Mergers In Pharma Sector - Cynosure Of The New-Age Takeovers The past two decades have effectuated a wave of change

in India- liberalization, technological advancements, globalization, and sustainable development to name a few. This includes a major corporate development called Mergers and Acquisitions (M&A). Takeovers, as it is commonly known, are an ever-green field in the corporate sector. Although the 1956 Companies Act did envisage the concept of amalgamation, in the present day, mergers and acquisitions connote a much wider meaning than a few mere provisions. Albeit the concept remains the same. Merger, in common parlance, is a combination of two or more commercial organizations into one. It is a tool for expanding activities of a company or to augment their future profits. The terms Mergers and Acquisitions are used inter-changeably. However there is a difference between the two- a friendly takeover is addressed as a merger whereas a hostile takeover is termed as an Acquisition. Takeovers used to be mainly concentrated on stable and profitable industries like steel, automobiles, banks etc. But the past few years have seen the trend digressing towards newer and more competitive sectors. The onset of the 21st century initiated a drift toward unexplored territories like the pharmaceutical sector. Global Takeovers In the last year of the decade, the world saw the biggest merger of this industry i.e. the Pfizer buyout of Wyeth for a staggering $68bn. The combined company will create one of the most diversified companies in the global health care industry. Operating through patient-centric businesses that match the speed and agility of small, focused enterprises with the benefits of a global organizations scale and resources, the company will respond more quickly and effectively to meet changing health care needs. The combined company will have product offerings in numerous growing therapeutic areas, a strong product pipeline, leading scientific and manufacturing capabilities and a premier global footprint in health care. Further the takeover of Solvay pharmaceuticals by US drug maker Abbot Laboratories and the proposed merger of Novartis AG and Alcon Inc.2 has sent the share markets on a high tide. The reason behind such bullish response is mainly the excitement among investors that the imminent merger of these companies will create a multi-national drug maker in India3. Other major global takeovers in the pharmaceutical sector are shown in the following table: Sr. No 1. 2. 3. 4. 5. Company (Acquirer) Roche (Swiss) Daiichi Sankyo (Japan) Fresenius Kabi (German) Abbot (USA) Merck (USA) Company (Target) Genentech (USA) Ranbaxy (India) Dabur Pharma (India) Wockhardt (India) Schering Plough (USA) For Amount $46.8bn $4.2bn Rs.1000 Cr. $22.5mn $41.1bn Segment Involved R&D, Cancer Drugs Generic Drugs Oncology Nutrition Cardiovascular Meds

Though global mergers have positive ramifications on markets, profitability and consumer base, it has its flipside also. Takeovers may ensue in stifling of competition and thereby creating monopoly in the market. The Patented drugs become available to the acquirer company and the R&D of those drugs may also suffer in the process. Indian Scenario The Indian Pharmaceutical industry is a favourite one when it comes to cross border M&A. This is hugely due to the fact that such takeovers are beneficial in-house quick growth strategies. The desire to gain foothold in the market of another country is another major reason behind such mergers. Such transactions help the company save itself from the pain-staking procedure of establishing a noveau entity in an alien country. Entry into a domestic market is a key driver of cross-border mergers. It helps companies save significant time that may be needed to build the green-field businesses of similar scale.4 At times M&A also cater as ego enhancers of MNCs. Other factors associated to such transactions include lack of research and development, productivity, expiring patents and generic competition. The Indian pharmaceutical industry is known for its generics, cost effectiveness and competitiveness5. The nature of diseases in India is varied and the market is ever expanding. Large global pharmaceutical companies aim towards establishing a low-cost base out of the country. A number of Indian companies have made acquisitions in the global market. With domestic drug sales of almost $5bn, Indian companies have also developed a considerable service industry for the global pharmaceutical market. Approximately 32 cross border transactions worth $2000mn have been executed by domestic pharmaceutical companies.6 There are likely to be more acquisitions in regulated markets in the US and Europe.7 A few examples of outbound M&A are illustrated in the following table:

Sr. No. 1. 2. 3. 45. 6. 7. 8. 9.

Company (Acquirer) Biocon Dr. Reddys Labs Wockhardt Wockhardt Wockhardt Wockhardt Zydus Cadilla Ranbaxy Nicholas Piramal

Company (Target) Axicorp (German) Trigenesis Therapeutics (USA) Esparma (German) C. P. Pharmaceuticals (UK) Negma Laboratories (France) Morton Grove Pharma (USA) Alpharma (France) RPG Aventis (France) Biosyntech (Canada)

For Amount $ 30 million $ 11 million $ 11million Rs. 83 crore $ 265 million $38 million 5.5 million Euros $ 70 million $4.85mn

Segment Involved Biosimilars Speciality Drugs Branded Generics Healthcare Products R&D Liquid Generics Formulation Business Generic Drugs Regenerative-Heel Pain

Nevertheless, in the last two years, there has been a slow down in the out-bound M&A and more MNCs are being seen acquiring Indian Pharmaceutical Companies. This is mainly done to gain access to the generic drug market. Earlier the lack of patent protection made the Indian market undesirable to the multi-national companies that had dominated the pharmaceutical market. Since the multinational companies streamed out of the Indian Market, the Indian domestic companies started to take their place and carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs. Now the Indian companies face a threat of takeover under the new IPR regime8 which makes product patents finally available for the Indian Pharmaceutical industry. The advent of pharmaceutical product patent recognition in January 2005 changed the ground rules for Indian companies. In the run up to the new post-patent era and since, the Indian industry has been evolving. R&D departments are moving away from reverse-engineering in favour of developing novel drug delivery systems and discovery research.* This has resulted in the need of new investments and R&D. It also provides for compulsory licensing which allows countries to import cheaper generic versions of patented drugs in the interest of public health. This reduces the profitability of the Indian drug companies. A few more takeovers in the generic industry will lead to neutralization of the Indias generic revolution which in itself is a stumbling block for the Indian economy. The reason for such interest of foreign companies in the generic market is the strategy for the innovators to retain the innovation potential while acquiring huge generic potential.9 The year 2009 saw the biggest merger in the generic market when Japans 3rd largest drug maker Daiichi Sankyo took over Indias Ranbaxy Laboratories. Daiichi purchased 63.9% of the stake at Ranbaxys for $4.2 billion. This was done by way of tender offer, private placement of new share and purchase of outstanding shares from the founding family.10 The Japanese firm bought Ranbaxy seeking to secure revenue over a long run amongst intensifying competition and price pressure in the branded drug market globally. This deal is speculated to be a win-win for Ranbaxy and Daiichi Sankyo. Daiichi Sankyo will be able to leverage the low cost advantage offered by India complimented by world class infrastructure while Ranbaxy will benefit from product pipeline of Daiichi. said Sarabjit Kaur Nangra- VP Research, Angel Broking. According to Frost and Sullivans, Daiichi Sankyo will be amongst the largest generic manufacturers globally after the merger. The company would be a strong contender in both the generic as well as innovator space. However the Daiichi-Ranbaxy merger has sent out alarms in the pharmaceutical industry. In a letter to the department of pharmaceuticals, Indian Pharmaceutical Alliance has said lack of available funding is the main reason for the recent spurt in the sale of stakes in domestic companies. This has urged the Government to fund R&D activities of the pharmaceutical companies in order to safeguard their businesses from takeovers. Challenges The challenges faced by companies in executing a merger can be broadly categorized under the following applicable laws: 1. The Companies Act, 1956 2. Securities and Exchange Board of India (SEBI) Takeover Code 3. Foreign Exchange Management Act, 1999. 4. Competition Act, 2000 While the Indian Companies Act, 1956, usually governs mergers in India, international deals involve additional compliances with rules laid down under the FEMA (Foreign Exchange Management Act, 1999) and associated law.11 Further, listed companies are also subject to the rules and regulations laid down by the SEBI (Securities and Exchange Board of India). Compliances under the Companies Act require the Acquirer Company to prepare a scheme of amalgamation under section 393 of Companies Act, 1956. The draft scheme has to be agreed to by

Target Company and submitted to the High Court. Both companys Board of Directors should approve the scheme and authorize the directors to make an application to the High Court under section 391 of Companies Act, 1956. The copy of order is to be filed with the Registrar of companies within 30 days of passing of orders by the court. The compliances under SEBI involve the following steps: 1. Acquirer must make a public announcement of- the offer price, the number of shares to be acquired from the public, identity of acquirer, purpose of acquisition, plans of acquirer, change and control over the target company and period within which the formalities would be completed. 2. The acquirer must make a public announcement through a merchant banker within 4 working days of entering into an agreement of acquiring shares or voting rights of the target company. 3. Relevant documents should be filed with the SEBI which include a copy of the public announcement in the newspaper, the draft, letter of offer and a due diligence certificate. 4. Correct and adequate information must be disclosed and comments should be incorporated by SEBI. 5. Letter of offers to shareholders of the target company must be sent within 45 days of the public announcement. The offer remains open for 30 days for acceptance by the shareholders. 6. The acquirer should determine the offer price after considering the relevant parameters. Once an offer is made an acquirer cannot withdraw it except unless the statutory approvals have been refused, the sole acquirer has died or if the SEBI merits the withdrawal of the offer. In case of cross-border mergers, the Foreign Exchange Management (Transfer or Issue of Security by a person Resident outside India) Regulations 2001 will be applicable. Although the compliance of these rules and regulations seems easy, a lot of difficulties are faced during the actual application of those rules n procedures, and a lot more when the merger is a cross-border one. There are often occasions when interplay between SEBI regulations and those of FEMA can make it difficult for deals to be structured. said Mr. Diljeet Titus, Titus and Titus Co., Delhi. There are numerous challenges faced by companies during cross-border mergers. A major obstacle is the legal disparity between the two merging entities, since these companies follow statutes of different countries. Hence even if the merger is a friendly one, the legal disparity creates a major road-block in structuring and finalizing the deal. Another issue is that of the complex legal set up especially in the financial sectors of any of the merged entities, thereby causing a problem in decision making processes. Misuse of supervisory powers by the shareholder of the merged entity may also put the new business model at risk. There are other barriers like lack of funds, economical imbalance at the time of execution, political interference, shareholders reluctance, labour issues etc. Apart from this, there are extra costs incurred like the off-costs and on-going costs during any cross border merger which are absent in domestic mergers. Consumer protection rules, differences in employee legislations, different accounting systems, data protection directives, cross-border business policies employed in different countries could cause obstructions to cross border M&A and can further escalate the cost. Exchange of share mechanism also proves to be more expensive in case the 2 merged entities are listed in different stock exchanges. These fundamental intricacies of the cross border M&A make it a Byzantine deal. Conclusion Cross-border mergers place Indian companies on the global map. Being a significant part of the global pharmaceutical sector will help the Indian companies to take further steps in maintaining the global pharmaceutical standards which would be beneficial for them in all segments including exports, increased profitability, increase in the R&D laboratories, funding received by the companies, increased number of patented products, expansion of their market share etc. This in turn will be beneficial to the global pharmaceuticals as well since the cost effective techniques used by Indian companies and the huge market India provides to this sector can help enhance the research and creation of newer and improved drugs. Although there always remains the risk of losing individual identity of such companies or exposing the industry to a threat of rampant takeovers, on the whole Mergers elevates the economic graph of the country.

The technicalities involved in an M&A transaction are humongous and often falls apart midway. If the SEBI and the RBI (Reserve Bank of India) each establishes an effective legal cell to respond to questions raised by the parties to a merger on a timely basis, it can help make the M&A a lesser painful process. Regarding the Indian Pharmaceutical industry cross-border mergers are healthy only so long as it does not take away its innovation revolution. __________________________________________________________ * Espicom, 5th May 2009- The Indian Pharmaceutical Industry 2009- Diversification, Expansion & Ambitions 1. Pfizer.com, 26th January 2009. 2. Wall Street Journal, 30th September 2009- Abbot Solvay Rise On Takeover; Aurora Sentinel, 04th Jan 2010Novartis Looks To Buyout Alcon for $38.5 billion. 3. Wall Street Journal, 30th September 2009- Abbot Solvay Rise On Takeover. 4. ExpressPharmaOnline.com, 1-15 October 2008- The Making of a Merger 5. Express Healthcare Management, 1st-15th September 2005- Mergers and Acquisitions in Pharma. 6. ExpressPharmaOnline.com, 1-15 October 2008- The Making of a Merger 7. ibid 8. Financial Express, 5th May 2009 9. Financial Express, 5th May 2009- Indian Drug Firms Face Takeover Threats 10. Financial Express, 7th Nov 2008 11. The Hindu Business Line, 17 October 2006.

Pharma sector injects fresh life into M&A space

Rupali Mukherjee, TNN Feb 16, 2011, 06.01am IST

MUMBAI: When Ajay Piramal, promoter and chairman of Piramal Healthcare, struck a deal with USbased pharma biggie Abbott Inc for selling assets of the domestic formulation unit at over 9 times its sales, little did he know it will set a benchmark. From being a marginal contributor to the M&A space, the pharma sector has shifted gears and attracts revenue multiples of 9 to 10 times as recent deals have proved. A strong and growing domestic market, a robust pipeline of generic drugs (cheaper versions of patented drugs) and an ability to service developed markets abroad have suddenly made Indian pharma companies most sought-after in the M&A space. Little wonder that the buzz is growing around possible takeover of companies with strong generic capabilities. There have been talks of an European suitor serenading south-based generics player Aurobindo Pharma, while speculation on generic major Cipla refuses to die. There are also talks of other such deals like Dr Reddy's, Cadila, Torrent and Divi's Labs being on the radar of MNCs such as Merck, Pfizer and GlaxoSmithKline (GSK). Rumours of Dr Reddy's being acquired by GSK started doing the rounds just after Ranbaxy was snapped up by Daiichi while rumours about Cipla surface almost every month. They have all been denied by respective companies. Though the most recent examples of the MNCs' shopping in the Indian pharma space involve Reckitt Benckiser's $726 million acquisition of Paras Pharma (transaction value of 8 times) and Abbott's takeover of Piramal, the story started in a small way in 2006 with the $736 million Matrix-Mylan deal. Over the last couple of yearsRanbaxy's deal with Daiichi Sankyo struck at 4 times salesset the trend for premium valuations. The $4.6-billion deal in June 2008 remains the largest takeover in the pharma space. After Ranbaxy, there was a spate of deals including vaccine major Shantha Biotech, which was acquired by Sanofi and followed by Orchid selling its injectable business to US-based Hospira. Till the late 1990s, pharma MNCs were indifferent to the domestic pharma market. Even in the last decade, the focus shifted to leveraging India as a low-cost destination, with MNCs mainly contracting production from domestic players. Now there has been a distinct shift in strategy from giving out manufacturing contracts to owning them.

Mergers and Acqusitions Trends in the Pharmaceutical Sector

Date Published: 5 Dec 2006

Shivani Shukla, Program Manager, Pharmaceuticals Practice For feedback / enquiries contact sdedhia@frost.com The Industry The Indian Pharmaceutical Sector is currently the largest amongst the developing nations. Given its current momentum of growth the Indian pharmaceuticals market is expected to expand to US$ 25 billion by 2010. There is a worldwide structural trend evolving in pharmaceuticals and Indian companies play a key role in this framework, driven by their superior biotech and drug synthesis skills, high quality and vertically integrated manufacturing assets, differentiated business models and significant cost advantages. Indian pharmaceutical companies reign supreme compared to their multinational counterparts in India. Profit margins of Indian companies are on the rise and the recent trend of mergers and acquisitions by Indian pharmaceuticals are likely to provide an upside to the growth numbers. The total Indian Pharmaceutical Market is valued at US$ 8790 million with a growth rate of 8%. The market is predominantly a branded generic market with more 20,000 domestic manufacturers of end-use pharmaceuticals, making the industry highly fragmented. In the organized sector of the Indian Pharmaceutical industry there are about 250-300 companies, controlling about 70% of the total output in value terms, with top 10 players accounting for one third of the total market. The healthcare sector in India has experienced a paradigm a shift due emerging trends in globalization, developing markets, industry dynamics and increasing regulatory and competitive pressures. Companies across the world are reaching out to their counterparts to take mutual advantage of the others core competencies in R&D, Manufacturing, Marketing and the niche opportunities offered by the changing global pharmaceutical environment. The pharmaceutical sector offers an array of growth opportunities. This sector has always been dynamic in nature and the pace of change has never been as rapid as it is now. To adapt to these changing trends, the Indian pharmaceutical and biotechnology companies have evolved distinctive business models to take advantage of their inherent strengths and the "Borderless" nature of this sector. These differentiated business models provide the pharmaceutical and biotechnology companies the necessary competitive edge for consolidation and growth.

Mergers and Acquisitions Today, there is a global trend towards consolidation and going forward, as pressures on the pharmaceutical industry increase, this trend will continue. The lack of research and development (R&D)

productivity, expiring patents, generic competition and high profile product recalls are driving the mergers and acquisition (M&A) activity in the global pharmaceutical and biotech sector. This sector is unique in the sense that it traverses across geographies, as health has no boundaries, and this very boundary-less nature supports consolidation in this Industry. With the easy availability of capital and increased global interest in the pharmaceutical and biotech industry, the sector has become quite a `mergers-and-acquisitions' favorite. Apart from the patented pharmaceutical and biotech companies scouting for newer geographies to launch their patented molecules, the global generics market also has undergone an unprecedented consolidation wave in the past two years. Last year, Teva acquired US generics major IVAX for $7.4 bn, to become the worlds largest generics company. In 2004, Teva paid $3.4 bn for Sicor of the US. Teva and Sandoz, generics arm of the Swiss pharma group, Novartis, have been buying small generics companies to grow in size. Sandoz bought Hexal and Eon Laboratories in Germany, as well as Croatias Lek, Canadas Sabex and Denmarks Durascan in 2004 and 2005. Deflation in the generic industry would lead to displacement of weaker players leading to consolidation. The trend has gathered momentum with the $1.9bn buyout of Andrx by Watson to create the 3rd largest specialty pharma company There are three levels of integration that are currently being sought in the generics industry Back-end manufacturing capability (API/formulation) Product integration (ANDA pipeline), and Front-end (marketing and distribution) in the developed world

The US and European generics companies are scouting for alliances/buyouts at the back end of the chain, which would allow them to offset any manufacturing cost advantage held by companies in the developing markets. The Indian companies are looking at the front-end integration as building a front-end distribution set-up from scratch could take significant time. The product side integration is common to both sides, with weaker US/European generics companies looking at anyone that could offer a basket of products. This is because the US/European pipeline is weak while Indian companies are aspiring to grow rapidly, want to achieve critical mass quickly, and are looking for geographic expansion. Mergers and Acquisitions Trend in India Mergers and Acquisitions (M&A) interest in India is currently very high in the pharma industry. Size and end-to-end connectivity are major detriments in the global markets. To achieve them, Western MNCs have to look to Indian companies. Indias changing therapeutic requirements and patent laws will provide new opportunities for big pharma for launching their patented molecules. While, Indias strong manufacturing base will stand global generic companies in good stead as a low-cost development and manufacturing destination. Besides consolidation in the domestic industry and investments by the US and European firms, the spate of mergers and acquisitions by Indian companies has ushered an era of the "Indian Pharmaceutical MNC". After traversing the learning curve through partnerships and alliances with international pharmaceutical firms, Indian pharmaceutical companies have now moved up a step in the value chain and are looking at inorganic route to growth through acquisitions. Many top and mid tier Indian companies have gone on a global "shopping spree" to build up critical mass in International markets. Also, given the easy access to global finance the Indian companies are finding it easier to fund their acquisitions. Incentives for Mergers and Acquisitions by Indian companies Build critical mass in terms of marketing, manufacturing and research infrastructure Establish front end presence

Diversification into new areas: Tap other geographies / therapeutic segments / customers to enhance product life cycle and build synergies for new products Enhance product, technology and intellectual property portfolio Catapulting market share

The Indian companies excel as far as the back end of the pharmaceutical value chain is concerned i.e manufacturing APIs and formulations. Over the past few years the Indian pharmaceutical companies have also stepped up their efforts in product development for the global generic market and this is visible with the DMF filings at the US FDA. About 30% of the new DMF filings at the US FDA are being filed by Indian companies. What the Indian companies are short of is the front-end distribution and marketing infrastructure in the developed world. The current stress is on bridging this gap through any / or all of the following strategies. The type of tactic employed would depend on the companies existing capabilities, available resources, nature and scale of expansion planned and on the targeted geographical market.

Acquisitions are the quickest way to front end access. What is interesting is the fact that apart from market access i.e marketing and distribution infrastructure, the acquiring company also gets an established customer base as well as some amount of product integration (the acquired entities generally have a basket of products) without the accompanying regulatory hurdles. There are also entry barriers for companies from the developing countries and acquisitions make it easy for these organizations to find a foothold in the developed markets. For instance, there is a cultural and language barrier in Europe and Europe is high on the radar of Indian pharmaceutical companies. The sheer heterogeneity of Europe and the fragmented nature of its pharmaceutical market make acquisitions an easy route for entry into this region and the US being the largest pharmaceutical market in the world will always interest the Indian pharma companies for its sheer size. Over the last two years, several Indian companies have targeted the developed markets in their pursuit of growth, especially via the inorganic route. Companies such as Ranbaxy, Wockhardt, Cadila, Matrix, and Jubilant have made one or more European acquisitions, while others such as Torrent are also scouting for potential targets. Besides gaining a faster entry into the target market, one of the basic strategies behind the acquisitions remains that of leveraging Indias low cost advantage by shifting the manufacturing base to India. At the same time, the acquired companies also serve as an effective front end for Indian companies in these markets. Acquisitions by Indian Companies

Mergers and Acquisitions - Challenges While growth via acquisitions is a sound idea in principle, there are challenges as well, which relate mainly to the stretched valuations of acquisition targets and the ability to turn them around within a reasonable period of time. The acquisitions of RPG Aventis (by Ranbaxy) and Alpharma (by Cadila) in France are clear examples of acquisitions proving to be a drain on the companys profitability and return ratios for several years post acquisition. In several other cases acquisitions by Indian generic companies are small and have been primarily to expand geographical reach while at the same time, shifting production from the acquired units to their cost-effective Indian plants. A few have been to develop a bouquet of products. Other than Wockhardts acquisition of CP Pharma and Esparma, it has taken at least three years for the other global acquisitions to see break-even. Most of the acquiring companies have to pay greater attention to post merger integration as this is a key for success of an acquisition and Indian companies have to wake up to this fact. Also, with the increasing

spate of acquisitions, target valuations have substantially increased making it harder for Indian companies to fund the acquisition Making an Acquisition Work As M&A practitioners know, effective post-deal management can mean the difference between success and failure. No matter how well structured a deal is, conditions can change to upset the value equation. In the subsequent 2-3 years following an acquisition, very few companies grow more quickly than they had before. The loss of revenue momentum is one reason why so many mergers and acquisitions fail to create value for shareholders. And coming up short on revenue targets has far more serious effects on the bottom line than failing to meet planned cost savings. Since nearly half of all mergers and acquisitions fail to achieve even their planned cost savings, it is imperative to maintain revenue growth. In any merger, acquisition, or joint venture, the sooner managers integrate their companies the faster they capture the expected synergies. It is imperative to keep the following points in mind while planning for an acquisition Clarify deal strategy from the beginning Confirm the business rationale Check for the right strategic fit Assemble the right team Focus on value, not cost Create transparency Manage the risks Plan for effective post-acquisition integration

Case Study Wockhardt Ltd Wockhardt is a global, pharmaceutical and biotechnology company that has grown by leveraging two powerful trends in the world healthcare market - globalization and biotechnology. The Company has a market capitalization of US$ 1.3 billion and an annual turnover of US$ 285 million (Rs. 12.39 billion). Wockhardt has a strong and growing presence in the worlds leading markets, with half of its revenue coming from Europe and the United States. Wockhardts market presence covers formulations, biopharmaceuticals, nutrition products, vaccines and active pharmaceutical ingredients (APIs). The key strengths of Wockhardt are: Manufacturing Capabilities Wockhardts manufacturing facilities in India and UK have the approval of major regulatory bodies, including US FDA and UK's MHRA, with capabilities for both Finished Dosage Formulations and APIs

Biotechnology Wockhardt has developed comprehensive concept-to-market strengths in all facets of recombinant biotechnology. These include gene-cloning, development of production strains, expertise in all three major expression systems, purification, downstream processing and testing

The company has set up the Wockhardt Biotech Park, amongst Indias largest biopharmaceuticals complex, with six dedicated plants built to international standards with capacities to meet 10-15% of global demand for important biopharmaceuticals A sound regulatory infrastructure has been set up for its biogenerics pipeline with registrations in developing markets. The company has also set up front-end offices in the identified markets either owned organizations, strategic joint ventures or distribution arrangements Wockhardts pioneering efforts in biotechnology have led to the launch of three successful products in the Indian market - Biovac-B (hepatitis B vaccine), Wepox (erythropoietin), and Wosulin (recombinant insulin). The company has also made a breakthrough with Interferon alpha 2b and Glargine. Growth stimulating factors (GSF) are also in the development pipeline.

Acquisition Management The company has a strong track record in acquisition management, with three successful acquisitions in the European market and two in the domestic space.

The acquisitions in Europe and the subsequent integration of their operations have strengthened Wockhardts position in the high-potential markets of UK and Germany, and have expanded the global reach of the organization. The growth drivers for Wockhardts European business include exports, new product launches, penetration in the European Union through mutual recognition, and strategic acquisitions. Wockhardt UK Limited Wockhardt UK Limited (Erstwhile CP pharmaceuticals) is amongst the 10 largest generics companies in UK and the second largest hospital generics supplier. The Company has a comprehensive, FDA-approved manufacturing facility for injectables that plays a strategic role in driving the companys growth through partnerships in contract manufacturing Wockhardt UK has built up a critical mass in the segments of Retail Generics, Hospital Generics, Private Label GSL / OTC Pharmaceuticals, Dental Care (denture cleaning tablets, powders and fixative creams)

Esparma GmbH The acquisition of Esparma GmbH in 2004, has given Wockhardt a strategic entry point into Germany, the largest generics market in Europe Esparma has a strong presence in the high-potential segments of urology, neurology and diabetology, assisted by a dedicated sales & marketing infrastructure

The key to Wockhardts successful acquisition management is the managements ability to turnaround the acquired company in record time and thus create value out of the acquisition. The company believes in value buys that would have a tactical fit with its core competencies and key strategic objectives. The

acquisitions are mainly driven by market access since Wockhardt has an extensive pipeline of generics and biogenerics and needs a strategic front-end for the same. The company has plans for further acquisitions in the developed markets of Europe and US to further consolidate and strengthen their positions in these geographies. Future Trends Given the increasing spate of mergers and acquisitions in the global pharmaceutical sector, the valuations are at an all time peak, there is too much money chasing too few targets. Going forward this trend would slow down as valuations are cyclical in nature. The consolidation trend will continue with Indian pharmaceutical players playing a major role. Indian pharmaceutical companies have spent close to $1.4 bn in acquiring companies globally in the past 18 months. With access to capital, higher staying power because of low costs, and managements willing to globalize, this trend will continue.