Abbott prepares to acquire Piramal’s Healthcare Solutions business and capture top pharma spot in India

Terms call for just over $2 billion up front and $400 each year for the next four years

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ABBOTT PARK, Ill.—For a $2.12 billion up-front payment and $400 annually for the next four years, Abbott, a giant in the pharm industry, is setting up to become a giant in India by striking a deal with Piramal Healthcare Limited to acquire full ownership of Piramal's Healthcare Solutions business.

With this business already being a leader in the Indian branded generics market, the deal will give Abbott the No. 1 position in the Indian pharmaceutical market, advancing not only Abbott's goals in branded generics by also further accelerates Abbott's emerging markets growth strategy. That strategy has been highlighted recently with the recent acquisition of Solvay Pharmaceuticals and the recent announcements of Abbott's collaboration with Zydus Cadila and its creation of a new stand-alone Established Products Division to focus on expanding the global markets for its leading branded generics portfolio.

"We've quietly and deliberately assembled a leading presence in branded generics in emerging markets," says Abbott spokesperson Scott Stoffel. "It's a key part of our diversified growth strategy and we're really thrilled to be working with Piramal. They are a very successful and attractive company with a strong employee bases that has built a leading business in India that meshes well with our goals."

Miles D. White, chairman and chief executive officer of Abbott, calls India "one of the world's most attractive and rapidly growing markets" and notes that this acquisition will complement Abbott's proprietary pharmaceutical offerings and pipeline in developed markets.

"Emerging markets represent one of the greatest opportunities in health care—not only in pharmaceuticals—but across all of our business segments. Today, emerging markets represent more than 20 percent of Abbott's total business," White notes.

If the deal clears all the final steps, the combined Healthcare Solutions and Abbott businesses will become the clear market leader in India, with a market share of approximately 7 percent, according to Ajay Piramal, chairman of Piramal Group.

India is one of the world's fastest-growing pharmaceutical markets, due in large part to branded generics. The market will generate nearly $8 billion in pharmaceutical annual sales this year, a number that is expected to more than double by 2015. Abbott estimates the growth of its Indian pharmaceutical business with Piramal to approach 20 percent annually, with expected sales of more than $2.5 billion by 2020. Piramal markets the products in its Healthcare Solutions business in India only and does not market traditional generic products.

White says that branded generics have significant brand equity in many international markets, providing durable, sustainable franchises for future growth. Today, branded generics account for 25 percent of the global pharmaceutical market, have the majority of market share in the largest emerging markets, and are expected to outpace growth of patented and generic products.

The Mumbai-based Piramal Healthcare Solutions business has a comprehensive portfolio of branded generics with annual sales expected to exceed $500 million next year in India, and market-leading brands in multiple therapeutic areas, including antibiotics, respiratory, cardiovascular, pain and neuroscience. This business grew 23 percent in 2010 (fiscal year ended March 31, 2010), faster than the market in India.

Piramal's Healthcare Solutions business will become part of Abbott's newly created, stand-alone Established Products Division. Piramal's Healthcare Solutions business employs more than 5,000 people in India. Abbott, which is celebrating its 100th year in India, has more than 2,500 employees across all of its businesses there.

Throughout the past decade, Abbott has built a leading portfolio of branded generics, through its own products as well as those acquired with the 2001 acquisition of Knoll's pharmaceutical business. In 2007, the company established a separate business unit within its international pharmaceutical division dedicated to established products. Additionally, a new geographic region focused on Russia, India and China was created, which resulted in the doubling of Abbott's growth rate in those countries.

Most recently, the company acquired Solvay Pharmaceuticals, obtaining a diverse branded generics portfolio and providing significant critical mass in key emerging markets.

As a result of these combined actions, Stoffel notes, Abbott is now among the leading multinational health care companies in numerous emerging markets, with approximately 20 percent of Abbott's pharmaceutical sales today are in emerging markets.

This transaction is subject to shareholder approval of Piramal Healthcare Limited and other customary closing conditions, and is expected to close in the second half of 2010. This transaction is being conducted by a wholly-owned subsidiary of Abbott, resulting in full ownership of the assets of Piramal's Healthcare Solutions business (Domestic Formulations).

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