38 BIOAnalysis
BioSpectrum | November 2017 | www . biospectrumindia . com
HIGHLIGHTS
• Fosun Pharma acquires 74 per cent in India ’ s Gland Pharma at a valuation for $ 1.09 billion .
• The residual stake will remain with the founder ’ s ( Penmetsa ) family .
• Gland Pharma ’ promoters Ravi Penmetsa and his father P V N Raju will continue on the board of the company . Ravi Penmetsa would remain managing director .
• The present management team will be incharge of the day to day running of the company .
offerings . More importantly , this acquisition will give Fosun easy access to the US and Europe markets as well as increase its presence in Asia and India . According to Fosun ’ s filing , Gland revenues in the fiscal year ending in March were Rs 1,490 crore ($ 232 million ), with 3.14 million rupees in profits .
Sanjeev Kumar , Industry Manager , Transformational Health : Life Sciences , Frost & Sullivan , highlighted , “ There is a huge opportunity in the injectable industry . In the US alone , over 20 billion injectable drugs are expected to expire in next 5-6 years . Owing to these prospects the market has attracted large pharmaceutical firms to look for expanding in injectable business either by acquisition or through strategic partnership . For example , Mylan , acquired the injectable business of Strides Shasun Ltd in 2013 , several other pharma companies such as Baxter , Torrent pharmaceutical etc . are also looking to increase the investment in this segment . Gland pharma is one of the leading developer and manufacturer of generic injectables , which is strategically based in India . Several of its manufacturing facilities are approved by USFDA . Also , a majority of Gland Pharma ’ s business comes from the US . Therefore , if Fosun collaborates with Gland Pharma , it will have instant access to the US market as well as several other semi-regulated markets .”
Fosun ’ s gain ?
India ’ s concerns over the Gland-Fosun deal are not , however , a result of the border tensions , Reuters reported , citing sources familiar with the matter .
The concern is largely about India losing its edge on a particular pharma segment where it has significant presence internationally . “ They have more to do with giving control of a large pharma company to a Chinese entity ,” the source said .
Sanjeev Kumar , said , “ Fosun earlier wanted a larger share in Gland Pharma , hence offered to buy 86 % stake in the company . Due to Dokalam tension between India and China , this deal came under heavy and stringent scanner . Practically it was never taken up by the Cabinet Committee of Economic Affairs and was consequently put on hold mainly due to concerns over the foreign takeover of a leading local drug exporter .”
But is a 74 per cent stake with a Chinese company , really that different from an 86 per cent stake ? Last year with an aim to promote the sector , Indian government allowed 74 per cent FDI in existing Indian pharma companies with few preconditions such as maintaining research expenditure and meeting production volumes to ensure availability of essential medicines .
“ With the objective of promoting the development of this ( pharmaceutical ) sector , it has been decided to permit up to 74 per cent FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74 per cent will continue . The move to permit 74 % FDI under automatic route in Brownfield pharmaceutical sector is aimed at attracting required capital , international best practices and latest technologies in the sector , an official statement from the Indian Ministry , said .
“ The government of India had relaxed the foreign investment rules last year itself ,” explained Sanjeev Kumar , “ Allowing foreign companies to invest up to 74 per cent in local drug manufactures without government approval . As Fosun pharma was still highly interested in investing in this company , they took a faster route .”
But what has largely changed in the deal except for a small percentage of stake is something that remains to be answered . Fosun still has a majority stake of the company and though non-wholly owned has control over decision making , gains access to Gland ’ s facilities and products . Everything largely remains the same , with the only difference that the founder family retained a larger share . Earlier , in 2016 , while commenting on the revised guidelines , Indian Pharmaceutical Alliance secretarygeneral Dilip G . Shah had told IANS that “ with 74 per cent FDI , the government ’ s control is totally gone . Though the move may not adversely affect the industry , the move has some risks as certain Indian assets like the injectables facilities are the jewels of the industry and time alone would tell if acquisitions have been helpful or harmful .” For now , one Indian jewel is with the Chinese .
Aishwarya Venkatesh aishwarya . venkatesh @ mmactiv . com