For nearly two years, Parkway Pantai has delayed the opening of its 450-bed India hospital, the Singapore-based medical firm's bid to cash in on one of Asia's fastest growing private healthcare markets, as it waited for the necessary permits. Parkway, a unit of the world's second largest healthcare group by market value IHH Healthcare Bhd, now intends to use acquisitions to quickly expand in India, where the private hospitals market is estimated to be worth $55 billion a year but where companies must obtain as many as 70 clearances from federal and local authorities to launch a new facility. "Greenfield is off the agenda," Ramesh Krishnan, Parkway's head of Middle East and South Asia operations, told Reuters by telephone from Singapore. "It's a market you don't want to wait eternally to tap into, so we've basically decided to do it inorganically. It's just a question of a shorter runway." In Mumbai, garbage festers around Parkway's already built Gleneagles Khubchandani hospital, which had been expected to open in 2012. Krishnan said it will now open next year. Expanding through acquisitions has increasingly become the tactic of choice for hospital operators seeking to speedily expand in India, where the demand for private healthcare is booming thanks to an overburdened public healthcare system. Data from BofA-ML Global Research shows the private hospital market is set to grow 16 percent a year to reach $120 billion by 2020, almost double the size of the Chinese market. This expansion strategy, however, does nothing to address a severe shortage of hospital beds, or bring down the cost of healthcare, issues that Prime Minister Narendra Modi's government has so far failed to fix despite election promises to upgrade the entire healthcare sector. India has 7 hospital beds per 10,000 people, lower than Southeast Asia's average of 10 beds and China's 38 beds, the World Health Organisation said last year. "Acquisitions are good for the industry, but can have worrying long-term implications for infrastructure development in the sector," said Rana Mehta, head of healthcare at consultants PwC India. Buy Trumps BuildExpanding through acquisitions is more lucrative for hospital firms than starting from scratch: the BofA-ML data shows companies pay up to $150,000 to set up a new bed in India, or more than double the $60,000 they pay to buy an existing bed. Acquisitions in India also remain cheaper than in many other countries: in Singapore, it costs $1.5 million to buy a hospital bed, and in South Africa, the cost is $100,000, the data shows. So far this year, IHH Healthcare has bought majority stakes in India's Global Hospitals Group and Continental Hospitals for about $240 million. The company already holds a 10.85 percent stake in India's largest hospital chain Apollo Hospitals Enterprise. "In India, strategic acquisitions help increase our speed to market and meet the pent-up demand for quality private healthcare," IHH Chief Executive Tan See Leng said via email. Privately owned Cygnus Hospitals said it plans to add about 35 hospitals to its network by 2018 solely through acquisitions. Manipal Hospitals has also ruled out building new facilities. "The land permits and other clearances can take years," said Manipal's Chief Operating Officer Gopal Devanahalli. The cost of suitable real estate, especially in rapidly developing cities, is also deterring hospital operators from building new facilities. Property consultants Jones Lang LaSalle said land prices in Ahmedabad, Pune and Hyderabad, among others, have risen by more than a third since 2011. In June, Apollo Hospitals acquired a 220-bed hospital in Guwahati after it failed to find suitable land to build a new hospital in the northeastern city. "Cost of real estate and construction in some locations has become so prohibitive that it makes sense for us to evaluate acquisitions," said Chief Financial Officer Krishnan Akhileswaran. Apollo was also looking into possibly acquiring hospitals in Assam and Karnataka states, he added. (Reuters)
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Indian multinational pharmaceutical and biotechnology company, Cipla Ltd.’s recently announced acquisitions of the two US-based companies InvaGen Pharmaceuticals Inc. (InvaGen) and Exelan Pharmaceuticals Inc. are unlikely to affect its ratings, says India Ratings and Research (Ind-Ra). The two acquisitions, referred to as ‘transaction’, are subject to certain closing conditions and are valued at $550m. “The transaction is in sync with the management’s strategy to gear up and strengthen its front-end presence in the US, which is considered a high-margin geography,” says Jahnavi Prabhu, senior analyst, India Research. Cipla expects operational synergies accruing on account of this transaction to be reflected in therapy and product diversification, scaling-up of revenue, high profitability (acquired business generating EBIDTA margin of 25 per cent) and negligible debt levels of the acquired entity. The acquisition of InvaGen is likely to provide Cipla access to around 40 approved abbreviated new drug filings, 32 marketed products and a pipeline of 30 products which are to be approved over the next four years. In addition, InvaGen has filed five first-to-file products which represent a market size of around $8bn in revenue by 2018. “Cipla can also access to the government and institutional market in the US,” says Prabhu. Prabhu believes that it is also likely to provide Cipla access to large wholesalers and retailers in the US. InvaGen has three units located in Long Island, New York, with a total annual production capacity of 12 billion tablets and capsules and about 500 employees. The agency expects the acquisitions to be funded by a mix of internal accruals, existing cash balances and debt. It expects Cipla’s net leverage (adjusted net debt/EBIDTA) to increase but remain commensurate with the existing ratings. The benefits accruing on account of the to be acquired companies’ net leverage being lower than Cipla’s given their nil debt levels and higher EBIDTA margins are likely to be offset by the debt assumed for the acquisition. At FY15E, Cipla reported net leverage of 1.2x (FY14: 1.2x) and interest coverage (EBIDTA/interest) of 13.1x (15.4x). The company expects the transaction to be completed by end-December 2015, subject to the completion of certain conditions precedent and receipt of applicable regulatory approvals including the expiration or termination of the waiting period provided for by the Hart-Scott-Rodino Antitrust Improvements Act.
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India has again denied Pfizer Inc a patent on its rheumatoid arthritis drug tofacitinib, the latest setback for a multinational drugmaker seeking to enforce its intellectual property rights in the country. Pfizer sought a patent that covers an important chemical formulation of the active compound in the medicine, but the Indian Patent Office said the company would have to establish that the compound for which it is seeking a patent is therapeutically more effective than the active compound. "The invention disclosed and claimed in the instant application ... is not considered as an invention under the provisions of the Act," Bharat N S, an assistant controller at the patent office, wrote in an order dated Sept. 3. Pfizer is reviewing its options for further action, a Mumbai-based company spokesman said in an emailed statement. Drug patents have become a thorny issue for global drugmakers seeking to expand in India's fast-growing healthcare market. Companies including Pfizer, Bayer and Roche have in recent years struggled to retain exclusivity on drugs in India, and have blamed patent laws they say are designed to favour the local industry. India, however, has said its drug patents policy is designed to ensure medicines remain affordable for the country where less than 15 percent of the population has health insurance. India's patent office had rejected Pfizer's application to patent tofacitinib in 2011, but was ordered to reconsider the decision by the Intellectual Property Appellate Board, after Pfizer appealed. (Reuters)
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Pharma firm Wockhardt said it will continue to strengthen its R&D capabilities to develop innovative and technologically advanced medicines. Addressing the shareholders in the company's annual report, Wockhardt Managing Director Murtaza Khorakiwala said the firm has set up three world-class, multi-disciplinary R&D facilities in India, the UK and the US, which are engaged in studies and experiments to develop new drugs and novel drug delivery systems for tomorrow. "We believe that the future lies in innovation, which will lead to quantum leaps in growth. We are determined to continue to focus on enhancing and strengthening our R&D capabilities," Khorakiwala said. "The R&D efforts comprise of over 850 scientists, research associates and technicians focusing on generics and new drug discovery programme concentrating on anti-infectives and recombinant bio-pharmaceuticals," he added. Wockhardt has increased its investment in R&D from 9.3 per cent of total sales in FY14 at Rs 450 crore to 11.5 per cent of total sales in FY15 at Rs 515 crore. The company said R&D efforts has resulted into the company building its intellectual property base by filing 267 patents and winning 82 patents in FY15, taking cumulative patents filed to 2,268 and patents won to 341. Wockhardt's new drug discovery programme also won QIDP (Qualified Infections Disease Product) status by US FDA for three new breakthrough drugs under development, making it the first pharma company in the world to hold this distinction. These anti-infective drugs will have an accelerated development trajectory to cater to critical and unmet needs in the antibiotics space, Khorakiwala said. The company is looking to continue its focus on building domestic business, sustaining business in developed markets and exploring new markets globally. "To meet unmet medical needs across the world, we will continue to focus on building our domestic business, sustaining business in developed markets and exploring new markets globally," Khorakiwala said. With manufacturing and R&D facilities in India, the UK and the US, Wockhardt caters to global markets across India, US, Europe, Asia, the Middle East, Africa and Latin America, he added. In FY 15, its international business accounted for 72 per cent of total sales, with the domestic business contributing 28 per cent, registering a growth of 24 per cent over FY14. "Wockhardt has become the largest Indian generics company in the UK and largest generic pharma player in Ireland," Khorakiwala said.
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The Friday announcement lifted Cipla shares as high as 4 per cent to Rs 675 a unit to start with, the share price settled at 4.4 per cent lower at Rs 652 just before Friday closing, reports C H UnnikrishnanIndian generic drug maker Cipla said on Friday (4 September) that its UK unit, Cipla EU, has acquired two US-based generic drug companies -- InvaGen Pharmaceuticals Inc., and Exelan Pharmaceuticals Inc for a total value of Rs 3,655 crore ($550 million). This acquisition, which is the second landmark acquisition in Cipla’s 80 years of history, will give the company scale in the US generics market through a wide ranging product portfolio in neuro, cardiovascular, diabetes, infection treatments. Although the Friday announcement lifted Cipla shares as high as 4 per cent to Rs 675 a unit from the previous close in the morning trade on BSE, the share price settled at 4.4 per cent lower at Rs 652 just before Friday closing. "The transaction being subject to certain closing conditions, is valued at $550 million and will be an all cash transaction," Cipla said in statement. The combined revenue from these transactions is over $200 million for the year ended December 2014, the company added. InvaGen, owned by the promoter of Hyderabad-based drug maker Hetero Drugs Ltd, currently offers a large capacity manufacturing base at Hauppauge in New York. It also provides Cipla with a skilled research and development unit in the US for the first time, in addition to a large product pipeline. InvaGen has 3 manufacturing units located in Long Island with a total production capacity of 12 billion tablets and capsules per annum and about 500 employees. This acquisition further provides Cipla with an access to large wholesalers/retailers in the US. While, the acquisition of Exelan Pharmaceuticals provides Cipla access to the government and institutional market in the US through Exelan’s deep expertise, engagement and experienced management team in the business. “This investment is in line with Cipla’s strategy to grow Cipla’s share in the US pharmaceutical market. We see InvaGen as a strong strategic fit with a relevant diverse portfolio as well as a strong market and customer presence," said Cipla managing director and global chief executive Subhanu Saxena. "This is an exciting opportunity for InvaGen to join with Cipla. InvaGen brings an experienced team and good manufacturing capabilities to the partnership. We are confident that the combination of InvaGen and Cipla will significantly enhance the product portfolio offering, including specialty products, to the US patients and will give InvaGen access to Cipla's global expertise and presence," said Sudhakar Vidiyala, president and chief executive officer of InvaGen Pharmaceuticals. While responding to media reports on Friday that Hetero divests its US generic business, the Hyderabad drug maker said that the current sale of Invagen pharmaceuticals is the sale of strategic investment by the Hetero promoter group which has a different product portfolio than Hetero. "InvaGen Pharmaceuticals is not linked directly to the flagship companies of Hetero group, and the company (Hetero) has currently a portfolio of 130 to-be-approved products in US. The company will continue to strengthen its presence in US market by investing in generics and speciality products through its subsidiary firm Camber Pharmaceuticals Inc," Hetero spokesperson said.
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Cipla Ltd, India's fourth-largest drugmaker by sales, said on Friday it has agreed to buy two generics businesses in the United States in an all-cash deal worth $550 million to get access to a wide range of products. The companies to be acquired, InvaGen Pharmaceuticals Inc and Exelan Pharmaceuticals Inc, had combined sales of $225 million in the last twelve months to June 2015, Cipla said in a statement. As per the agreement, the cash consideration payable for Invagen is $500 million and for Exelan is $50 million. The transaction is expected to be completed by end of December 2015, Cipla said. The company said the acquisitions will strengthen its presence in the US in terms of scale, revenue, manufacturing opportunities and building a wide range of product portfolio. Invagen was incorporated in the year 2003 and is engaged in the business of development, manufacturing, marketing and distribution of generic pharmaceuticals with focus on wide range of therapeutic areas including cardiovascular, anti-infective, CNS, anti-inflammatory, anti-diabetic and anti-depressants, according to the Cipla statement. The turnover of Invagen for the financial year ending December 2012, December 2013 and December 2014 was about $130 million, $135 million and $190 million respectively. Exelan was incorporated in the year 2011 and is engaged in the business of sales and marketing of generic pharmaceuticals for the government and institutional market. The turnover of Exelan for the financial year ending December 2012, December 2013 and December 2014 was about $2 million, $14 million and $28 million respectively. Shares RiseShares in Cipla, a pioneer in India's emergence as a force in generic drugs, climbed after the announcement, extending gains to as much as 4 per cent, while the Nifty was trading down nearly 2 per cent. The US makes up only about 8 per cent of its total sales so far, but Cipla expects it will make up a fifth of its overall sales by 2020, Chief Executive Subhanu Saxena said in June. The ramp up of the US business is aimed at reducing its reliance on emerging markets such as India, China and Brazil that currently contribute about 80 per cent to its overall revenue.
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Bayer AG on Tuesday “legally and economically” separated material science business into a new unit named Covestro AG, reports C H UnnikrishnanCovestro, the rechristened material science (industrial chemicals and solutions) business unit of German life sciences-to-chemicals multinational Bayer AG, plans to sharpen its focus on the key emerging markets including India after having been carved out as an independent entity. The industry chemicals maker with key focus on automotive, construction and electronics sectors, may also make additional investments in these markets both for product development and manufacturing. "With the freedom and bold business direction of the new independent entity, we look forward to building a successful future for Covestro in India as it is the case with all our key markets," said Ajay Dhuranni, managing director, Covestro India Pvt Ltd, in an interview with BW Businessworld on Wednesday. As on today, we have built enough capacity in our existing manufacturing plants in India and the imports from the group's facilities in China are also sufficient to meet the current demand in the local market. But, in case the market expands with additional requirements in terms of technology and products, we can always think about new investments, Dhurani said. A year ago, Bayer had said that it wanted to focus entirely on the life science businesses – HealthCare and CropScience – and float MaterialScience on the stock market as a separate company. In this way Bayer is positioning itself as a world-leading company in the field of human, animal and plant health. Bayer’s board of directors had unanimously approved this decision. Bayer chief executive had in September 2014 said that the group’s intention is to create two top global corporations: Bayer as a world-class innovation company in the life science businesses, and material science unit as a leading player in its own segment. “Both these companies have excellent prospects for success in their respective industries. Employment levels are expected to remain stable over the next few years, both globally and in Germany, said Bayer CEO Marijn Dekkers announced last year. In recent years, Bayer has been focusing mainly on its life sciences activities with the launch of several novel pharmaceutical products. It had also had acquired the over-the-counter products business of US drug maker Merck & Co., Inc the same year. The group was also concentrating on successful development of the CropScience business. The life sciences business is currently account for about 70 per cent of Bayer's sales. Covestro will come out wth an initial public offer (IPO) and will be listed in Europe as a separate company in the next couple of months. Post the IPO, Bayer will eventually exit from this company as several private equity players have already shown interest in buying out the business. A key reason for the spin off and the IPO is to give Covestro direct access to capital for its future development as its access to funds from Bayer cold be constrained due to the group’s substantial investment needs of the life science businesses for both organic and external growth. But, as a separate company, Covestro can now align its organizational structures and strategic decisions faster in line with its specific industrial environment and business model. Covestro, as a separate entity in the space of industry chemicals and solutions, is currently Europe's fourth-largest and it had global sales of around EUR 11.7 billion in 2014. The company has a an employee strength of at least 17000 globally. Ranked among the top five chemical companies in India, Covestro has some 300 people in its workforce and it owns three factories located at Ankleshwar in Gujarat, Noida in UP and Cuddalore in Tamil Nadu. Recently, the company had doubled its TPU (thermoplastic polyurethanes) manufacturing capacity in Cuddalore. --
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In its quest to save on costs, Cygnus Hospitals does not invest in land and building. It operates on lease. The money it saves, it spends on quality and service. Starting from Haryana, the hospital group has spread to neighbouring Punjab and Rajasthan and plans to move into UP.Bihar and Madhya Pradesh in future. Dr Dinesh Batra, Director, Cygnus Hospitals talks to BW|Businessworld's Haider Ali Khan What does ‘Cygnus’ mean?The name ‘Cygnus’ is derived from a name of Constellation. As our name suggests, we at Cygnus are trying to create a star (hospital) in every district of northern India, especially in states of Haryana, Punjab and Delhi. And not only have we provided good infrastructure but, the good doctors. You are mostly active in Haryana, why is it so?We started from Haryana as we belong to the state. And there is a huge need of tertiary care in the country. And we have extended our services in Punjab and Rajasthan also. Are government policies in Haryana more favourable for you?We had interaction with the Chief Minister of Haryana and visited US and Canada with him. The government supported us and gave us an open window and single roof solutions to operate. The government has also asked for a proposal to work together in Public-Private partnership. We will submit the proposal within two to three months to the government of Haryana. Is there any plan to expand in states like Uttar Pradesh, Bihar and Madhya Pradesh?We have started from our neighbourhood states of Punjab and Rajasthan. And yes, in due course of time we will move towards states like UP, Bihar etc. How many centres do you have at present?We have 10 centres, which are fully functional. By March 2016, it will be 15 and 50 by March 2018. How are you going to provide affordable healthcare to the people?See, this is the case of mindset. We need Rs 1 crore investments per bed which means for a 100 bed hospital, we require Rs 100 crore. But, we only spend Rs 10 crore, as we do not invest in land and building. We operate on lease. All our hospitals are running on lease model. Are you going to compromise on quality then?No, as we do not invest in asset building. The quality and service are what we focus upon. What is the state of government hospitals, as you are also a doctor?There are two major issues with government hospitals. First, most of the doctors at government hospitals are assigned a task which they are not supposed to do like a surgeon is involved in National Health programme etc. The roles are not as per qualification. The second issue is overcrowding. There is huge dearth of doctors in our country. A doctor has to look after 500 patients in a day; as a result they are not being able to do the justice with the patients. We also have lack of infrastructure like cardio care and trauma centres in government hospitals. Are you helping in Skill India initiative?We are definitely involved in skilling of people. We have a tie-up with IMS Health, and students from Jammu and Kashmir are trained under it, in lab technology. What is the future of Telemedicine in India?We will be able to tell only when we will start this service. After three months from now, I will be able to disclose as it is under experimental stages.
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