Stronger appetite of global investors for India
After China, India is the most sought-after country of choice by global investors for foreign direct investments (1). India's
liberal and attractive investment policies, coupled with highly liquid financial markets, are key reasons for this growth.
Creative deals are being struck between Indian companies and investors where funds are being used to finance specific projects
instead of simply investing in existing companies or diluting current shareholders. Dr. Reddy's Laboratories used this strategy
in 2005 in forming Perlecan Pharma, a drug-development company, by securing $52.5 million in funding from India's leading
private equity investors ICICI Venture Funds Management Company and Citigroup Venture Capital International Mauritius Limited.
In exchange, Dr. Reddy's transferred to Perlecan Pharma all rights and title, including the development and commercialization
rights, for the assets of four NCEs used to treat metabolic and cardiovascular disorders.
Advinus, founded by Rashmi Barbhaiya, a nonresident Indian scientist, received its funding from The Tata Group, one of the
largest and most-well known corporate houses in India. Similarly, the US-based Carlyle Group invested $20 million into Claris
Lifesciences, and the Blackstone Group invested $50 million in Emcure Pharmaceutical.
Several key factors account for the increased comfort level and interest of global investors in India:
- Investor-friendly policies of the Indian government
- Increased attention from global biotechnology and pharmaceutical buyers of contract services
- Highly liquid financial markets in India
- Willingness of Indian entrepreneurs and promoters to forge creative and sophisticated deals
- Desire of Indian entrepreneurs to grow inorganically, requiring a large pool of cash and global financial capabilities.
Establishing a global footprint
Figure 3
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Recent activity demonstrates that India is presenting itself as more than a destination for cost savings. By offering infrastructure
in laboratories, manufacturing suites and informatics, coupled with project management and information-technology capabilities,
Indian companies have attracted partners in medicinal chemistry, bioinformatics, cheminformatics, custom synthesis, clinical
trials, and manufacturing of APIs, and formulations. Through increased projects, Indian pharmaceutical outsourcing companies
have developed a deeper understanding of their customer needs and what additional services they can add to their current set
of solutions (see Figure 3).
Figure 4
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From the mid-1990s onward, most Indian companies invested heavily on building infrastructure that could handle complex projects
and attract world-class talent. Significant investments were made in project-management tools and people development. Company
owners started hiring professional management instead of family members to run businesses and perform key functions such as
business development (see Figure 4).
As attention on India increased, along with the ever growing market capitalization of their companies, Indian executives began
to evaluate whether they could build on their platforms in India to provide global solutions. In consultation with their clients,
they quickly realized that in order to grab a bigger chunk of the outsourcing market, they would need to have a global footprint
through which they can offer near-shore–offshore business models just like their counterparts from the information technology
industry. This recognition led to Indian companies going out and acquiring companies or assets around the world, mainly in
the United States and Europe. Recent examples include:
- NPIL's 2006 acquisition of Pfizer's manufacturing facility in Morpeth, United Kingdom, with potential outsourcing revenues
exceeding $350 million and NPIL's 2005 acquisition of the custom manufacturer Avecia Pharmaceutical in 2005
- Dishman Pharmaceuticals and Chemicals' acquisitions of the contract manufacturer Carbogen Amcis in 2006 and the contract-research
firm Synprotec in 2005. In July 2007, Dishman also signed a memorandum of understanding with Solvay Pharmaceuticals to acquire
Solvay's fine chemicals and vitamin D business, which includes Solvay's production site in Veenendaal, The Netherlands.
- Jubilant Organosys's purchases of Hollister-Stier Laboratories, a contract manufacturer of sterile injectables, in 2007 and
Target Research Associates, Inc., a clinical research organization in 2005
- Shasun Chemicals & Drugs' acquisition of Rhodia's custom synthesis and contract manufacturing business in 2006
- Hikal's investment for a majority stake in the Danish pharmaceutical marketing and distribution company Marsing & Co. in 2004.
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