In developed markets, as pharmaceutical enterprises grapple with pricing pressures and expiring patents, they have started expecting a lot from emerging markets. Even large emerging pharmaceutical markets are expected to grow more powerfully than developed markets in the near term. The share of profits and revenues subsidized by emerging countries is lesser in pharma than in other global industries. Also, major multinationals have yet to beat these countries’ vast emerging middle classes.
Generic companies looking to surge market share, scale, revenue, and competitive advantage have also been active with Mergers and Acquisitions (M&A). They have retorted to various stumbling block through strenuous M&A activity and partnerships, compelled by the need for reverse integration, speedy geographic expansion, emerging markets, active pharmaceutical ingredients, and destructive portfolio that are built in specialty, niche, and biologics products.
One such recent M&A activity among largest overseas acquisitions by Intas Pharmaceuticals, an Ahmedabad-based India pharmaceutical company acquiring the generics business of Actavis in the UK and Ireland from global generics giant Teva happened for an enterprise value of £600 million (Rs 5,100 crore). In 2016, it is the biggest outbound M&A transaction in the pharma space so far.
At a usual universal consumer goods firm, emerging markets account for a share of around 1.5 to 3 times greater than at a typical multinational pharma enterprise. These kind of figures indicate that emerging markets are still developing and proffer noteworthy opportunities for further development. However, such optimism that multinational pharma companies face in emerging markets must be tempered by getting aware of the volatility and challenges. Numerous factors that are fueling rapid growth in the global generic pharmaceutical industry include growing middle class in emerging markets, rapidly increasing healthcare expenditures of governments’ and payers’ and a longer life expectancy of living long-life. A great number of patent expiration of innovator drugs has also boosted the growth of the generic industries.
The UK market being a highly competitive one, the UK market is acquiring established brands for increasing market penetration and this strategy is serving Indian generic companies as well. In Europe, UK is one of the top two generics market. While there is robust potential for growing in the market and a highly competitive market. For any Indian generic drug maker who is eyeing to upsurge its UK market share, makes sense for them to go for well entrenched brands in the market.
The rapid growth of the generic industry has faced a number of challenges, such as heavy competition, including from authorized generics in the United States, introduction of lowest-price tendering and Government-mandated price cuts in certain European markets, all have contributed to diminishing prices and ever decreasing margins. These challenges faced by generic companies were tackled by, diversifying their product portfolios, achieving economies of scale, becoming vertically integrated across the manufacturing process, and expanding their geographic presence into emerging markets.
Moreover, in order to weather the storm, many generic companies have relied on M&A rather than organic growth. Looking forward, it is believed that emerging markets will continue to proffer smart opportunities for growth, but pharma firms will need to sail across the intricacies of individual markets while tailoring commercial models in an approach to their specific needs.
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