THE BETAPHARM ACQUISITION

: DRL’s Inorganic Growth Strategy in Europe

Presented by:Amit BajajAmit ModaniGaurav KumarKanika SehgalNitika SharmaNupur KarnaniPrarthana Malhotra

ABOUT DRL… Founded in 1984 : Dr. Anji Reddy.Became public limited in 1986 and started exporting drugs in the same year.First Indian pharmaceutical co. for out licensing the products.Acquisitions : Cheminor drugs, BMS laboratories UK, Meridian healthcare UK.etcOperated in 5 segments as of 2006.

CASE BRIEFING… Acquisition of Betapharm, the 4th largest

pharmaceutical co. in Germany.

DRL won the deal though it was not the highest bidder.

Benefits to both the companies.

DRL also faced problems a few months later due to legal issues, and shelved its further expansion in Europe.

Betapharm Arzneimittel GMBH

• Founded in 1993 at Augsburg• Acquired by 3i• Product Portfolio• Key Figures• Well defined CSR initiatives

Revenue (2005) 186 million

Average Revenue Growth (2000-05)

26% per annum

Market Share in Germany 3.5% to 4% (approx.)

Position in the German generic market

4th

No. of Employees 370

Key Figures for Betapharm

COMPETITION FOR BETAPHARM

• When the bidding process began, there were four Indian companies;– Wockhardt, – Zydus Cadila,– Ranbaxy, and– Dr Reddy’s.

DRL’S ACQUISITION OF BETAPHARM

• Competition to acquire the firm for:• Marketing Infrastructure• Access to German Market • Intense competition in US• Expansion in other than Indian market

DRL EMERGES AS THE WINNER

•Extensive preparation for clinching the deal•Amount paid for the acquisition - 480 million Euros•Analysts thought it to be a costly deal

BENEFITS to DRL• Immediate presence in the German generic market.• Increase in product portfolio•Scope of leveraging a strategic presence in the European generic market.• Large and mature healthcare market of Germany.• Strong manufacturing infrastructure of Betapharm, well-established distribution channels & relationships with doctors, pharmacists, etc.• Reduction in dependence on the US generic market.• The acquisitions also put DRL in a position to look for more acquisitions of smaller pharmaceutical firms.

BENEFITS to BETAPHARM

• It could cover major ailments• It could utilize Dr. Reddy’s expertise• It could take advantage of Low-cost

manufacturing instead of outsourcing

A RISKY ACQUISITION?

•Acquisition resulted in depletion of cash reserves•Declining sales in US generics market as litigation cost was increasing in US•Pressure of reducing price to 20 to 50% in stagnant market•Difficult to increase market share

THANK YOU