Arashakar Log in Keep me signed in. Abbott acquisition of St. The stock markets reacted negatively to the deal. BOis booming as governments battle rising healthcare costs.
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Quote In May, U. At the same time, hopes have receded of a wholly Indian pharmaceutical major emerging as a global player.
According to Wharton faculty and industry experts, changing global business models and the resources needed to develop blockbuster drugs are propelling Indian companies to join forces with multinationals through strategic alliances or as targets for acquisitions.
Based in Abbott Park, Ill. The Abbott-Piramal combine reports to him, but he notes it will be run as a standalone business unit after the merger takes effect later this year. The Abbott-Piramal deal is the latest in a wave of consolidation within the global pharmaceutical industry over the past few years. Wharton management professor Saikat Chaudhuri says the relatively higher valuation makes sense for Abbott. On top of that, India is a growing market. Globally, Abbott also faces the pressure of playing catch-up with its bigger rivals.
There are a limited number of Indian generics companies that are attractive, and there might be considerable competition for them. The U. It will, however, continue research in drug discovery through an affiliate company. Piramal Healthcare also retains custom manufacturing, over-the-counter consumer products, diagnostic medical devices and services and clinical research, among other activities. Indian companies can hope to become truly global pharmaceutical companies only through drug discovery, says Piramal.
Now, Piramal on its own has that opportunity. Increased funding expands the scope for drug research, but that alone is not enough; other pieces have to fall in place, Piramal notes. You have to create a whole organization, and that takes time. It allows Abbott to commercialize two dozen Zydus Cadila drugs in 15 emerging markets. The collaboration includes medicines for pain, cancer and cardiovascular, neurological and respiratory diseases, with product launches beginning in Abbott and other Big Pharma companies face the twin challenges of slow growth in the developed markets and maturing product pipelines that are getting harder to replenish with newer, blockbuster drugs, according to Chaudhuri.
In the past few years, they have realized that those pipelines are running dry, and are trying to diversify. The potential to expand with very high priced specialty products is seriously limited. Food and Drug Administration charged the Indian company with numerous violations on quality and safety fronts, and banned some of its drugs. That is one reason pharmaceutical multinationals are doing deals with the relatively small number of well established Indian companies that have met international standards in manufacturing.
Several other deals occurred over the past one year. Changing Business Models — and Commitment All the same, the West continues to dominate pharmaceutical innovation, and companies in India and other emerging markets could play a supportive role, according to Danzon. Chaudhuri acknowledges those new realities, but with a patriotic tinge. As Ranbaxy, Dr.
These other players are not even interested in doing that. The earlier regime recognized patents on pharmaceutical processes but not on pharmaceutical products, allowing companies to reverse-engineer copies of the branded and patented drugs of western companies.
It makes a lot of sense if they can pull off all the integration issues. Danzon points to Dr. For consumers, the great value in generics is getting it cheaper. But that is also changing, she says. Mexico, for example, is in the process of changing its regime to require generics to be bioequivalent, she says. It is not so much a concern about the downside, but about how we maximize the opportunity.
A ‘Bigger Foothold’: What Does the Abbott-Piramal Deal Mean for Indian Pharma?
The Indian drug maker, which itself has made 15 acquisitions since , insists it will remain in the industry and invest in the remaining business. Abbott will add branded generic drugs from the Piramal portfolio, including Phensedyl, one of the top two pharma brands in the country. Ajay Piramal, however, reiterated that he was not exiting the business. For MNCs, emerging markets, with their cheaper generic medicines, are turning out to be the new battleground, given that most are witnessing stalled sales in Western markets.
Abbott buys Piramal's pharma arm for $3.7bn