Abbott deal: Piramal to stop selling generic medicines in India for next 8 years

India’s fourth largest drug maker Piramal Healthcare Ltd would stop making generic medicine formulations for domestic market for the next 8 years following its acquisition by US firm Abbott Laboratories.

Abbott has signed an agreement with Piramal Healthcare Limited to acquire full ownership of Piramal’s Healthcare Solutions business (Domestic Formulations).

Under terms of the agreement, Abbott will purchase the assets of Piramal’s Healthcare Solutions business for a $2.12 billion up-front payment with payments of $400 million annually for the next four years, beginning in 2011.

As part of the deal, promoters of Piramal Healthcare have agreed not to make generic drugs to sell in India for a period of eight years starting from the day the deal comes into effect.

The Abbott-Piramal deal transaction is expected to close in the second half of 2010 subject to shareholder approval of Piramal Healthcare Limited and other customary closing conditions.

This transaction is being conducted by a wholly-owned subsidiary of Abbott, resulting in full ownership of the assets of Piramal’s Healthcare Solutions business (Domestic Formulations).

Not only for the Indian market, Piramals have agreed not to enegage in the manufacture and sale of these products in emerging markets either, Piramal Healthcare founders said in a statement.

The Mumbai-based Piramal Healthcare Solutions business has a comprehensive portfolio of branded generics with annual sales expected to exceed $500 million next year in India, and market-leading brands in multiple therapeutic areas, including antibiotics, respiratory, cardiovascular, pain and neuroscience.

Piramal Healthcare’s domestic formulation business manufactures, markets and sells branded pharmaceutical products in finished form.

The domestic formulation business is currently conducted in India, Nepal and Sri Lanka.

The assets to be transferred to Abbott following the deal include the company’s manufacturing facilities at Baddi, Himachal Predesh and rigjhts to approximately 350 brands and trademarks.

The sale will also involve the transfer of the employees of the domestic formulation business.

This business grew 23 percent in 2010 (fiscal year ended March 31, 2010), faster than the market in India.

Piramal Healthcare has posted over 50% growth in net profits during the financial year ended March 2010, driven by strong domestic sales.

Piramal Healthcare has shown impressive growth anti-infective, dermatology, nutritionals and OTC segment.

Its OTC business crossed Rs 100 crore mark and it strengthen this division by acquisition of i-pill brand from Cipla. The OTC business is poised for strong growth with a range of strong brands like Lacto Calamine, Superactiv, i-pill, Polycrol, Saridon and Itchmosol and a strong network of covering 2.20 lakh stores.

Piramal Healcare’s net profit after foreign exchange adjustments increased by 52.4 per cent to Rs 481.90 crore from Rs 316.25 crore in the previous year.

The company’s earnings per share moved to Rs 23.4 from Rs 17.3 in the last year. The Board has declared equity dividend of 270 per cent per equity share of Rs 2 for the year 2009-10 as compared to 210 per cent in the last year.

The consolidate net sales increased by 11.9 per cent to Rs 3,671 crore from Rs 3,281 crore. During the year, Healthcare Solutions (domestic formulations) division reported strong growth of 24.6 per cent, with sales of Rs 200 crore.

Piramal Health’s pharma solutions (custom manufacturing) business recorded sales of Rs 880 crore during the year ended March 2010 as compared to Rs 1060 crore in the previous year as result of closure of its manufacturing facility at Huddersfield, UK.

Pharma solutions revenues from facilities in India remained constant at Rs 380 billion compared to Rs 390 crore in the previous year. The critical care business continued it’s strong growth trajectory.

Piramal has a strong commercial presence, including the largest sales force in India with a unique model that includes dedicated sales personnel in rural areas inhabited by 70 percent of the population. The combined Abbott and Piramal sales forces will be the industry’s largest in India.

Piramal’s Healthcare Solutions business will become part of Abbott’s newly created, stand-alone Established Products Division. Piramal’s Healthcare Solutions business employs more than 5,000 people in India.