Friday, May 21, 2010

Abbott Charges Into India

Rumors have been circulating for weeks that Piramal, one of India's leading biopharma players, was up for sale. And just as staunchly, management tried to quell the gossip (as recently as yesterday--if you are keeping track.)

Turns out there was quite a bit of truth to the rumorville. Only the buyer wasn't one of the usual suspects. Both GlaxoSmithKline and Sanofi-Aventis' names have been twinned with Piramal in part because of their aggressive moves into both emerging markets and branded generics.

The ultimate winner of Piramal? Abbott, which has been making its own waves in recent weeks through last week's collaboration with Zydus Cadila and the creation of its established product unit.

Abbott claims the deal gives it the numero uno position (in Hindi, that's नंबर एक or nambara ēka) with 7% market share in the Indian pharmaceutical market, but those bragging rights are costing it a pretty penny. Abbott will pay a total of $3.7 billion dollars for Piramal. Interestingly, not all of it is upfront cash--Piramal gets an upfront payment of $2.12 billion and then $400 million annually for the next four years starting in 2011. (A hedge perhaps to mitigate the snafus Daiichi Sankyo has encountered with Ranbaxy?)

Structured this way, Abbott says the transaction, which is still subject to Piramal shareholder approval, will not impact its ongoing earnings per share guidance in 2010. The diversified health care company plans to fund the deal with cash on the balance sheet.

The strategy behind Abbott's deal is obvious and one familiar to IN VIVO Blog readers. Indeed, it can be summed up in three catch phrases: diversification, branded generics, emerging markets. Abbott's CEO and chairman Miles White decided to elaborate however, stating in the press release announcing the news:

This strategic action will advance Abbott into the leading market position in India, one of the world's most attractive and rapidly growing markets. Our strong position in branded generics and growing presence in emerging markets is part of our ongoing diversified pharmaceutical strategy, complementing our market-leading proprietary pharmaceutical offerings and pipeline in developed markets. (Highlights courtesy of IN VIVO Blog.)
We'll have more on the deal later in "The Pink Sheet" DAILY and PharmAsia News. But for now we'll go out on a limb and say that one of the immediate impacts of the deal has got to be the increased liklihood of getting an authentic curry in Abbott Park, Illinois.

Image courtesy of flickrer christopherhu used with permission through a creative commons license.

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