Eventful year for pharmaceutical sector

pharma

New Delhi: ‘Eventful’ would perhaps be the most apt term to describe the year 2008 for the Indian pharmaceutical industry, for it saw hefty excise duty cuts, foreign firms acquiring domestic ones, legal tussles against the USFDA ban on import of some drugs by the USFDA, et al.

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And hogging the limelight was none other than Ranbaxy Laboratories, which was accused of trying a hostile takeover of the Chennai-based Orchid Pharmaceuticals, and ended up itself being acquired by Japan’s Daiichi Sankyo in a total deal valued around Rs 21,000 crore, the largest-ever in Indian pharma industry so far.

Slideshow of the day: Bulls vanish in 2008

While Ranbaxy and Orchid settled for an amicable solution with the former taking less than 15 per cent stake in the latter, the Gurgaon-based firm could not prevent itself from a crackdown by the US Food and Drugs Administration (USFDA), which banned import of 30 of its generic drugs.

Pharma sector in good health in 2008

Not to be left behind, Sun Pharmaceuticals was also in the news for a good part of the year after its failed bid to take over Israel’s Taro Pharmaceuticals.

A year after striking a $454-million deal, Sun found that the Israeli firm was no longer willing to be acquired and what followed was a long-drawn court battle and a game of one-upmanship, with Sun making an open offer to Taro shareholders. The matter is far from being settled.

Pharma sector in good health in 2008

Yet, the year could not have begun on a better note for the industry, which is poised to become a $33-billion market by 2011-12, including $22 billion of exports (as per consultancy firm KPMG estimates). The then Finance Minister, P. Chidambaram, halved the excise duty on pharmaceutical products from 16 per cent to eight per cent in the Budget.

Towards the end of the year, excise duty came to four per cent when the Government announced another four percentage point cut in Cenvat.

The pharmaceutical companies were, however, not so pro-active as their counterparts in other sectors to pass on the benefits of the Cenvat cut and the price regulator National Pharmaceutical Pricing Authority (NPPA) had to step in and ask them to cut prices of some scheduled formulations.

With the proposed National Pharmaceutical Policy forgotten and failing to see the light of the day this year too, it was left entirely to NPPA to check the prices.

Major activity

One of the significant developments of the year was the reversal of the trend of Indian firms going for acquisitions abroad. Ranbaxy and Dabur Pharma came under the control of foreign firms in multi-crore deals.

In the first major merger and acquisition activity of the year, the Delhi-based Dabur Pharma was acquired by the Singapore-based Fresenius Kabi for around Rs 1,000 crore, when promoters, Burmans, sold off their entire 73 per cent. An open offer for another 20 per cent stake followed that gave Fresenius Kabi over 90 per cent control in Dabur Pharma.

The deal of the year, however, was that of Ranbaxy and Daiichi Sankyo. Ranbaxy promoters, the Singhs, decided to exit the company and offloaded their 34.82 per cent stake. It was followed by an open offer for 20 per cent and issue of preferential allotment and warrants, totalling 63.82 per cent stake that cost the Japanese firm around Rs 21,000 crore.

Malvinder Singh continued to be the CEO and Managing Director of Ranbaxy though.

Legal tussle

The Gurgaon-based firm was also in the news for some wrong reasons, with the USFDA tightening the noose around its neck. The American health regulator banned import of 30 drugs produced in Ranbaxy’s two USFDA approved plants located in Dewas and Poanta Sahib.

Ranbaxy had to face a motion filed by the US federal authorities, who alleged the drug maker of not following manufacturing standards and fabricating data made in regulatory filings.

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On the whole, it was a year when the pharmaceutical industry players had to swallow a mixture of bitter and sweet pills.

They would certainly be hoping that the coming year provides them more nutrients for a healthier growth.

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