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Sanofi-Aventis scans India for acquisitions

Sanofi-Aventis, the $42-billion French drug maker, which bought companies in Brazil, Mexico, and the home-grown Shanta Biotech this year,has sent a delegation to India to finalise another target for acquisition in a market that is estimated to be worth more than $17 billion and growing, two persons familiar with the matter said.

The top team from Sanofi met executives at some Indian pharma companies, including the country’s fourth-largest drug maker Piramal Healthcare and privately-held Micro Labs, for a probable acquisition. This is the second time that Sanofi is courting Piramals this year, people aware of the negotiations said. But Piramals denied it saying they are negotiating for a stake sale.

“This is simply not true,” Swati Piramal, director (strategic alliance & communications), told ET. “We do business with MNCs and so lots of them visit us regularly. We have not given out any mandate.” she said.
A director at Bangalore-based Micro Labs declined to comment.

A team of around 10 officials from Sanofi-Aventis has been in India recently to visit Mumbai-based Piramal Lifesciences, the hived-off R&D company of the Piramals, where they spent a few days meeting executives, said a source familiar with Sanofi’s moves. The team have also met some of the other leading manufacturers in Mumbai and Bangalore, the source said.

A Sanofi-Aventis spokesperson declined to comment. Global pharma giants, such as GlaxoSmithKline, Pfizer and Sanofi, are hunting for generic drug makers, as they face potential revenue slump when a host of the patents they hold expires in the next few years. The absence of blockbuster patented drugs is forcing these companies to increase their revenues by buying up generic companies in developing markets, which are growing exponentially because of economic prosperity.

Multiple investment bankers, whom ET spoke to, said the talks with Piramals have resumed. Piramal, which was built by acquiring local units of many global companies in the past, has a field force of 4,000 people, one of the largest in the country. Its net sales stood at Rs 3,281.1 crore in FY09 and net profit was Rs 318.8 crore. Piramal, unlike some Indian pharma companies, did not get into legal tussle with patent holders, or lose money on currency transactions.
“The deal may take a few months to fructify,” said a banker. “The valuation differences have to be bridged.”
The promoters of the company are seeking a 50% premium over Friday’s Rs 382.55 on the Bombay Stock Exchange, the banker said. The Piramal family owns 49.56% in the company. Talks between the two companies broke off last time in April due to differences on valuation.

A company like Piramal in a nation of more than 100-crore people can be an accelerator of growth for the French drug maker. “Piramal’s domestic business looks very interesting and will be a good fit for Sanofi,” said a pharma analyst from a brokerage in the US.

Sanofi-Aventis, in April 2009, acquired Laboratorios Kendrick in Mexico for an undisclosed amount. In the same month, it bought Medley in Brazil for EURO 500 million. In February, the Paris-headquartered company bought a controlling stake in Czech pharma company Zentiva for EURO 1.8 billion and capped the acquisition spree when its vaccines unit, Sanofi-Pasteur, bought Hyderabad-based Shantha Biotech for EURO 550 million.

The company may lose patents of drugs worth over $19 billion by 2013, forecasts show. The company’s $3.6-billion insulin analog, Lantus, is scheduled go off patent by the end of this year, while Plavix, a cardiovascular drug, will lose patent in 2011. Plavix sells for $9.4 billion a year.

Although Sanofi-Aventis is the second-largest MNC in India, it contributed less than 1% of its global sales of EURO 29 billion. However, some analysts believe that Piramal may not be the right fit for Sanofi.

“Ideally, MNCs look for companies that have a strong presence across emerging markets,” said Bino Pathiparampil, vice-president (research) at India Infoline. “Piramal has a strong presence in the domestic market which is attractive, but, on the downside, it has been acquiring a lot of companies and focusing more on contract research and manufacturing services, a space where MNCs do not want to be in.” he said.

Source: Economic Times

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