ABBOTT-PIRAMAL OUTLOOK

• Vikram Dhariwal (05)

• Prasoon Mishra (06)
• Yash Ahuja (22)
• Abhijit Dhote (36)
• Arpit Verma (41)
• Diwakar Singh (43)
• Bhavesh Kothari (45)
• Sagar Mehra (54)
 INDUSTRY ANALYSIS
• Indian Pharma Industry is the third largest in the
world - $9 Billion USD.
• CAGR is estimated to be around 12-15%
• By 2015, Indian Pharma Industry set to touch US
$20 billion.
• The “organized” sector of India's pharmaceutical
industry consists of 250 to 300 companies, which
account for 70 percent of products on the
market.
 TOP TEN COMPANIES
TOP TEN COMPANIES IN THE INDIAN PHARMA INDUSTRY

CIPLA

RANBAXY

GSK(INDIA)

PIRAMAL HEALTHCARE
ZYDUS CADILA

SUN PHARMA

LUPIN LABORATORIES

ALKEM

SANOFI-AVENTIS(INDIA)

MANKIND PHARMA
WHY MNC’s ARE INTERESTED IN INDIA

• Indian Pharma sector likely to grow 11% over

the years.
• Optimum regulatory situation & patent regime
is getting established.
• Increased revenue growth.
• India is currently the fifth largest emerging
market in the world today with ~$9 bn of sales
in 2010
Top 10 countries expected to contribute
85% of EM Sales
COUNTRY RANK MARKET SALES SHARE OF EM MARKET
(US $bn) GROWTH

(%)

CHINA 1 17.6 25 27
MEXICO 2 17.4 11 4
BRAZIL 3 15.7 11 13

TURKEY 4 11.2 11 10
INDIA 5 9.2 8 25
RUSSIA 6 7.9 6 9
VENEZUELA 7 2.6 4 32
ARGENTINA 8 2.4 4 22

SOUTH AFRICA 9 1.5 2 12

ALGERIA 10 1.2 2 21
 The Indian Pharma industry
INDIA AS AN EMERGING MARKET
• Doubling the disposable income and the number of middle class households
• Expansion of medical infrastructure
• Penetration of health insurance
• Rising prevalence of chronic diseases
• Adoption of product patents
• Aggressive market penetration driven by smaller companies
REASON FOR GROWTH PERCENT CONTRIBUTION
INCOME GROWTH 40
MEDICAL INFRASTRUCTURE 20
INSURANCE PENETRATION 15
INCREASE IN PREVELANCE 10
OTHERS 15

6-20 $ Bn (FROM 2005-15), THE 14 BILLION DOLLAR WILL BE DUE TO THE ABOVE SPLIT UP
 MARKET SHARE
CHRONIC DISEASE
EG: CANCER,
DIABETICS
GROWTH

BCG PHARMA
INDUSTRY

DOG – NEXT
FLU

TO NIL
– EG: COLD,
ACUTE DISEASE
ABBOTT HEALTHCARE PRIVATE LIMITED
PIRAMAL HEATHCARE LIMITED
 INTRODUCTION TO ABBOTT-PIRAMAL
ACQUIRER
●
Abbott Healthcare Private Limited, India

SELLER
●
Piramal Healthcare Limited, India

ASSETS ACQUIRED
●
Domestic Formulation Business (including mass market) which manufactures, markets and sells branded pharmaceutical products in finished form.

MODE OF ACQUISITION
●
Business Transfer of the Formulation Business into AHPL as a going concern.

CONSIDERATION
●
USD 3.72 billion (approx. INR 175 billion). Upfront payment: USD 2.12 billion Future payment: USD 400 million payable upon each of the subsequent four anniversaries of the closing commencing in 2011.

MODE OF FUNDING
●
Cash on the balance sheet of AHPL.
 WHY PIRAMAL?

• Abbott is following a Emerging market

penetration strategy.
• Near saturation of the western market is bringing
MNC’s to India.
• This deal would help them give an edge over
their competitors.
• Added attraction: In India, individuals and not
govt pay for a big portion of the healthcare costs.
SYNERGIES AVAILABLE TO ABBOTT
 Abbott-Solvay-Piramal

●
The Abbott-Solvay-Piramal trio would emerge as the undisputed leader in the lucrative Rs 4,350 crore gastrointestinal
market with over 11% share.The trio would outperform Cadila Healthcare, Dr Reddy’s and Alkem on its way.

Vitamins & nutrients

●
Abbott & Piramal together can form a combined market share of over 8%. The duo would surpass rival MNCs Novartis,
Pfizer, GSK, Merck among host of other companies.

Dermatology Segment

●
Piramal holds 6.5% market share in the dermatology segment and with this acquisition Abbott will become among the top
5 players solely riding on this acquisition.

Neurology Space

●
Abbott-Piramal duo would make solid gains and jump straight to the second position only trailing Sun Pharma

Core Anti-infectives

●
Abbott would gain significant presence riding on Piramal’s strength. In the segment, while Abbott figures nowhere in the top
10, Piramal commands a market share of 5.6% and the sixth position
 STRUCTURE OF THE TRANSACTION

Abbott
fjjj
Piramal Group
Laboratories, USA (Promoter Group)

100% 52.1%
CASH USD
3.72bn Piramal Public
Abott Healthcare
Pvt. Ltd. Healthcare Ltd. Shareholders
47.9%

Business
Transfer

Formulation
Business
 Increasing Sales and Market Size
3000

R 17%
CAG
2500

– 24%
R
CAG
2000

1500 SALES(cr)

1000

500

0
2005 2006 2007 2008 2009 2010 2011e 2012e
 Recent M&A Deals in Indian Pharma Space

Deal Value
Target Company Acquirer (USD mn) EV/SALES Mode of Acquisition

Matrix Labs Mylan 736 4.1x Acquired whole company

Ranbaxy Labs Daiichi 4600 6.4x Acquired whole company

Dabur Pharma Fresenius Kabi 273 3.7x Acquired whole company

Santha Biotec Sanofi-Aventis 784 8.7x Acquired whole company

Orchid Chemicals Hospira 400 5x Acquired Injectable business only

Acquired domestic formulation

Piramal Healthcare Abbot 3700 8.1x business
 Is The Deal Expensive ??

Particulars Amount
Up Front Payment (US $mn) 2120
NPV of Future Payments 400mn US $ for 4 years
from 2011 (Discounted at 10%) 1268
PV Total Reciepts (US $ mn) 3388
PV Total Payments (cr) 15856
Additional Payment To PEL(Rs) 350
EV/SALES Valuation 8.1

 Current valuation of the deal is at 6.6x and 5.5x on basis of FY11e and FY12E sales.

 We see the valuation of Piramal’s DFB at 7x on basis of FY10 sales.

ADVANCING ABBOTT (Growth Strategy)