1. IMPACT OF MERGERS AND
ACQUISITION OF
PHARMACEUTICAL INDUSTRY IN
INDIAN SCENARIO
PRESENTED BY
TEENA PATIDAR

2. WHAT ARE THE MERGERS AND ACQUISITION?
 A merger is said to occur when two or more companies combine
into one company.
Eg: Glaxosmithkline (By merging of Glaxowellcome and
Smithkline Beecham)
• Acquisition may be defined as an act of acquiring effective
control by one company over assets or management of another
company without combination of companies.
Eg: Abott- Piramal deal (17247 crore)

3. TYPES OF MERGERS AND ACQUISITION
 Congeneric mergers-
Eg: Hospira (US)- Orchid labs.
 Conglomerate mergers-
 Vertical mergers-
Eg: Merck- Medco merger
 Horizontal mergers:
 Acquisitions are classified as:
Hostile-
Friendly-

4. REASONS FOR MAKING MERGERS AND ACQUISITIONS
INCLUDE
 To acquire complementary products, in order to broaden the
line.
 To acquire new markets or distribution channels.
 To acquire technology, to complement or replace the currently
used one.
 Lack of R&D productivity.
 Expiring patents.
 Generic Competitions

5. LAW REGARDING MERGERS AND ACQUISITIONS-
 In USA, there are both state laws and federal laws to administer
Mergers and Acquisitions.
 Indian Competition Act

6. BENEFITS OF MERGERS & ACQUISITIONS
Shareholders
value
Increase in
market share
Increase in
cost
efficiency
Increase value
generation

7. MAJOR MERGERS AND ACQUISITIONS OF
PHARMACEUTICAL INDUSTRY

8. CONTD….

9. RECENT MERGERS AND ACQUISITION
 09-Apr-2013 - Bristol-Myers Squibb accelerate its diabetes R&D
joint venture with AstraZeneca .
 04-Mar-2013 - Mylan says its acquisition of Agila puts the
generics company in a “leading position” in the injectables
market.
 19-Feb-2013 - Mylan Laboratories has purchased a new finished
formulations facility in an Indian Special Economic Zone from
Unichem Laboratories.
 11-Feb-2013 - Sun Pharmaceutical Industries has done efforts to
buy Israel’s Taro, explaining the move is in the best interest of
shareholders.

10. MAJOR DEALS
PFIZER-WYETH DEAL
RANBAXY DAICHII SANKYO DEAL
Piramal abbott Deal

11. PFIZER WYETH
DEAL
Pfizer Wyeth Deal-
 On 26 Jan 2009 Pfizer acquired Wyeth at $68 billion.
 Pfizer mission “To become a premier biopharmaceutical
company in the world”.

12. CONTD….

13. REASON OF ACQUISITION
Patent expiration-
 Lipitor (atorvastatin).
 Norvasc (amlodipine) lost patent exclusivity
 The Zyrtec (cetirizine) franchise-indicated for allergic rhinitis.
 Sildenafil (Viagra) - Erectile dysfunction treatment
 Detrol LA (tolterodine) overactive bladder and Camptosar
(irinotecan) primarily colon cancer.

14. CONTD…

15. IMPACT OF DEAL ON PFIZER AND WYETH
 Wyeth will expand Pfizer's presence in non-prescription
pharmaceutical markets.
 Pfizer's diversification into therapeutic protein and vaccine
markets.
 the merger will crucially allow Pfizer to retain its status as the
industry's biggest-selling company
 The combined Pfizer-Wyeth entity would derive around 89% of
prescription pharmaceutical revenues from small molecules, 7%
from therapeutic proteins and 5% from vaccines.

16. CONTD..
 Pfizer-Wyeth will initially have a negligible presence in the high-
growth monoclonal antibodies market also.
 It would diversify Pfizer into vaccines and injectable biologic
medicines by adding Wyeth's big-selling Prevnar vaccine for
childhood infections and Enbrel rheumatoid arthritis treatment

17. RANBAXY DAICHII SANKYO
DEAL
 Ranbaxy Laboratories on June11 2008 said it was giving up
control to Daiichi Sankyo, the No. 3 Japanese pharmaceutical
company.

18. REASON OF ACQUISITION
 Ranbaxy under FDA scrutiny
 As a culmination of this problem, Ranbaxy faced a ban in
September 2008.
 Daiichi Sankyo, at the other end, has suffered a heavy increase
in selling, general and administrative (SGA) expenses to the tune
of 10% from 2006 levels to $3128.9 million.

19. CONTD…

20. CONTD..

21. IMPACT OF ACQUISITION ON RANBAXY AND DAIICHI
Daichii can effectively use-
 Ranbaxy Low-cost manufacturing infrastructure and supply
chain strengths.
 Strength in proprietary medicine complements Ranbaxy’s
leadership in the generics segment and acquired a broader
product base.

22. CONTD..
 Ranbaxy could bypass a lot of European and U.S. companies that
are finding it difficult to enter the Japanese market, where
safety and testing requirements are a lot higher.
 This deal will make the combined company the 15th largest
pharma company in the world.

23. PIRAMAL-ABBOTT DEAL
Abbott acquired Piramal at May 2010

24. IMPACT OF DEAL ON PIRAMAL AND ABBOTT -
Piramal portfolio has 350 leading branded generics Establish a in
multiple therapeutic leading areas , presence in Piramal give
Abbott critical branded mass and a generics comprehensive
leading portfolio of branded generics.

25. IMPACT OF MERGERS AND ACQUISITIONS ON
PHARMACEUTICAL MARKET
Indian pharmaceutical market is changing under the light of the
below three aspects-
 Cost effective manufacturing being implemented by developed
economies
 Growing importance of emerging markets
 Changing significance of India's domestic market
Positive Impact of M&A on pharmaceutical market
 Improve global competitiveness
 Move up the value chain

26. CONTD….
 Creation and entry to new markets
 Increase their product portfolio
 Acquire assets (including research and contract manufacturing
firms, in order to boost their outsourcing capabilities) and new
products
Negative Impact-
Indian firms face some challenges such as decreasing profits in
the generics market, competitive threats from big
pharmaceutical MNEs fierce competition from Chinese and
Eastern European manufacturers.

27. CONTD…

28. IMPACT OF MERGERS AND ACQUISITIONS ON R&D
DEVELOPMENT-
 One of the most obvious reasons to merge or acquire is a
shortfall in the R&D pipeline.
 This was the position Glaxo faced in 1995 when Zantac, the
world’s best-ever selling drug at the time was coming to the end
of its lifespan. Following its timely acquisition of Wellcome,the
company renewed its pipeline to create a substantial and
innovative asset.
 To diversity of knowledge from successfull industry resulting
inovation new drug.

29. CONTD….
Negative impact-
 R&D seems to be especially vulnerable to the negative impact of
mergers and acquisitions.
 For example, comparing data from Pfizer's pipeline updates
(which are posted on its website every 6 months) before the
Wyeth merger in February 2008, and in February 2011, reveals
that 40% of the compounds (not including those from Wyeth)
have been in Phase II development for more than 3 years.

30. CONTD…

31. MERGERS AND ACQUISITION AND NEW MOLECULAR
ENTITY DRUGS
When research-based pharmaceutical companies perform
mergers and acquisitions
Sales revenue increase
Funds for research increase
Productivity increas
New product comes in market

32. CONTD..
Mergers and Acquisition year No of deals NME
2003 173 21
2004 171 32
2005 128 18
2006 138 17
2007 180 16
2008 140 21
2009 140 18
total 1070 143

33. IMPACT OF MERGERS AND ACQUISITION ON
SHAREHOLDER VALUE
 The main motive behind mergers and acquisitions is that they
create value for both shareholders of the target and acquiring
companies

34. IMPACT OF MERGERS AND ACQUISITIONS ON WORKERS
OR EMPLOYEES
In the event when a new resulting company is efficient business
wise, it would require less number of people to perform the
same task. Under such circumstances, the company would
attempt to downsize the labor force.
When daichii sankyo acquires ranbaxy many employee have
losed their jobs

35. IMPACT OF MERGERS AND ACQUISITIONS ON
PERFORMANCE
Positive impact-
 One is through an increase in the scale factor, which in turn will
reduce the total cost of production of the merging firms, which
will result in the better performance.
 mergers and acquisitions may give monopoly power to the
merging firms in the market and this will give them powers to
increase the ‘mark-up’ which again lead to high prices and
ultimately to high profits.
Negative impact-Sometimes mergers will reduce the performance
of the merging firms if it acquires loss-making firms and are not
able to derive the expected synergies.

36. CONTD…
Performance
Indicator
Pre
merge
Post
merge
changes
Gross profit margin 13.22 18.23 increased
Net profit margin 7.11 11.2 increased
R&D intensity 1.47 2.23 increased
Advertisment
intensity
1.11 1.29 increased
Maketing intensity 3.39 3.4 increased
Cost intensity 95.35 90.24 improved
Import intensity 11.66 22.23 increased
Export intensity 12.84 17.14 increased
Capacity utilisation 98.23 82.11 decreased

37. PRODUCT DIVERSIFICATION AND MERGERS AND
ACQUISITION
 Product Diversification through Consolidation Firms may opt for
mergers in order to reduce the risk and uncertainty. If a firm is
more diversified, then there is greater possibility of obtaining
stable return.
 Any losses in one particular market can be offset by profit in
some other market.therapeutic categories and thereby not only
reduce risks, but also expand their market size.
Pfizer Wyeth deal

38. CONCLUSION
 The key principle behind buying a Strong company is to create
shareholder value over and above that of the sum of the two
companies. to create a more competitive, cost-efficient
company
 75% of large mergers fail to create shareholder value greater
than industry averages
 Productivity drops 50% following the announcement of a
merger.
 Employee satisfaction drops 14% following mergers.

39. Thank-You