abbott piramal outlook
TRANSCRIPT
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 COMPANIESTOP 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 (US $bn)
SHARE OF EM MARKET 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 CONTRIBUTIONINCOME GROWTH 40MEDICAL INFRASTRUCTURE 20INSURANCE PENETRATION 15INCREASE IN PREVELANCE 10OTHERS 15
6-20 $ Bn (FROM 2005-15), THE 14 BILLION DOLLAR WILL BE DUE TO THE ABOVE SPLIT UP
CHRONIC DISEASEEG: CANCER, DIABETICS
ACUTE DISEASE – EG: COLD, FLU
BCG PHARMA INDUSTRY
GR
OW
THMARKET SHARE
ABBOTT HEALTHCARE PRIVATE LIMITED
PIRAMAL HEATHCARE LIMITED
INTRODUCTION TO ABBOTT-PIRAMALACQUIRER
• 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
fjjjPiramal Group(Promoter Group)
Formulation Business
Abott Healthcare Pvt. Ltd.
Piramal Healthcare Ltd.
Public Shareholders
Abbott Laboratories, USA
100%
47.9%
52.1%
CASH USD 3.72bn
Business Transfer
Increasing Sales and Market Size
2005 2006 2007 2008 2009 2010 2011e 2012e0
500
1000
1500
2000
2500
3000
SALES(cr)
CAGR 17%
CAGR – 24%
Recent M&A Deals in Indian Pharma Space
Target Company AcquirerDeal Value (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
Piramal Healthcare Abbot 3700 8.1x Acquired domestic formulation
business
Is The Deal Expensive ??
Particulars Amount
Up Front Payment (US $mn) 2120NPV 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)