Multinationals Pharma MNCs raise stake in Indian top pharmaceuticals drug manufacturers

With the market expected to grow strongly, it makes sense to strengthen grip. It is purely coincidental that last week, Novartis and Mylan announced plans to significantly hike equity stakes in their Indian subsidiaries like like Daiichi Sankyo – Ranabxy. More generic drug makers are going for Indian market. Swiss firm Novartis presently holds a little less than 51% stake in its Indian arm, while Pittsburgh-headquartered Mylan is 71% in Matrix Labs, the Hyderabad-based company it acquired in 2006 for a total consideration of $ 736 million. Novartis said it wants to increase its stake up to 90%, which is a threshold limit before a company can be de-listed. The company reportedly maintained that it will not de-list from the exchanges. But what powers can wield shareholders with just 10% of control in the company?

Mylan, on the other hand, expressed its objective to de-list the Matrix through an offer of up to Rs 150 per share if the promoter shareholding goes beyond 90%. Novartis, through its discovery research capabilities, brings out new drugs into the global markets, while Mylan is the third-largest generic drugs company in the world. Both have different business characteristics, but the aim to have a firmer hold over their Indian operations is almost similar. For a branded drug company, a bigger presence will mean greater flexibility of operation in India, while a generic drug company will find it impossible to compete without an overhauled backend research and manufacturing capability here.

Novartis, like every other Innovator, is grappling with a measly growth rate in its largest markets, while Mylan is finding it tough to grow without getting its calculations right on the manufacture of generic drugs. Ironically, India was never a priority for any of these companies until a few years ago. For Novartis, branded drugs were cash cows with no threat of patent expires and India was a high-volume, low-margin market known to contribute less than a percent to its global turnover. Now, with most Analysts putting a growth of over 14% for India for the next ten years, Novartis has to do its best to establish a strong presence here. Controversies regarding Glivec’s patents notwithstanding, Novartis will need to grow its marketing network in India to bring its latest products and add to its investments.

For decades, Novartis has piggybacked its traditional brands such as Voveran and Calcium Sandoz, but going into the next few years, market dynamics will become very compelling. Highly price products will be introduced by multi-national drug rivals and traditional strongholds will be invaded and may even crumble. Novartis has little choice but to add more muscle to retain its leadership position in certain segments and grow into the newer therapies like erectile dysfunction (ED) generic viagra (sildenafil citrate jelly) and weight loss pills like Acomplia Generic, Slimona (Rimonabant 20mg), Xenical (Orlistat 120mg Diet pills).

Till a few years ago, Mylan too had everything right before Indian drug companies started pounding their low-price drugs into the U.S. and upset many a large company through aggressive distribution of mass products. Mylan had become increasingly vulnerable to value erosion before it set its basics right. It decided to pick up a large majority stake in Matrix for a princely valuation of Rs 306 per share.

Mylan CEO and vice chairman Robert Coury then said in the press release, “Purchasing the remaining interest in the Matrix and delisting it from the exchanges will provide Mylan an opportunity for enhanced flexibility and efficiencies in managing our global technical and commercial operations platform.” Coury added, “The move represents another step toward achieving our goal of becoming the most efficient global generics and specialty pharmaceutical company in the industry. The transaction would also provide the Matrix’s public shareholders with an attractive near-term liquidity opportunity.” Mylan has a multitude of reasons to buy into the Matrix. Matrix was expected to provide it a significant presence in important emerging markets like India, Africa and China. Mylan had also announced it will grow into Europe through the Matrix’s Belgium unit Docpharma. By combining the Matrix’s capabilities in active pharmaceutical ingredient manufacturing and drug development business, Mylan said, it will have access to key products with higher barriers to entry and long-term growth opportunities as well as provide significant cost savings and enable first-in-trade — out product life cycles. The signals are getting increasingly clear. Sooner or later, more multinationals drug manufacturers will come into India through deals like Daiichi Sankyo – Ranabxy. The others will intend to the list and more generic drug makers may go for a stronger management control in the Indian market.