Mylans Acquisition of Matrix

In January 2007, Mylan Inc. (Mylan), one of the largest US generic drug makers,
acquired a 71.5 percent stake in Matrix Laboratories Ltd. (Matrix), India, a leading
Active Pharmaceutical Ingredients (API) supplier globally, for a cash and stock deal
of US$736 million. The Mylan-Matrix deal was the largest acquisition in the Indian
pharmaceutical industry and was viewed by analysts as a step toward backward
integration for Mylan. The deal not only gave Mylan access to a low cost
manufacturing platform, but also immediate presence in the emerging markets of Asia
and Africa as well as the lucrative generic drugs markets in Europe.
Matrix, on the other hand, gained the much-needed scale that generic companies
required to survive in a very competitive market place. It was very important for
Indian pharmaceutical companies considering that these companies did not have
research molecules of their own.
Analysts felt that with the global generic drugs industry undergoing a consolidation
phase, large pharmaceutical companies were eyeing Indian pharmaceutical
companies as potential targets of M&A deals. This was because, with considerable
pricing pressures in the US, these companies were on the lookout for low-cost
suppliers.
In addition to the low-cost manufacturing platform, the attractiveness of the Indian
companies stemmed from the fact that they had large and varied product portfolios
and world-class manufacturing facilities. Indian pharmaceutical companies also had
a number of Drug Master Files (DMFs) and Abbreviated New Drug Application
(ANDA) filings in the US, the world's largest market for pharmaceuticals. Moreover,
some of these companies had developed a significant presence in the European and
African markets through the inorganic route.

Mylans Acquisition of Matrix

This is an extremely complementary transaction that accomplishes a number of
Mylans key objectives. Mylan is executing on its commitment to establish a global
platform and expand its dosage forms and therapeutic categories. Additionally, this
acquisition deepens Mylans vertical integration and enhances its supply chain
capabilities. The transaction will allow Mylan and Matrix to strengthen and expand
their core businesses and competencies, while creating significant opportunities for
global expansion and growth.1
- Robert J Coury, Vice Chairman and CEO, Mylan Inc. in 2006.
A player has to decide how he can stay in the field for as long as possible. Matrix, as
a significant API supplier, needed a bigger playing field. Partnering with Mylan gives
us that.2,3
- Nimagadda Prasad, Executive Chairman, Matrix Laboratories Ltd. in 2006.
Clearly, were seeing a trend in the industry toward acquisitions and consolidation...
This is a continuing trend to move more sourcing and manufacturing overseas and to
own it as opposed to just contracting it.4
- Martha Freitag, an industry analyst at Argus Research Corp. 5, in 2006.

Benefits beyond Global Expansion

Mylan Inc. (Mylan), one of the largest US generic drug 6 makers, acquired a 71.5
percent stake in Matrix Laboratories Ltd. (Matrix), India, a leading API supplier,
globally in January 2007 for a cash and stock deal of US$736 million. The MylanMatrix deal was the largest acquisition in the Indian pharmaceutical industry and was
viewed by analysts as a step toward backward integration for Mylan. 7 On completion
of the deal, Robert J Coury (Coury), Vice Chairman and CEO of Mylan, said,
Todays announcement marks the successful closing of the transformational Matrix
transaction, and it also marks the beginning of a new era at Mylan where our
organization is continuing to expand beyond our well-established position as a leading
domestic generic pharmaceutical company toward our objective of establishing Mylan
as a world leader in generics and specialty pharmaceuticals.8

3
4

5
6

Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix Laboratories,

www.matrixlabsindia.com, August 28, 2006.
API (acronym for Active Pharmaceutical Ingredients), also known as bulk drugs, are active
chemicals used in the manufacturing of drugs.
Gina S Krishnan, Matrix Unloaded, www.businessworldindia.com, September 11, 2006.
Mylan Laboratories Mylan to Have Majority of Indias Matrix, www.advfn.com, August
29, 2006.
Argus Research Corp. is an independent research firm.
Generic drugs (or Generics) are either copies or the basic form of a proprietary drug (or
brand-named) drugs produced by large multinationals. For example, Lipitor is the brand
names for the drug Atorvastatin that was patented by Pfizer Inc. Any other drug with the
same composition manufactured and marketed by other companies is called generics.
Surojit Chatterjee, Mylan Buys Majority Stake in Indias Matrix Lab for $ 736 Million,
www.in.ibtimes.com, August 30, 2006.
Mylan Laboratories Inc. Completes Matrix Laboratories Limited Transaction,
www.devicespace.com, January 9, 2007.

428

Mylans Acquisition of Matrix

According to analysts, the deal was a winning proposition for both the parties to the
transaction. Where Mylan was concerned, Matrixs takeover helped it to enter the
global generic markets beyond the US market. In particular, this acquisition helped
Mylan to enter the emerging pharmaceutical markets of India, China, and South
Africa, given Matrixs presence in these regions. Second, the deal would also aid
Mylan enter the high-margin European markets through Matrixs subsidiary
Docpharma NV9 (Docpharma), which was already operating in the European markets.
In addition to this, Matrix would also act as a low-cost product sourcing platform for
Mylan given Matrixs strong pipeline of APIs. Jim Miller, president of PharmSource
Information Services, Inc. 10, noted, What is most striking about the deal is that
although Mylan is the buyer, Matrix is clearly the more sophisticated global player.
Matrix has built a sophisticated supply chain that sources early-stage intermediates in
China, converts them to APIs in FDA-approved plants in India, formulates the APIs
into finished dosage forms, and sells them in Asian and European markets. Mylan, by
contrast, manufactures only drug products and operates largely in the United States.
Matrixs global capabilities are likely to have much greater value to Mylan in the
generics and branded generics markets than they are in contract manufacturing. 11,12
The tie-up with Mylan would benefit Matrix in terms of providing it with a bigger
playing field. Moreover, it would be able to leverage on Mylans existing
manufacturing and sales network in the US to penetrate deeper into the US market and
benefit from economies of scale. Besides, given Mylans financial resources, Matrixs
subsidiary Docpharma could consolidate its position in the European market and in
the medium term use Mylans knowledge to enter the US generics market.
Commenting on the deal, Nimagadda Prasad (Prasad), the Executive Chairman of
Matrix, said, Mylan, a proven industry leader, is an ideal partner for Matrix. Our
strategic vision remains unchanged and we believe this transaction creates greater
growth opportunities for Matrix and its employees and also will allow us to accelerate
our existing expansion plans in India and abroad.13
Analysts felt that with the global generic drugs industry undergoing a consolidation
phase, large pharmaceutical companies such as Teva Pharmaceutical Industries Ltd. 14
(Teva), Sandoz15, Barr Pharmaceuticals, Inc. 16 (Barr), the Actavis Group17 (Actavis),

10

11

12

13

14

15

16

Docpharma NV was a Belgium-based generic drugs company that was acquired by Matrix
in 2005.
PharmSource Information Services, Inc. is a provider of information services to the
pharmaceutical and biopharmaceutical companies on contract drug development and
manufacture.
US Food and Drug Administration (FDA) is an agency of the US Department of Health and
Human Services and is responsible for the safety regulation of most types of foods, dietary
supplements, drugs, vaccines, biological medical products, blood products, medical devices,
radiation-emitting devices, veterinary products, and cosmetics.
Jim Miller, Will Delivery Technologies Deliver Profits to CMOs? www.pharmtech.com,
October 2, 2006.
Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix Laboratories,
www.prnewswire.co.uk, August 28, 2006.
Teva Pharmaceutical Industries Ltd., headquartered in Petah Tikva, Israel, is the leading
generic drugs company. In 2006, it had total sales of US$8.4 billion.
Sandoz, headquartered at Holzkirchen, Germany, is the generics subsidiary of Swiss
multinational pharmaceutical company Novartis AG. In 2006, it had total sales of US$5.9
billion.
Barr Pharmaceuticals, Inc., headquartered in Montvale, New Jersey, USA, is a leading
generic drugs company. In December 2006, it acquired a leading Croatian generic drugs
major Pliva d.d. to become the worlds third largest generic drugs company with combined

429

International Business
Watson Pharmaceuticals, Inc.18 (Watson), etc., were eyeing Indian pharmaceutical
companies as potential targets of M&A deals. This was because, with considerable
pricing pressures in the US, these companies were on the lookout for low-cost
suppliers. In addition to the low-cost manufacturing platform, the attractiveness of the
Indian companies stemmed from the fact that they had large and varied product
portfolios and FDA-approved manufacturing facilities. Indian pharmaceutical
companies also had a number of DMFs19 and ANDA20 filings in the US, the worlds
largest market for pharmaceuticals. Moreover, some of these companies had
developed a significant presence in the European and African markets through the
inorganic route. In this context, analysts felt the acquisition of Matrix would benefit
Mylan. Datamonitor Plcs21 pharmaceutical markets analyst, Joshua Owide, noted,
As the generics industry becomes increasingly competitive, Mylan has found a deal
that will help it to not only target emerging markets but also establish it as a
prominent force in the global market. On the whole, the deal represents an excellent
opportunity for Mylan to strengthen its core business activities. As a generic-focused
pharmaceutical company, manufacturing level competencies, particularly that
pertaining to drug composition, are fundamental to its operation. Subsequently, it is
likely that the synergies created by this deal will optimize Mylans market share and
margins.22
However, not everyone was optimistic about the deal. Some analysts considered the deal
to be too expensive for Mylan given the fact that it valued Matrix at 22x earnings
multiple v/s 18x, the average multiple for the Indian pharmaceutical industry. Others
kept their fingers crossed considering that this was Mylans first foray outside the US,
and as such, the company might face a problem in transforming itself into a global
organization. Mylan defended the deal saying Matrixs acquisition was strategic and was
a calculated risk essential to provide Mylan a global reach.

Background Note
Mylan
Mylan was the second-largest US generic drug maker as of 2006.23 The company was
headquartered in West Virginia, USA, and was involved in developing, licensing,
manufacturing, marketing, and distributing many generic and proprietary drugs. The
company primarily focused on solid oral dosage generic drugs. These generic drugs

17
18

19

20

21

22

23

sales of approximately US$ 2.4 billion. (Source: Victoria Harrison, Barr Acquires 92%
Share in Pliva, www.pharmaceutical-business-review.com, December 23, 2006.)
Actavis Group, Reykjavk, Iceland, is a leading generic drugs company.
Watson Pharmaceuticals, Inc., headquartered in Corona, California, USA, is a leading
generic drugs company.
DMFs (acronym for Drug Master File) contain information on the processes and facilities
used in drug manufacture and storage and are submitted to the US Food and Drug
Administration (FDA) for examination.
An ANDA (acronym for Abbreviated New Drug Application) contains data which when
submitted to FDAs Center for Drug Evaluation and Research, Office of Generic Drugs,
provides for the review and ultimate approval of a generic drug product. (Source:
www.fda.gov)
Datamonitor Plc, headquartered in London, UK, is a leading provider of information
services to key industries.
Joshua Owide, Mylan Laboratories: Entering the Matrix, www.pharmaceutical-businessreview.com, August 30, 2006.
Mrinalini Datta, Mylan Labs to Acquire India Rival, www.iht.com, August 28, 2006

430

Mylans Acquisition of Matrix

were more affordable than the branded prescription drugs that were marketed by
research-based pharmaceutical companies. Mylan Pharmaceuticals Inc., Mylan
Technologies Inc., Bertek Pharmaceuticals Inc., and UDL Laboratories Inc. were its
four principal subsidiaries.
Mylans history dates back to 1961 when Milan Pharmaceuticals (Milan) was founded
by Milan Mike Puskar (Puskar) and his friend Don Panoz in White Sulphur Springs,
West Virginia, as a pharmaceutical distribution company. In 1970, Milan became
incorporated as Mylan Inc. and the company was listed in 1973. In 1980, under Puskars
leadership, the company achieved a milestone by introducing its own brand of Mylan
drugs. This laid the platform for its future growth. The year 1984 marked the approval of
Mylans first proprietary drug, Maxzide, an anti-hypertensive drug. With this, Mylan
became the first generic drug maker to get a patent for its own product.24
In the next ten years i.e. by 1995, Mylan had the most dispersed line of
pharmaceuticals in the US, be it generic or branded. Mylan also made some notable
acquisitions during 1993 to 1999 (Refer to Exhibit I for Mylan: A Timeline) to
consolidate its market size and to emerge as a stronger pharmaceutical player. These
included Bertex Inc, which was recognized for its transdermal drug delivery,
Penederm Inc renowned for dermatology products, and B. Hickman Inc. that was
acknowledged for its skilled workforce. The acquisition of these three companies laid
the foundation of Bertex Pharmaceuticals Inc. By 2002, the Mylans revenues had
crossed the US$1 billion mark and in 2004 the company was included in S&P 500 25.26

Exhibit I
Mylan: A Timeline
Event

24
25

26

Remark/ Rationale

1961

Milan Pharmaceutical is
incorporated

Principal business is of distribution

of drugs.

1965

Starts manufacturing vitamins

First product to be manufactured

under Milan banner.

1973

Mylan becomes a public limited

company

Milan Pharma is incorporated as

Mylan Inc. and the company gets
listed.

1984

It starts marketing its first

proprietary drug Maxzide, an
antihypertensive drug

Becomes the first generic drug

maker to get a patent for its product.

1987

Opens a new manufacturing unit

at Caguas, Puerto Rico

To enhance its manufacturing

capacity in order to move toward a
bigger platform.

1989

Acquires a 50 percent stake in

Somerset Pharmaceuticals Inc, a
US-based a proprietary research
and development pharmaceutical
company.

To acquire the rights to market a

new medication for the treatment of
Parkinsons disease called Eldepryl.

Mylan History, www.mylan.com.

The S&P 500 is an index containing the stocks of 500 Large-Cap corporations. It is
maintained by a leading publisher of financial research and analysis on stocks and bonds,
Standard & Poors.
Mylan History, www.mylanpharms.com.

431

International Business
Event

Remark/ Rationale

1991

Acquires another US-based

pharmaceutical company, Dow B.
Hickam Pharmaceuticals

To acquire its skilled workforce and

marketing
and
manufacturing
facilities of wound and burn care
pharmaceutical products.

1993

Acquires Bertek Inc. US-based

manufacturer and innovator of
transdermal (patch) drug delivery
systems

Addition of Bertek gives Mylan

five worldwide and seven domestic
patents for transdermal drug
delivery technology.

1996

Acquires UDL Laboratories Inc, a

US-based supplier of unit dose
multi source pharmaceuticals

To gain its supplying capabilities of

unit dose to the institutional and
long-term care market place.

1996

Establishes Bertex
Pharmaceuticals as its main
branded pharmaceuticals
subsidiary

To increase participation in the

branded drug segment, which
offered higher profits than the
generic sector

1998

Acquires Penederm Inc., a USbased pharmaceutical company

recognized in the dermatology
segment, and merges it with
Bertek.

To
acquire
Topicare27.

its

technology

Adapted from Company History, www.mylan.com and www.fundinguniverse.com.

In mid-2004, Mylan made a bid to acquire King Pharmaceuticals 28 in a deal valued at
US$4 billion to enhance its business in the brand drug segment.29 However, the deal
was aborted in February 2005, as the two companies could not arrive at an agreement.
Since then, the company was trying to bolster its business in generics. With the global
generic drugs industry already in a consolidation phase, Mylan was on the lookout for
an M&A deal that would help it remain competitive (Refer to Exhibit II for a note on
the global generic drugs industry).
As of 2007, Mylan Pharmaceuticals Inc. and UDL Laboratories Inc. looked after the
generic drugs operations of Mylan while Bertek Pharmaceuticals Inc. and Mylan
Technologies Inc. looked after the branded segment. The companys pharmaceutical
basket had 150 products including antibiotics, antidepressants, anti-inflammatory
drugs, beta-blockers, and laxatives that catered to various therapeutic segments. The
company also enjoyed a global presence and had a strong marketing and distribution
network stretching from North America to Europe, the Middle East and Africa
(EMEA), as well as the Asia Pacific region (APAC). For the fiscal year ended 2007,
Mylans total revenue has increased by 28 percent year-on-year from US$1257
million in 2006 to US$1611 million (Refer to Exhibit III for selected financials of
Mylan).

27

28

29

Topicare is a proprietary delivery technology of Penederm Inc in which it markets patented

topically administered prescription product.
King Pharmaceuticals, headquartered in Bristol, Tennessee, USA, is a pharmaceutical
company that was founded in 1994. In 2006, its revenues were US$2 billion.
Mylan Buys Matrix for $736 Million: Buys Indian Firm to Enter Asian and European
Markets, www.levinassociates.com, 2006.

432

Mylans Acquisition of Matrix

Exhibit II
A Note on the Global Generic Drug Industry
In 2006, the global market for generic drugs was estimated to be US$77 billion. 30
The top four players in this industry were Teva, Sandoz, Barr, and Merck KgaAs 31
generic unit.32 Other notable players in this industry included Mylan, Watson, and
Actavis.
In addition to competing among themselves, the generic drugs companies also
competed with pharmaceutical companies that sold branded drugs on the price
platform. So, they also competed in the total pharmaceutical market that was
estimated to be US$607 billion in 2006 (according to IMS Health 33). Generic drugs
are generally sold under their chemical name. For instance, generic versions of
Viagra may sell under the chemical name Sildenafil citrate. But in some markets,
generic drugs may be sold under a brand name. For instance, Viagra is sold in
India by various companies under names such as Manforce, Penegra, Caverta,
Androz, etc. Such products are called branded generics.
Factors such as a number of patent expirations of blockbuster drugs of researchbased pharmaceutical companies between 2000 and 2006 had given a huge impetus
to the generics drugs industry. In addition, changes in legislation and regulation in
various countries that favored the use of generic drugs and pressure from various
government and other third party payers to adopt low-priced generic drugs to
minimize healthcare costs had led to an increase in the usage of generic drugs. For
instance, in the worlds largest pharmaceutical market, USA, generic drugs
accounted for around 50 percent of the pharmaceutical market by volume. This
made the US an attractive market for companies that manufactured and marketed
generic drugs and some of the largest generic drug manufacturers had a strong
presence in this market. In Europe too, the generic drugs were getting increased
acceptance. While countries like Germany, Sweden, Denmark, the UK, and the
Netherlands were the larger markets for generic drugs, the smaller generic markets
of Spain, Italy, and Portugal were forecast to increase rapidly mainly as a result of
government cost-containment pressures.
Increased acceptance of generic drugs had catapulted the leading generic drugs
companies such as Teva and Sandoz to the league of major pharmaceutical
companies. These companies were also becoming increasingly ambitious and were
often engaging the research-based pharmaceutical companies in litigations by
challenging their patents in order to bring their generic drugs into the market even
before the patent of the branded drug had expired.
Analysts felt that the generic drugs market was poised for high growth rates in the
future. According to Visiongain34, the market for generic drugs would increase to
30

31

32

33

34

Consolidation in the Generic Pharmaceutical Industry: An Evolving Landscape, Urch

Publishing, October 2007.
Merck KGaA, headquartered in Darmstadt, Germany, is one of the oldest chemical and
pharmaceutical companies. Its history dates back to the 17 th century. In 2006, Merck
KGaAs generic unit had total sales of US$1.8 billion.
Tova Cohen and Steven Scheer, Teva Pharma Seen Best Placed to Win Merck Generics,
www.reuters.com, May 8, 2007.
IMS Health is the worlds leading provider of business intelligence and strategic consulting
services to the pharmaceutical and healthcare industries.
Visiongain, headquartered in London, UK, is a company that provides analysis of the
worldwide telecom and pharmaceutical industries.

433

International Business
US$83.9 billion by 2010.35 IMS Health predicted that the generic drug market
would grow by 22 percent annually until 2010 in the five largest generic markets. 36
However, the generic drugs companies also faced a number of challenges. Factors
such as pricing pressure and several legislative and regulatory hurdles put a lot of
pressure on the generic drugs companies. The patent regulations in the US gave
enough scope for research-based pharmaceutical companies to create barriers for
entry through litigations. Research-based pharmaceutical companies sought to
extend the patent life of their blockbuster drugs and discourage the entry of generic
drugs manufacturers.
In such a scenario, generic drugs companies had to survive in a very competitive
market. These challenges had led to this industry entering a consolidation phase.
Many leading generic drugs companies entered into M&A deals. Between 2005
and 2007, there were as many as 18 M&A deals in this industry. 37 The number of
dominant players had gone down to around six from 14 two years earlier. Some
notable deals were Tevas acquisition of Ivax Corporation 38 in 2005, Sandozs
acquisition of Hexel AG39 and Eon Labs, Inc.40 in 2005, and Barrs acquisition of
Pliva. These deals had put pressure on other generic drugs companies to
consolidate or risk compromising their competitiveness.
Compiled from various sources.

Exhibit III
Selected Financial Data of Mylan Inc.
(in US$ million)

2007

2006

2005

2004

2003

1,611.82

1,257.16

1253.37

1374.62

1269.19

Cost of Sales (B)

768.15

629.55

629.83

612.15

597.76

Gross Profit (A-B)

843.67

627.62

623.54

762.47

671.44

Research and
Development

103.70

102.43

87.88

100.81

86.75

Acquired in process
research and
development (from
Matrix)

147.00

Selling, general and

administrative

215.54

225.38

259.48

201.61

173.07

Total Revenues (A)

Operating Expenses:

35
36
37

38

39

40

The Worlds Top Ten Generic Companies, www.leaddiscovery.co.uk, November 2005.

Brian Lawler, The Coming Generic Drug Boom, www.fool.com, October 16, 2006.
Mylan Outbids Teva and Private Equity Investors to Acquire Merck KGaAs Generics
Unit, www.globalinsights.com, 2007.
Ivax Corporation was a US-based generics drugs major and one of the worlds top ten
generics drugs company.
Hexel AG (Hexel) was a Germany-based generics drugs major and one of the leading
generics drugs companies.
Eon Labs, Inc., an affiliate of Hexel, was a US-based generic drugs company.

434

Mylans Acquisition of Matrix

Litigation settlements,
net

50.12

12.42

25.99

34.76

2.37

427.55

287.39

302.17

494.80

413.99

Interest Expense

52.28

31.29

Other income, net

50.23

18.50

10.08

17.81

12.53

Earnings before
income taxes and
minority interest

425.51

274.61

312.25

512.61

426.51

Provision for income

taxes

208.02

90.06

108.66

177.99

154.16

0.21

217.28

184.54

203.59

334.61

272.35

Earning from
operations

Minority Interest
Net Earnings

Mylans fiscal year ends March 31.

Source: Mylan Inc., Annual Report-2007, www.mylan.com

Matrix
Matrix, a listed Indian pharmaceutical company, was an API manufacturer established
in February 2001. It was the worlds second-largest manufacturer of APIs in terms of
DMF filing.41 Its core business was to manufacture APIs and solid oral dosage forms.
Matrix operated in regulated markets such as the US and the European Union and had
a wide range of products catering to the anti-AIDS, cardiovascular, central nervous
system, anti-asthmatic, anti-bacterial, anti-fungal, gastrointestinal, pain management,
and lifestyle related therapeutic segments.
Tracing back the history of Matrix, its foundation lay in the dreams envisioned by its
promoters viz Prasad, C Satyanarayana, and M Ravinder. 42 The trio took over an
ailing Hyderabad-based pharmaceutical company, Herren Drugs & Pharmaceuticals43
(Herren), in June 2000. Matrix was formed as a result of the renaming of Herren in
February 2001. During that time it fended off an acquisition bid by H. Lundbeck A/S44
(Lundbeck). Lundbeck wanted to buy Matrix to own a new process that Matrix
haddeveloped to manufacture Citalopram, a drug originally developed by the Danish
company. Analysts felt that the companys refusal to sell out had earned it a lot of free
publicity.45
In 2002, Matrix filed the process patent for Citalopram under the Patent Co-operation
Treaty. Even before the US patent on Citalopram expired in January 2004, Matrix was
prepared to supply the drug. Initially the company was heavily dependent on the sales
41
42

43
44
45

Form 8-K for MYLAN INC, www.yahoo.com, November 7, 2007.

N Prasad was then the CEO and Managing Director of Vorin Laboratories Ltd. (Vorin), a
Hyderabad-based subsidiary of one of the leading Indian pharmaceutical companies,
Ranbaxy Laboratories Ltd. C Satyanarayana was the R&D chief at Vorin. M Ravinder was a
successful pharmaceutical trader, distributor, and an investor entrepreneur.
Herren Drugs and Pharmaceuticals was a Rs.450 million company then.
H. Lundbeck A/S (Lundbeck) is a Danish international pharmaceutical company.
Gina S Krishnan, The Matrix Evolution, www.businessworldindia.com, Debember 29,
2003.

435

International Business
of Citalopram, which accounted for 50 percent of its revenues in the fiscal year
2002.46 Over the years, Matrix strategically diversified its product portfolio. By 2006,
the companys API product range had increased to 169 and was spread across 17
therapeutic segments. Its API product portfolio also contained 10 anti-retrovirals47
(ARV). Along with this, Matrix had also started selling generic drugs under DMF
filing and Para IV filing48 in the US. It had a number of such Para IV filings in the
pipeline.
To expand its capacity and to penetrate the regulated markets in the US and Europe in
a big way, the company adopted the inorganic growth route. In line with this strategy,
Matrix acquired a 54.89 percent stake in May 2002 in Medicorp Technology
(Medicorp), an API manufacturer which had FDA approval. By the end of the year,
the company further consolidated its size through merger & acquisition deals with
Vorin Laboratories Ltd (Vorin), an API manufacturer. By May 2003, the process of
consolidation of Medicorp and Vorin with Matrix was completed. The merged entity
Matrix Labs was headed by Prasad as the managing director and chairman (Refer to
Exhibit IV for the values added by the three companies to the Matrix Labs).

Exhibit IV
Value Added by the Respective Companies to the Merged Entity (Matrix)
Parameters

Matrix

Medicorp

Vorin

Products

Six: CNS
agents & antibacterial

Ten: Gastro-intestinal,
proton pump inhibitors,
anti-inflammatory &
cardio-vascular

Fifteen: Antibacterial, antiasthma & antivirals

Markets and
customers

Europe

North America and Japan

India, Middle
East, Africa and
South Africa

Facilities

TGA and
European
norms

USFDA, TGA and MICA

ISO 9000

Regulatory
compliance

----

DMFs filed in developed

markets

----

Source: Annual Report: 2002-03, www.matrixlabsindia.com

Continuing with its policy of sustained growth through the M&A route, Matrix under
the leadership of Prasad struck some major deals during 2004 and 2005 (Refer to
Exhibit V for Matrix: A Timeline). These deals helped Matrix to expand its market
from a single country to five countries by the end of fiscal year 2006. In addition to
being an international API company, it started competing as a manufacturer of
finished dosage forms (FDF) in Europe and China and also ventured into medical
devices. This also helped the company to diversify its risks considerably.

46
47
48

Matrix Laboratories Ltd., 2001-02 Annual Reports, www.matrixlabsindia.com

Anti-retroviral drugs (ARV) are used in the treatment of HIV infection.
Para IV filing provided the company with exclusive rights of 182 days to market the generic
version of a drug in US market, once the patent for the proprietary drug expired.

436

Mylans Acquisition of Matrix

Exhibit V

Matrix: A Timeline
Event

Impact/ Benefit

February 2001

Herren renamed as Matrix.

February 2002

Process Patent for Citalopram

is filed by Matrix on February
27.

To gain the preferred supplier

status in global generic market.

May
2002

Acquires 54.89 percent stake in

Medicorp

To gain a large customer base,

presence in regulated market
and also access to sophisticated
technologies.

May
2003

Amalgamation of Medicorp
and Vorin into Matrix
Laboratories Ltd.

Reduced time cycle of its

market and product
development helped in
increasing its profit and
sustainability in the competitive
business environment.

November
2003

Decides to launch two joint

venture companies, Medikon
Galenicals in India and CEM
Pharma Life Science in Ireland
with two German companies
having a total capital outlay of
3.90 million.

Backward integration for the

supply of IPPs (generic APIs
business) and R&D support.

March 2004

FDA approves the

manufacturing facility of
Matrix at Jeedimetla,
Hyderabad.

Gains clearance for supplying

APIs to the US market.

March 2004

Vera Laboratories Ltd, Fine

Drugs and Chemicals Ltd,
Medikon Laboratories Ltd. and
Caliber Engineering Private
Ltd. merge with Matrix
Laboratories Ltd.

To enhance transparency and

corporate governance practices
and to move toward a more derisk business model.

January 2005

Acquires Finished Dosage

Facility situated near Nashik .

In order to integrate forward

into formulations
manufacturing.

February 2005

Acquires a 60 percent stake in

Mchem, China

Backward integration for the

manufacture of intermediates
and to help consolidate its
position as a major supplier of
APIs

April
2005

Floats two 50:50 joint venture

with South Africa based Aspen
Pharmacare Holdings Ltd.
having largest FDA approved
API manufacturing facility.

To manufacture and market

anti-HIV drugs in South Africa.

437

International Business
Event

Impact/ Benefit

June
2005

Acquires controlling stake in

Docpharma, a Belgium-based
generic drug distributor.

To gain generics marketing

expertise in the underpenetrated markets of Europe
such as Belgium and other
markets of Southern Europe.

September
2005

Matrix acquires a 43 percent

stake in Explora Laboratories
SA, a Switzerland-based
pharmaceutical company
engaged in R&D for high
potency API manufacture

To gain access to technology

platforms and product
portfolios such as corticosteroid
and anti-cancer therapeutic
segment. Opportunity to
leverage on technology
platform to project itself as a
partner to research based
pharmaceutical companies in
the area of contract research
and contract manufacturing.

Matrix acquires up to 55
percent controlling interest in
Concord Biotech Ltd., a USFDA approved biotechnology
company in India.

Gains fermentation & Biocatalytic technology

capabilities for manufacture of
APIs.

December
2005

Compiled from various sources

In addition to its core business of API manufacturing, the company had also identified
contract research and manufacturing as a potential growth opportunity. In this regard,
it decided to supply APIs and to make product dossiers49 of products going off patent
in the mature markets of the West. These comprehensive product dossiers, which
Martix then licensed to different companies for different markets, helped it to obtain
the contract for supplying the API in addition to the license fee. For this, Matrix
launched two joint venture companies in November 2003 Medikon Galenicals in
India and CEM Pharma Life Science in Ireland with two German companies.50 It
also signed a deal with Niche Generics Ltd.51 (UK) for the dossier for Perindopril, a
US$400-million per annum product.
Analysts felt that Matrixs global presence had resulted in it having a more de-risked
business model and also enabled it to achieve a more predictable growth in the long
run. As of 2007, the company operated in five key business segments (Refer to
Exhibit VI for the five segments and their contribution). It had 10 API intermediate
manufacturing facilities, six of which were FDA approved. These facilities are located
in India (6), China (3), and South Africa (1). Its manufacturing facility of FDFs had
the capacity to produce 2 billion tablets and 300 million capsules on a two-shift basis
per annum. It had a total workforce of 2000 which included more than 300 R&D
49

50

51

These are regulatory submission documents and may include data from clinical trials, data
from other studies on the drug such as bioequivalence studies, etc.
The German investment partners of the two joint venture companies were H Fischer & Co
International GmbH and CES Beteiligungs GmbH respectively. Both the companies were
part of the lucrative German pharmaceutical industry with a focus on generics.
Niche Generics ltd. is a Europe based generic drug supplier which tries to roll out the
generic drug as soon as the patent expires.

438

Mylans Acquisition of Matrix

scientists. The company had five key business segments viz. Generic APIs, ARVs,
FDF, hospital business, and contract manufacturing services (Refer to Exhibit VI to
see their Contribution to Matrixs Sales). For the fiscal year ended 2007, Martixs
total sales had increased by 42 percent year-on-year from Rs.11.59 billion in 2006 to
Rs.16.48 billion (Refer to Exhibit VII for the key financials of Matrix).
Exhibit VI

Contribution of Matrixs Business Segments

2006-07
Rs.(Mn)

% to
total
sales

2005-06
Rs.(Mn)

% to
total
sales

Year-onyear
Growth
%

Generic APIs

5,505

33

3,859

33

43

Anti-retro Virals (ARVs)

3,390

21

2,797

24

21

Finished Dosage Forms

4,295

26

2,484

22

73

Hospital business

2,209

13

1,654

14

34

Contract Manufacturing
Services

1,081

792

36

Total Sales

16480

100

11586

100

42

Particulars

Source: Matrix Laboratories Ltd., Annual Report: 2006-2007,

www.matrixlabsindia.com.

Exhibit VII
Matrix Laboratories Ltd. Financial for Fiscal 2006- 07
Particulars ( Rs. Millions)

2007

2006

Total sales

16,480.27

11586

Total assets

27,989.42

30788.66

Total liabilities

17,399.26

30788.66

Profit before tax

1,021.42

2381.72

756.53

2005.63

Profit after tax before share of Associate

Matrixs fiscal year ends March 31.

Source: Matrix Laboratories ltd., Annual Report-2007, www.matrixlabsindia.com

With the generic drugs industry in a consolidation phase, leading companies were
targeting Indian generic drugs companies for M&A deals. Matrix was one of the
prime candidates for such a deal. Analysts felt that entering into such deals would be
beneficial for the Indian generic drugs companies as well, as these companies lacked
the scale that was vital for survival in the highly competitive generics drugs market.
With India bringing its patent law in line with the patent laws in mature markets such
as the UK and the US in 2005, a majority of the 3,000-odd Indian pharmaceutical
companies were in a precarious position52 (Refer to Exhibit VIII for a note on the
Indian pharmaceutical industry).

52

Gina Krishnan, The Sell-Out Begins, www.businessworldindia.com, September 11, 2006.

439

International Business

Exhibit VIII
A Note on the Indian Pharmaceutical Industry
In 2006, the total market for pharmaceuticals in India was estimated to be US$7.3
billion. The market is dominated by companies manufacturing and marketing
branded generic drugs. As of 2006, Indian pharmaceutical companies also
produced more than 22 percent of the worlds generic drugs. The significant
presence of Indian pharmaceutical companies in the generic drugs market had been
attributed, in part, to the loose patent regime prevalent in India before 2005.
Between 1970 and January 1, 2005, India recognized only process patents. This
patent environment was not suitable for research-based pharmaceutical companies
as their products could be reverse engineered by Indian pharmaceutical companies
and sold in India. Due to this, many Indian companies specialized in reverseengineering, which enabled them to develop generic drugs at a very low cost. The
competition among the various Indian companies also brought the price down
further. This prompted many research-based pharmaceutical companies to either
market their drugs at a moderate premium price or simply ignore the Indian
market.
After becoming a member of the World Trade Organization (WTO), India had to
comply with TRIPS53 (trade-related aspects of intellectual property rights). TRIPS
ensures that profits from any new product go exclusively to the innovator (patent
holder) for the full duration of the patent. TRIPS came into force on January 1
1995, but some developing and transitional economies were given time to comply
with the agreement. India was given time till January 1, 2005, to enforce a new
patent law that recognized product patents.
However, certain flexibilities have been introduced in TRIPS so that a patients
access to life saving drugs is not denied. A waiver was issued in the WTO Doha
ministerial conference in 2001, stating that intellectual property should not take
precedence over public health. Moreover, countries like India that had newly
introduced TRIPS legislations were allowed to copy any drug that was patented
before 1995, i.e. before the introduction of TRIPS. Those companies that seek to
copy drugs patented after 1995 can do so under a system called compulsory
licensing, if the company that owned the patent was found to have misused its
rights.
On December 27, 2004, the Indian government issued a temporary executive order
to meet the January 1, 2005 deadline. The Indian Parliament passed the new patent
law recognizing product patents, in March 2005. However, the law did not impact
those products invented before 1995 and generic companies still had the right to
continue manufacturing and selling those drugs.
With the change in patent law favoring research-based pharmaceutical companies,
analysts expected problems for Indian pharmaceutical companies, as most of them
did not have the R&D capability to discover new drugs. In such a scenario, the
research-based pharmaceutical companies were expected to be more open to
introducing new products in the Indian market, while most Indian companies
would be dependent on marketing licenses to market these new drugs in India.
Indian pharmaceutical companies were also focusing on contract
53

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) is an

international treaty administered by the World Trade Organization (WTO) which sets down
minimum standards for most forms of intellectual property (IP) regulation within all
member countries of the World Trade Organization.

440

Mylans Acquisition of Matrix

research/manufacturing. However, to attract such global contracts, these companies
have to achieve a critical mass or economies of scale to be viewed as a suitable
partner.
Therefore, in order to diversify risks, leading pharmaceutical companies in India
were looking for growing through M&A in foreign markets. The fact that the
patents for a large number of drugs in the US and Europe were due to expire in the
next few years, also added to the attractiveness of these markets to Indian
pharmaceutical companies. Since Indian pharmaceutical companies specialize in
manufacturing low cost and good quality generic drugs, they were in a position to
make the most of this opportunity. However, analysts believe that in order to be
more competitive the companies had to develop scale. Scale was very important
for companies considering that these companies did not have research molecules of
their own and relied on reverse engineering of drugs developed by research-based
pharmaceutical companies.
Compiled from various sources.

The Deal
In mid-2006, there were speculations that Mylan was in the process of acquiring a
majority stake in Matrix. Though the management at Matrix denied the reports, there
was a 10 percent rise in the companys share prices in anticipation of the deal. 54 These
reports followed reports earlier in the year that the worlds largest generic drugs
company Teva was interested in acquiring Matrix.
On August 27, 2006, Mylan announced its intention of acquiring Matrix in a cash and
stock deal worth US$736 million. With this, Mylan intended to establish a global
presence in emerging pharmaceutical markets such as India, which was the fourth
biggest drug market in terms of volume. 55 Coury commented, Mylan Matrix
transaction marks the beginning of a new era at Mylan where our organization is
continuing to expand beyond our well-established position as a leading domestic
generic pharmaceutical company toward our objective of establishing Mylan as a
world leader in generics and specialty pharmaceuticals. 56 As per the terms of the
transaction approved by the Mylan Board of Directors, Mylan acquired up to 71.5
percent of Matrixs outstanding paid-up share capital. Merrill Lynch & Co., Inc. 57 and
DSP Merrill Lynch Ltd.58 were the advisors to Mylan for completing this deal. Matrix
was advised by ABN AMRO Holding NV 59 and UBS AG60.

54
55
56
57

58

59

60

Mobis Philipose, Matrix Unloaded? www.dnaindia.com, June 22, 2006.

Pharmaceuticals, www.ibef.org, November 15, 2007
Mylan Lab Acquires Stake in Matrix, www.ciol.com, January 9, 2007.
Merrill Lynch & Co. Inc. (ML), headquartered in New York, USA, is a leading wealth
management financial services, and advisory company.
DSP Merrill Lynch Ltd. (DSPML), headquartered in Mumbai, India, is a leading financial
service provider in India. ML holds a 90 percent stake in DSPML.
ABN AMRO Holding NV, Amsterdam, the Netharlands, is a leading European bank with a
global presence.
UBS AG, headquartered in Basel & Zrich, Switzerland, is a leading financial services
company.

441

International Business
There were two phases to the Mylan Matrix deal. In the first phase, Mylan purchased
51.5 percent of the paid up share capital of Matrix in accordance with the agreement
made with certain selling shareholders. In order to do so, Mylans wholly-owned
subsidiary, MP Laboratories Ltd. (Mauritius) entered into a Share Purchase
Agreement (SPA) with key shareholders of Matrix viz. Prasad, N Prasad HUF61, G2
Corporate Services Limited, Maxwell (Mauritius) Pte. Limited 62, entities controlled by
Newbridge Capital63, and Spandana Foundation64. In the second phase of the deal on
November 22, 2006, Mylan made a public announcement of an open offer to acquire
20 percent of Matrixs share capital held by the general public. This was done in
accordance with SEBI65 regulations.
On completion of the open offer on December 21, 2006, and closing of the SPA,
Mylan acquired 71.5 percent of Matrixs total paid-up share capital. Both these
transactions were performed at Rs.306 per share (US$6.84 per share), putting the deal
at US$ 736 million, an approximate 15 percent premium to the last 30-days average
stock price of Matrix. Though the price to revenue multiple in relation to the market
value of Matrix stock in December 2006 was 2.8x and the price-to-EBIT multiple was
12.3x, the purchase price (Rs. 306) implied that Mylan valued Matrix at above US$1
billion, with a price to revenue multiple of 3.9x and a price-to-EBIT multiple of
17.2x.66 On January 8, 2007, Mylan finally closed the purchase of 71.5 percent of
Matrixs outstanding share capital. Though Mylan acquired the controlling stake in
Matrix after completion of the transaction, the rest of its share still continued to trade
on the Indian Stock Exchanges (Refer to Exhibit IX for the shareholding pattern of
Matrix). Mylan said that Matrix would continue to operate as an independent entity
after the deal.
One of the strategic pre-conditions attached to this deal was induction of Prasad on
Mylans Board of Directors as head of Global Strategies. Prasad was highly regarded
in the industry as a wealth creator who had bought Matrix for Rs.30 million in 2000
and sold it for an enterprise valuation of Rs.62.1 billion in 2006. 67 This precondition
was intended to make Mylans entry into the global API landscape a successful
venture backed by Prasads long experience in the global API industry. It was also
intended to keep Prasad away from launching a new pharmaceutical company as he
was reportedly keen on pursuing his entrepreneurial dreams. Prasad invested US$25
million of the proceeds from the sale of his share in Matrix in Mylan. 68 The idea
behind retaining an equity stake of five per cent in Matrix and investing $25 million in
Mylan and joining their management team heading the global business strategies is to
ensure confidence levels of the Matrix shareholders, employees, and also to the new
partner Mylan,69 said Prasad.
61

62

63

64
65

66

67
68
69

HUF (acronym for Hindu Undivided Family) is a legal taxable entity in the eye of law and
Income Tax Act of India.
Maxwell (Mauritius) is an arm of Singapore-based investment company, Temasek Holdings.
It held a 13.8 percent stake in Matrix.
Newbridge Capital is a joint venture between Texas Pacific Group and Blum Capital
Partners. Along with its entities, it held a 26 percent stake in Matrix.
Spandana Foundation is a charitable trust promoted by Prasad.
SEBI (acronym for Securities and Exchange Board of India) is the regulatory authority of
Indian securities markets.
Mylan Buys Matrix for $736 Million: Buys Indian Firm to Enter Asian and European
Markets, www.levinassociates.com, 2006.
Gina S Krishnan, Matrix Unloaded, www.businessworldindia.com, September 11, 2006.
Mylan Lab Acquires Stake in Matrix, www.ciol.com, January 9, 2007.
CR Sukumar, Matrix Promoter May Turn Angel Investor, www.thehindubusinessline.com,
September 2, 2006.

442

Mylans Acquisition of Matrix

Exhibit IX
Shareholding Pattern of Matrix

12%

1% 5%

1%
10%

71%

Indian Promoters

Foreign Promoters

Institutional Investors

NRIs

Indian Public

Foreign Nationals

* As on March 31, 2007.

Source: Matrix Laboratories Ltd., Annual Report: 2006-07,
www.matrixlabsindia.com.

Rationale behind the Acquisition

Benefits for Mylan
Mylan acquired the majority stake in Matrix primarily to establish a global
distribution network for its generic drug portfolio. This acquisition acted as an entry
window for Mylan to tap the huge potential of emerging pharmaceutical markets such
as India, China, and Africa, where Matrix already had a significant presence through
its various strategic alliances. Analysts felt that its presence in emerging markets
would be profitable for Mylan in the long term. 70
Matrix, in addition to having full-fledged facilities in India, had tie-ups with Aspen
Pharmacare Holdings Ltd., South Africa, and Mchem Group, China. The deal
provided Mylan with the opportunity to expand its market for generic drugs to these
emerging markets, where the generic drug turnover was greater than that of branded
drugs. With the mature markets of the West showing signs of saturation, these
emerging markets provided pharmaceutical companies with the next opportunity for
growth. For instance, in 2006, the Indian pharmaceutical market grew at the rate of
17.5 percent to US$7.3 billion while the pharmaceutical market in China grew by 12.3
percent to US$13.4 billion.71 This was much higher than the 5-6 percent growth
experienced by the pharmaceutical industry as a whole in the mid-2000s.
70

71

Mylan Signs US$736-million takeover Deal for Indias Matrix Laboratories,

www.globalinsights.com, 2006.
Robust Growth in Specialist-Driven Products, Including Oncology Treatments, Reflect
Changing Market Dynamics, www.imshealth.com, March 20, 2007.

443

International Business
Further, the acquisition was also expected to help Mylan enter the high-margin
European market through the Matrix subsidiary, Docpharma. Docpharma was a
leading distributor of branded generics in Belgium, the Netherlands, and Luxembourg,
and was in the process of expanding its operations into France and Italy. By utilizing
Docpharmas sales network, Mylan expected to market its products in the European
markets.
The inclusion of Matrixs world class 10 APIs and intermediate plants would enhance
Mylans back-end supply chain capabilities and provide a low-cost raw material
sourcing platform. This was expected to eventually improve Mylans cost structure
and enable it to compete more aggressively in price competitive markets such as the
US. As a result of the acquisition, Mylan would have an expanded and more flexible
manufacturing base. Some analysts felt that Matrix could well end up as one of
Mylans manufacturing centers.72 However, Mylans spokesman Patrick Fitzgerald
said that the company was not interested in off-shoring its manufacturing to Matrixs
facilities. What we will be doing is source our APIs from Matrix and also expand our
high-barrier-to-entry product capabilities Matrix is the worlds largest supplier of
generic anti-retroviral APIs and will allow us to be a leader in HIV medications, 73 he
said.
According to Mylan, Matrixs product portfolio in the solid dosage forms did not
clash with that of Mylan but rather complemented it. Matrix being the worlds largest
supplier of generic ARV APIs, Mylan would now be able to enter into the highbarrier-to-entry product segments, particularly in the area of ARV. Matrixs finished
dosage form pipeline would enable Mylan to pursue a broader portfolio of products in
a more cost-effective manner.
Matrix had strong reverse engineering and scientific capabilities and access to highly
talented and skilled manpower, which would help Mylan increase its number of
ANDA submissions. Coury said, Matrix brings to Mylan a highly experienced
management team, whose robust international experience and strong track record
managing integration will complement our U.S. team.74

Benefits for Matrix

The Mylan Matrix merger was expected to benefit Matrix as well. Experts felt that the
merger would help in accelerating Matrixs expansion plans in India and abroad. As a
part of Mylan, Matrix would benefit from Mylans predominant presence in the US
and their combined expanded production capabilities and manufacturing capacity,
which would result in economies of scale. The additional financial resources from
Mylan would help Matrix in enhancing its manufacturing capabilities and product
development activities and also to expand Docpharmas portfolio and European
presence, thereby helping Matrix strengthen its position in the European market.
Commenting on the deal, Prasad said This transaction offers significant benefits for
our customers. Together, our companies will be able to compete more effectively,
while delivering cost savings to our customers. The additional financial resources
Mylan brings us also will allow us to further enhance Matrixs capabilities in
72
73

74

Atul Sathe, How Mylan Can Turn around Matrix, www.rediff.com, September 18, 2006.
Mylan in Indias Biggest Pharmaceutical Takeover as it Enters the Matrix, www.inpharmatechnologist.com, August 30, 2006.
Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix Laboratories,
www.matrixlabsindia.com, August 28, 2006

444

Mylans Acquisition of Matrix

manufacturing and product development and expand Docpharmas portfolio and
presence across Europe. We look forward to drawing on Mylans strengths to advance
our anti-viral initiatives, as we believe bringing these products to patients at lower
costs is critical.75
Viswanathan Vasudevan, a fund manager at Aquarius Investment Advisors 76, said,
There will definitely be a broadening of the market of Matrix and it will give more
depth, reach, and coverage for the company, 77 For instance, the Mylan-Matrix
combine, with its global presence, would further augment Matrixs ARV sales.
Matrixs ARV business comprised 25 percent of its total revenues in 2005 and it
continued to be its focus area. It was one of the few players globally that offered
complete integration for ARV drugs right from the intermediate stage to the finished
dosage stage. The combined entity was well placed to partner with international HIV
programs to bring low-cost anti-AIDs drugs to HIV patients across the globe.
Analysts felt that the merger with Mylan would provide Matrix with the much-needed
scale that generic companies required to survive in a very competitive market place. It
was very important for Indian pharmaceutical companies considering that these
companies did not have research molecules of their own. Some analysts said that since
2004, Matrix had been facing considerable pricing pressures in the US and European
markets.78
Both the companies said that they did not expect any problems in cultural integration
post-merger. Prasad said that the culture of Matrix would remain intact as the culture
at Mylan was a mirror image of Matrix,79 Coury too felt that Matrix was a good
culture fit for Mylan. We are very excited about the transaction and expect, based on
our time together thus far, a smooth and effective integration. We have found that
Matrix and Docpharma have cultures and values that are extremely consistent to our
own at Mylan,80 he said.

The Other View

Though overall, the deal was expected to be a win-win proposition for both the
parties, analysts were cautious about the long-term sustainability of Matrixs existing
supply chain arrangements with other US generic players who would now become its
direct competitors. Further, as Matrix had already been the second largest API
supplier to Mylan since 2003, transfer pricing of drugs between Mylan and Matrix
was also expected to be an issue of concern which would affect the potential top-line
synergies expected from this deal in the near term. Moreover, as per Mylans press
release in December 2006, accretion to earnings would be mild in the short term.
Significant top-line synergies resulting from the combined operations would only flow
in the long term (by 2009-10) when Mylan and Matrixs subsidiary Docpharma, were
able to list their respective drugs in the Europe and the US market respectively.
75

76

77
78
79

80

Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix Laboratories,

www.matrixlabsindia.com, August 28, 2006
Aquarius Investment Advisors is a Singapore-based company which provides financial
advisory services.
Mrinalina Datta, Mylan Labs to Acquire India Rival, www.iht.com, August 28, 2006.
Atul Sathe, How Mylan Can Turn around Matrix, www.rediff.com, September 18, 2006.
J.Padmapriya, Matrix Founder Prasad Set to Get into the Groove at Mylan,
www.economictimes.indiatimes.com, September 9, 2006.
Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix Laboratories,
www.matrixlabsindia.com, August 28, 2006.

445

International Business
Many analysts also felt that Mylan had over-paid for the acquisition of Matrix.
According to them, by valuing Matrix at US$ 1 billion plus, Mylan had paid 22x
Matrixs expected earnings. This was high, considering the Indian drug sectors
average multiple of 18x. However, Mylan defended the deal, explaining that the
acquisition was a calculated risk essential to enable it to expand its presence beyond
US generic markets on a global scale and to keep up with its peers. Some analysts too
justified the price paid by Mylan as they viewed India as an attractive market for
pharmaceutical products -- a market that the pharmaceutical companies just couldnt
afford to ignore keeping the future in mind. 81
Some analysts felt that it wouldnt be easy for a company like Mylan, which had only
operated in the US, to suddenly transform itself into a global generic drugs
company.82

Post Deal Developments

After the deal was completed, Coury and Prasad were appointed as the Non-executive
Chairman and Non-executive Vice Chairman of the board of Matrix respectively.
Mylan also established its Asian headquarters in Singapore for Prasad and his team. 83
It was decided that Rajiv Malik (Malik) would continue to head Matrix, while Stijn
Van Rompay, the co-founder of Docpharma, would continue to manage Docpharma.
In the restructuring that followed at Mylan, Malik was appointed the Head of Global
Technical Operations at Mylan. In the new position, he was expected to look after the
global R&D, manufacturing, supply chain management, and regulatory affairs. 84 S
Srinivasan, Senior Vice President of Matrix, was promoted as COO of Matrix.
Mylans Senior Vice President of Strategic Corporate Development and Chief
Integration Officer was promoted to head Mylans North American operations.
Mylans Vice President of Facilities was promoted as head of Global Manufacturing.
The company also announced that its Chief Scientific Officer John ODonnell would
retire on April 1, 2007. During the past several months leading up to the successful
closing of this transformational transaction weve had the opportunity to carefully
evaluate all aspects of our organizations and we are realigning to allow us to realize
the full benefit, efficiencies, and growth potential of our new global platform. I am
very pleased at how quickly and efficiently we have brought these organizations
together and this reorganization will further enhance and accelerate the benefits to
Mylan and Matrix,85 explained Coury.
Mylan also increased its fiscal 2007 adjusted earnings per share guidance to US$1.50US$1.55 from the earlier projection of US$1.35-US$1.55 per share.86 The company
had cited the successful acquisition of the Matrix as a reason for this increase.

81

82

83
84

85

86

Mylan Buys Matrix for $736 Million: Buys Indian Firm to Enter Asian and European
Markets, www.levinassociates.com, 2006.
Mylan in Indias Biggest Pharmaceutical Takeover as it Enters the Matrix, www.inpharmatechnologist.com, August 30, 2006.
Mylan Lab Acquires Stake in Matrix, www.ciol.com, January 9, 2007.
UPDATE 1-Mylan Reorganizes Management after Matrix Deal, www.today.reuters.com,
January 31, 2007.
Mylan Laboratories Announces Strategic Global Reorganization to Maximize Growth
Opportunities and Leverage Efficiencies Provided by New Global Platform,
www.drugnewswire.com, February 1, 2007.
Mylan Laboratories Ups 2007 Outlook, www.businessweek.com, February 1, 2007.

446

Mylans Acquisition of Matrix

Shortly after the acquisition of Matrix, Mylan further consolidated its position in the
global arena by acquiring Merck KgaAs generic unit for US$6.8 billion in October
2007. This acquisition catapulted Mylan to the position of the worlds third largest
generic company behind Teva and Sandoz87, employing around 12,000 people
globally in more than 90 countries. As of end 2007, Mylans broad product offering
included more than 570 products and the worlds second largest portfolio of APIs and
126 US DMFs. The mood at Matrix was also upbeat. Becoming a Mylan subsidiary
has opened up new opportunities for Matrix and the recent announcement of the
acquisition of Merck KgaAs generic business by Mylan provides additional
opportunities for Matrix. These developments would provide a global scale for
achieving very efficient utilization of R&D, manufacturing, and other resources of the
company. We are proud that Matrix will become part of one of the worlds leading
global generics companies,88 said Malik.

Outlook
The acquisition of Matrix helped Mylan to expand beyond the US market and
establish a global presence with 5100 employees in 10 countries. This deal was a
landmark one, suggesting that Indian generic drug makers with FDA approved plants,
a strong product pipeline, and a low-cost and robust manufacturing base were
attractive takeover targets for global generic makers. Some analysts also expected
Mylans acquisition of Matrix to trigger more such M&A deals in the Indian
pharmaceutical industry. In this regard, Sanjiv Kaul, MD, ChrysCapital Management
Company89, said, The ticket size of this deal has been noticed by everyone. It will
open the eyes of both the overseas companies and Indian companies who will realize
that tremendous shareholder value can be unlocked through the divestment route
Just as the Mylan-Matrix deal is based on strong strategic fit, foreign companies such
as Barr, Watson, and Teva will find companies in India which have excellent fits with
them.90 In a nutshell, the Matrix deal, which was completed in January 2007,
provided Mylan with an in-house API supplier, a strong entry platform into the
lucrative European generic markets and the fast growing emerging markets such as
Indian and China, and, above all a robust manufacturing base using a low-cost work
force.
According to analysts, through the acquisition of Matrix and Merck KgaAs generic
unit, Mylan had not only expanded its global reach, but was also in a position to reap
benefits of economies of scale and a more diversified and balanced product portfolio.
According to Goldman Sachs Group91 equity analyst, Randall Stanicky, Mylan would
post revenue and profits of US$5.2 billion and US$362.3 million respectively,
87

88

89

90

91

Sandoz, headquartered at Holzkirchen, Germany, is the generics subsidiary of Swiss

multinational pharmaceutical company Novartis AG.
Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix Laboratories,
Press Release, www.matrixlabsindia.com, May 23, 2007.
ChrysCapital Management Company is an investment firm headquartered in Mauritius with
its prime focus on Indian market.
Javed Sayed, Matrix Deal to Trigger M&As in Pharma Sec,
www.economictimes.indiatimes.com,
August 30, 2006.
Goldman Sachs Group is headquartered in New York and it is a global investment banking,
securities, and investment management firm that provides a wide range of services
worldwide to a substantial and diversified client base.

447

International Business
compared to its revenue of US$1.3 billion and profit of US$188.7 million in 2006. 92
This would also substantially de-risk the entire business from downturns in any
particular market or segment, according to analysts. The management of Mylan was
understandably pleased with their newly acquired global standing and was gearing up
to further build on that. The new Mylan now has all of the critical attributes we need
to ensure future success and deliver powerful growth. We have enhanced scale and
stability, a truly global reach, vertical and horizontal integration, and breadth and
depth in our management team,93 said Coury.

92

93

Rick Stouffer, Generics Deal a Shot in Arm for Mylan, www.pittsburglive.com,

December 9, 2007.
Mylan Laboratories Inc Completes Acquisition of Generic Business of Merck KGaA,
www.biospace.com, October 2, 2007.

448

Mylans Acquisition of Matrix

References & Suggested Readings:

1.

Gina S Krishnan, The Matrix Evolution, www.businessworldindia.com, Debember 29,

2003.

2.

The Worlds Top Ten Generic Companies, www.leaddiscovery.co.uk, November

2005.

3.

Mobis Philipose, Matrix Unloaded? www.dnaindia.com, June 22, 2006.

4.

Mrinalini Datta, Mylan Labs to Acquire India Rival, www.iht.com, August 28,
2006.

5.

Mylan Laboratories to Acquire Up to 71.5% Controlling Interest in Matrix

Laboratories, www.prnewswire.co.uk, August 28, 2006.

6.

Mylan Targets Indian Drugs Firm, www.news.bbc.co.uk, August 28, 2006.

7.

Mylan Laboratories Mylan to Have Majority of Indias Matrix, www.advfn.com,

August 29, 2006.

8.

US-Based Mylan Buys Majority Stake in Matrix, www.indiatimes.com, August 29, 2006.

9.

Brian Gorman, Mylans Biogeneric Play, www.fool.com, August 30, 2006.

10.

Joshua Owide, Mylan Laboratories: Entering the Matrix, www.pharmaceuticalbusiness-review.com, August 30, 2006.

11.

Javed Sayed, Matrix Deal to Trigger M&As in Pharma Sec,

www.economictimes.indiatimes.com, August 30, 2006.

12.

Mylan in Indias Biggest Pharmaceutical Takeover as it Enters the Matrix,

www.in-pharmatechnologist.com, August 30, 2006.

13.

Surojit Chatterjee, Mylan Buys Majority Stake in Indias Matrix Lab for $ 736
Million, www.in.ibtimes.com, August 30, 2006.

14.

CR
Sukumar,
Matrix
Promoter
May
www.thehindubusinessline. com, September 2, 2006.

15.

J.Padmapriya, Matrix Founder Prasad Set to Get into the Groove at Mylan,
www.economictimes.indiatimes.com, September 9, 2006.

16.

Gina S Krishnan, Matrix Unloaded, www.businessworldindia.com, September 11,

2006.

17.

Gina Krishnan, The Sell-Out Begins, www.businessworldindia.com, September 11, 2006.

18.

Atul Sathe, How Mylan Can Turn around Matrix, www.rediff.com, September 18, 2006.

19.

Jim Miller, Will Delivery Technologies

www.pharmtech.com, October 2, 2006.

20.

Brian Lawler, The Coming Generic Drug Boom, www.fool.com, October 16, 2006.

21.

Nath Balakrishnan,
December 3, 2006.

22.

Mylan Buys Part of Drug Maker, www.pittsburgh.bizjournals.com, December 21,

2006.

23.

Mylan Signs US$736-million Takeover Deal for Indias Matrix Laboratories,

www.globalinsights.com, 2006.

24.

Mylan Buys Matrix for $736 Million: Buys Indian Firm to Enter Asian and
European Markets, www.levinassociates.com, 2006.

25.

Mylan Laboratories
Completes
www.cnnmoney. com, January 8, 2007.

Matrix-Mylan:

Accept,

Matrix

Turn

Deliver

Angel

Profits

Investor,

to

CMOs?

www.thehindubusinessline.com,

Laboratories

Transaction,

449

International Business
26.

Lee Brodie, Mylan, World Leader in Generic Drugs, www.cnbc.com, January 9,

2007.

27.

Mylan Lab Acquires Stake in Matrix, www.ciol.com, January 9, 2007.

28.

Mylan Laboratories Inc. Completes Matrix Laboratories Limited Transaction,

www.devicespace.com, January 9, 2007.

29.

UPDATE 1-Mylan Reorganizes Management

www.today.reuters.com, January 31, 2007.

30.

Mylan Laboratories Announces Strategic Global Reorganization to Maximize

Growth Opportunities and Leverage Efficiencies Provided by New Global
Platform, www.drugnewswire.com, February 1, 2007.

31.

Mylan Laboratories Ups 2007 Outlook, www.businessweek.com, February 1, 2007.

32.

Robust Growth in Specialist-Driven Products, Including Oncology Treatments,

Reflect Changing Market Dynamics, www.imshealth.com, March 20, 2007.

33.

Tova Cohen and Steven Scheer, Teva Pharma Seen Best Placed to Win Merck
Generics, www.reuters.com, May 8, 2007.

34.

CR Kumar and Bhuma Shrivatava, Mylans India Unit Key to Merck Buy,
www.livemint.com, May 14, 2007.

35.

Mylan Reportedly Wants Stake in Matrix, www.pittsburghlive.com, August 26, 2007.

36.

Mylan Laboratories Inc Completes Acquisition of Generic Business of Merck

KGaA, www.biospace.com, October 2, 2007.

37.

Consolidation in the Generic Pharmaceutical Industry: An Evolving Landscape,

Urch Publishing, October 2007.

38.

Pharmaceuticals, www.ibef.org, November 15, 2007.

39.

Rick Stouffer, Generics Deal a Shot in Arm for Mylan, www.pittsburglive.com,

December 9, 2007.

40.

Mylan Laboratories Completes Acquisition of 51.5% in Matrix Laboratories,

www.equitybulls.com, January, 2007.

41.

Mylan Outbids Teva and Private Equity Investors to Acquire Merck KGaAs
Generics Unit, www.globalinsights.com, 2007.

42.

www.fundinguniverse.com

43.

www.myiris.com

44.

www.globalinsight.com

45.

www.googlefinance.com

46.

www.matrixlabsindia.com

47.

www.mylanpharms.com

48.

www.wikipedia.com

450

after

Matrix

Deal,