Abbott To Acquire Piramal's Generics

Abbott Laboratories will pay $3.3 billion for the generic drug business of India's Piramal Healthcare. The move gives Abbott the leading position in the Indian pharmaceutical market, with a share of roughly 7%. It's a coveted position, given that the majority of drug industry growth is expected to come from emerging markets.

Piramal gets $2.1 billion of the cash up front and another $400 million annually over the next four years. The generics business represents about half of Piramal's annual sales. Its acquisition by Abbott leaves Piramal with operations in custom manufacturing, over-the-counter consumer products, and drug discovery.

Abbott has been ramping up its generic drug business since creating a separate division called established products in 2007. Last fall, the company bought Solvay's pharmaceuticals business for $7.6 billion, which brought a portfolio of branded generics and a presence in emerging markets. The Piramal deal comes on the heels of a smaller pact with India's Zydus Cadila that included 24 products sold in 15 emerging markets with the option to add 40 more products. Abbott says emerging markets already represent more than 20% of its total business.

The companies say the Indian pharmaceutical market is expected to more than double in size by 2015 from roughly $8 billion in sales this year. With the addition of Piramal's generics, which will have branded generics sales of about $500 million this year, Abbott's Indian business is expected to grow nearly 20% per year, reaching annual sales of more than $2.5 billion by 2020.

"Emerging markets" have become the buzz words du jour at big pharma, as improving economies mean more people can afford medicines in countries like China, India, Brazil, and Russia. According to Burrill & Co., just 13% of the pharmaceutical market was in emerging countries in 2011, whereas forecasts suggest 50% of business will be in those markets by 2020.

As a result, big-pharma firms have been scrambling to establish partnerships that can swiftly get them on the ground in those countries. Speculation about suitors for the Piramal business ranged from Pfizer to GlaxoSmithKline to Sanofi-Aventis.

GSK has broad generic drug deals with South Africa's Aspen Pharmacare and India's Dr. Reddy's Laboratories. Pfizer has established pacts with several Indian firms, including Strides Arcolab, Aurobindo, and Claris Life Sciences. Sanofi-Aventis has bought Indian vaccines maker Shantha Biotechnics and the Czech generics firm Zentiva. Even biotechs are starting to get into the game: Earlier this year, Cephalon bought the Swiss generics firm Mepha.

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