Indian firm's Top 10 aspirations are a stride too far...
Indian pharmaceutical manufacturer Strides Group hopes to create a leading veterinary medicine business by 2020 via a strategy of acquisition in the US, Brazil and Australia.
If the company's projections become reality it would mean animal health would have its first top 10 player from outside Europe or the US.
The company has already begun its acquisition spree by adding Lyka Animal Health to its existing veterinary medicines business. However, while it is good to aim high, Strides may be aiming a little too high at the moment.
Dr Sandeep Juneja, managing partner of HyPro Foods in Mumbai, told Animal Pharm: "I don't see this happening even with multiple acquisitions, either locally or globally."
Strides is aiming to build on its Alivira Animal Health business – part of the group's SeQuent Scientific business. However, its first acquisition will not be significantly revenue-boosting.
Dr Juneja said: "To make an entry into the top 10, this company has to breach the $600 million annual sales mark and Sequent's recent acquisition of the Lyka Animal Health business brought in less than $3 million in revenues."
Currently, Alivira's annual revenues will be no more than $10m. In September 2014, Alivira bulked up its portfolio by purchasing a 60% stake in Provet Veterinary Products, the largest domestic animal health firm in Turkey.
The company would need to seamlessly increase its turnover by over 60 times in the space of four years even to be in line with 10th-placed Phibro Animal Health's 2014 sales level.
High generic growth difficult
Dr Juneja also pointed out Strides, SeQuent and Alivira all have portfolios made up largely of generic treatments with low levels of differentiation. This will make it even harder to source potential acquisitions to complement its current offering.
Animal health's largest generic drugmaker is US firm Perrigo, which is the industry's 20th-largest company with 2014 sales of $178m.
Dr Juneja added: "Promoters of Stride are known in India for buying small companies solely with the aim to ramp them up and sell. They sold a biotechnology company in human pharma towards the end of 2013 for over a billion dollars and plan to do same in animal health."
Strides sold Agila Specialties to US generic drugmaker Mylan in a deal worth around $1.7 billion.
Nevertheless, if Stride's previous sell-off tactics are repeated in the animal health sphere, the larger industry players will be circling a potential acquisition that could provide them with extra weight in India and the Middle East.
Animal Health M&A boom in India
Dr Juneja told Animal Pharm: "With an expected market size of $600m in 2015 and a largely low-priced generics market, not much would be expected on the M&A front in India. However, the local industry continues to receive a high share of the attention, thanks to the availability of cheap funds.
He said, since 2000, the Indian animal health sector has seen a disproportionate amount of acquisitions compared to the size of the industry. Dr Juneja predicts this trend is set to continue.
He said the animal health market is experiencing a high input of investment at the moment due to a burgeoning Indian population and an increasingly wealthy middle class, which is continuing to embrace animal proteins at a faster rate despite recent controversies around beef in the market.
Additionally, a slow and unpredictable regulatory process has ensured M&A is a faster way to gain access to the Indian market for international animal health companies.
Dr Juneja added: "Success in India depends upon the speed and efficiency of new product launches in small pack sizes and at Indian prices – none of which are possible with an import model, hence interest in M&A.
"Contrary to expectations, local Indian companies continue to outbid multinationals when acquiring available targets. Expansions and consolidation through M&A remains the top reason for putting available easy money to good use."