Big Pharma's Emerging Market Fever: Abbott Aims for the Top of India's Industry

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 |  Includes: ABT, ALPMF, OSIP, SNY
by: The Burrill Report

By Marie Daghlian

Emerging market M&A headlined the third week of May as Big Pharma continued its push into emerging markets. Abbott Laboratories (NYSE:ABT) wasted no time after creating its Established Product Division to expand its branded generics market share, especially in emerging markets. The company announced a definitive agreement with Piramal Healthcare Limited to acquire full ownership of Piramal's Healthcare Solutions business, one of India’s top branded generics companies, for an upfront payment of $2.1 billion, plus $400 million annually for the next four years. The $3.7 billion deal will make Abbott in the leader in the Indian pharmaceutical market.

Speculation had been rife that Piramal was poised to be acquired, most likely by GSK, Pfizer (NYSE:PFE), or Sanofi-Aventis (NYSE:SNY). But U.S. healthcare giant Abbott beat them to the table, moving as fast as its competitors to be a major player in the global market. The acquisition comes fresh off the heels of a product licensing deal with Zydus Cadilla, another top Indian pharmaceutical, and the 2009 acquisition of Solvay Pharmaceuticals.

“Emerging markets represent one of the greatest opportunities in health care not only in pharmaceuticals but across all of our business segments,” says Miles D. White, chairman and CEO of Abbott. “ Today, emerging markets represent more than 20 percent of Abbott's total business.”

"With this deal, the combined Healthcare Solutions and Abbott businesses will become the clear market leader in India, with a market share of approximately 7 percent,” according to Ajay Piramal, chairman of the Piramal Group. “This was our collective vision and I am glad that those who are part of Piramal's Healthcare Solutions business will realize this dream," he says.

India is one of the world's fastest-growing pharmaceutical markets, due in large part to branded generics. The market will generate nearly $8 billion in pharmaceutical annual sales this year, a number that is expected to more than double by 2015. Abbott estimates the growth of its Indian pharmaceutical business with Piramal to approach 20 percent annually, with expected sales of more than $2.5 billion by 2020.

Approximately 20 percent of Abbott's pharmaceutical sales today are in emerging markets. Piramal’s Healthcare Solutions will become part of Abbott’s newly created Established Products Division.

Rumors had also surrounded a possible takeover of Australia’s troubled generic pharmaceutical company and drug distributor Sigma Pharmaceuticals. Melbourne-based Sigma is Australia’s biggest drug distributor by market share.
The company had lost more than half its value after reporting a loss of almost $400 million, the resignation of its CEO Elmo de Alwis, most recently, the resignation of its CFO Mark Smith, and soon the resignation of its chairman, John Stocker. Amid these hardships, South Africa’s Aspen Pharmacare has stepped in to offer $1.2 billion, or 60 cents per share and assumption of debt, for the ailing company.

The offer represents a 71 percent premium to Sigma’s share price of 35 cents just before the announcement. It doesn’t really take into consideration, though, the fact that the company’s sales forecast for 2010 is almost $3 billion.

“The next key milestone will be Aspen’s due dilgence,” Dan Hurren, a health-care analyst at UBS AG in Sydney told Bloomberg news. “Sigma faces a range of problems both internal and industrywide.”

Sanofi-Aventis also continued its thrust into emerging markets through the acquisition of Poland’s Nepentes, a manufacturer of pharmaceuticals and dermocosmetics, for $130 million. A public tender offer for all of the outstanding shares of Nepentes was launched by Sanofi-Aventis sp. Z o.o, a subsidiary. Controlling shareholders of Nepentes have agreed to tender their 63 percent share ownership to Sanofi.

Finally, bringing a long deal-in-the-making to a close, OSI Pharmaceuticals (OSIP) agreed to be acquired by Japan’s Astellas Pharma (OTCPK:ALPMF) in a deal valued at $4 billion. Astellas finally closed the deal after it budged and sweetened its offer from the original $52.50 per share to $57.50 per share. For its money, Astellas will get revenues from cancer drug Tarceva and OSI’s pipeline of metabolic and oncology candidates.

Deals for the Week Ending May 17, 2010

Global Venture Financings
Company Location Amount Raised ($M)
Principal Focus
Cardoz Stockholm, Sweden 13.00 Cardiovascular
Cambridge Endoscopic Devices Framingham, MA 3.00 Surgical tools
Stemgent Cambridge, MA 5.60 Stem cells
TPP Global Development Edinburgh, UK 14.20 Drug development
Cytogel Pharma Darien, CT 2.20 Biopharmaceuticals
AndroBioSys Buffalo, NY 0.20 Diagnostics
Breath Technologies San Ramon, CA 23.00 Medical devices
Celula San Diego, CA 15.00 Diagnostics
Durin Technologies New Brunswick, NJ 0.20 Diagnostics
Arsenal Medical Watertown, MA 10.00 Ophthalmology, cardiovascular
NeuroTherapeutics Pharma Chicago, IL 43.00 CNS
Inova Labs Austin, TX 10.00 Medical devices
Pronota Ghent, Belgium 1.80 Diagnostics
Afraxis San Diego, CA 1.20 Fragile X
Itherx Pharmaceuticals San Diego, CA 2.80 Hepatitis C
Cyntellect San Diego, CA 9.00 Stem cells
GeneLogics Victoria, British Columbia, Ca 1.00 Healthcare IT
TOTAL RAISED US $125.20
TOTAL RAISED NON-US $30.00
Grants and Contracts
Company
Funding/Contracting Agency
Amount ($M)
Principal Focus
Grants
Protalix Biotherapeutics (Israel) Office of Chief Scientist 4.10 Plant-based protein therapeutics
Population Diagnostics National Institutes of Health n/a Parkinson's diagnostics
Lentigen NIH STTR n/a Gene delivery technology
InVasc Therapeutics NIH SBIR Phase 1 0.40 Vascular therapeutics
Sorrento Therapeutics NIAID STTR 0.60 Staph infection therapeutics
Contracts
Immunetics NHLBI 2.80 Blood safety diagnostics
Biovest International US Department of Defense 1.50 Vaccine production technology
Trius Therapetuics US DoD DTRA 29.50 Antibiotics
Total Grants and Contracts $38.90
PUBLIC FINANCINGS
Company
Ticker
Amount
Raised $M

Financing Type
Transgene (France) Euronext:TNG $194.00 PIPE
Jazz Pharmaceuticals JAZZ 58.50 Follow on
Avanir Pharmaceuticals AVNR 4.10 Follow on--overallotments
Nile Therapeutics OTC:NLTX 0.68 Follow on--overallotments
DARA BioSciences DARAD 10.00 Follow on
RegeneRx Biopharmaceuticals RGN 4.72 Follow on
TapImmune OTC:TPIV 1.53 Debt
Medipattern (Canada) TSX-V:MKI 1.80 Debt
Cambridge Heart OTC:CAMH 0.96 Warrant exercise
Cbio (Australia) ASX:CBZ 10.63 Funding facility over 3 years
MethylGene (Canada) TSX:MYG 9.10 Non-dilutive financing
TOTAL PUBLIC FINANCINGS-US $81.49
NON-US $215.53
M&A
Acquirer
Target
Deal Value
in $M

Focus
Astellas Pharma (Japan) OSI Pharmaceuticals $4,000.00 Oncology
Abbott Laboratories Piramal's Healthcare Solutions (India) $3,720.00 Branded generics
Aspen Pharmacare (South Africa) Sigma Pharmaceuticals $1,230.00 Branded generics, drug distributor
Providence Equity Partners Virtual Radiologic $294.00 Radiology
Sanofi-Aventis (France) Nepentes (Poland) $130.40 Consumer health
St Jude Medical (NYSE:STJ)
LightLab Imaging $90.00 Medical imaging
C.R. Bard FlowCardia $80.00 Medical devices
Victory Pharma MiddleBrook Pharmaceuticals $17.10 Anti-infectives
Biotage (Sweden) Caliper Life Sciences $16.50 Tools/Technology
Tyco Electronics (NYSE:TEL)
Zarlink Semiconductor's Optical Products (Canada) $15.00 Medical devices
Ligand Pharmaceuticals (NASDAQ:LGND)
Genaera royalty stream $2.75 Respiratory
i3 (Ingenix) ChinaGate (China) n/a CRO
Aerocrine (Sweden) Apieron n/a Medical devices
maxIT Healthcare Ingenuity Solution n/a Healthcare IT
Grifols (Spain) Pharmalink (Sweden) n/a Infectious
Charlesbank Capital Partners H.I.G. Capital TLC Vision n/a Eye care services
Alliances
Company/Licensee Company/Licenser Deal Value
in $M
Focus
MP Biomedicals RUSNANO (Russia) n/a Nanobiotechnology agreement
Hawthorn Pharmaceuticals University of Pittsburgh n/a Cancer therapeutics license
Pfizer Washington University $22.50 Drug development collaboration
GeneDiagnostics (China) GeneNews (Canada) n/a Diagnostics partnership
Tianjin Tasly Pharmaceutical (China) Transgene (France) n/a Biologics joint venture
Trevena Scynexis n/a GPCR ligands collaboration
GSK Clinical Imaging Center (GSK-United Kingdom)) ImaginAb n/a Antibody collaboration
Recopharma (Sweden) Promosome n/a Technology partnership
Roche Diagnostics (Switzerland) American College of Cardiology n/a Biomarker collaboration
Luminex High Throughput Genomics n/a Technology partnership
Merck (NYSE:MRK)
ElexoPharm (Germany) $40.00 Cardiovascular therapeutics license
Institute for Systems Biology Ohio State University $2.00 Personalized medicine partnership
CTI Clinical Trial and Consulting Services Akron Clinical (Argentina) n/a CRO joint venture
Novozymes (Denmark) Ceres n/a Cellulosic biofuels research collaboration
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