For the past three years, there has been intense debate in India over foreign investment in its domestic pharmaceutical industry. The central issue is concern that unhampered purchases of local drugmakers would render the country unable to pursue its policy of generating low-cost generics and maintain secure manufacturing facilities to cope with epidemics and health emergencies (back story).
Now, the Indian Department of Industrial Policy and Promotion has delayed a $1.6 billion deal in which Mylan Laboratories (MYL) plans to acquire Agila Specialties, an injectable division of Strides Arcolab. The agency raised specific concerns over an Agila subsidiary called Onco Therapies, which specializes in cancer drugs, according to The Economic Times.
The government is concerned Mylan may export drugs to the US and the domestic price will become out of reach to its citizens. In its objection, the DIPP cited the 2009 purchase of Shantha Biotechnics by Sanofi (SNY), and an unnamed official told the paper Shantha ran the only facility in the country that makes a hepatitis B vaccine and the domestic cost was a “fraction” compared to prices in other countries.
Just the same, a Mylan spokeswoman writes us that the drugmaker is confident that the deal will close by the fourth quarter of this year.
The decision, however, comes after the Competition Commission of India cleared the deal last month after noting that Agila has an insignificant presence in the domestic pharmaceutical market. The agency noted that Agila "primarily caters to the export market” and domestic sales (excluding intra-group sales) contributed less than 5 percent” to company revenue last year, according to the paper.
The varying decisions reflect conflicting views of foreign investment among different agencies. Two years ago, for instance, the Indian government decided not to proceed with a proposal to place a 49 percent cap on foreign investment in its domestic pharmaceutical industry. At the time, multi-national drugmakers had increased their share of the Indian market to 25 percent from 15 percent (back story).
For more than a decade, India has been rather liberal about foreign direct investment in its pharmaceutical industry. But there has been a wave of deals, including the $3.6 billion acquisition of Ranbaxy Laboratories by Japan’s Daiichi Sankyo; Mylan Laboratories’ $734 million acquisition of Matrix Laboratories; Fresenius spent $219 million to buy Dabur Pharma in 2008; Abbott Laboratories (ABT) paid $3.72 billion to acquire Piramal Healthcare's domestic drug formulation unit and spent $726 million to buy Paras Pharmaceuticals; and Hospira (HSP) bought Orchid Chemicals.
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