two companies To create a more competitive, cost-efficient company 75% of large mergers fail to create share holder value greater tha n industry averages Productivity drops 50% following the a nnouncement of a merger. Employee satisfaction drops 14% following mergers.