FDI in Pharma (Final)

Presented byGroup 5
FOREIGN DIRECT INVESTMENT

WHAT IS IT???
A foreign direct investment is an acquisition or

construction of physical capital by a firm from
one (source) country in another (host) country.
TYPES OF FDI
Green
field
investm
ent
Brown
field
investm
ent
Joint
Venture
s
FACTORS AFFECTING
FDI
ResourceDunnings
Marketseeking
FDI
seeking
FDI
OLICriterion
POSITIVE SPILLOVER EFFECTS
Imitation and demonstration effects.

Transfer of Technology
Research and Development
Labour training and human capital
NEGATIVE SPILLOVER
EFFECTS
Market stealing effect.
Ownership structure of foreign firms.

Adverse effect on small and medium enterprises.
THE INDIAN PHARMACEUTICAL INDUSTRY HISTORICAL PERSPECTIVE
The number of purely Indian pharma companies is fairly less. Indian pharma industry is mainly
operated as well as controlled by dominant foreign companies having subsidiaries in India due to
availability of cheap labor in India at lowest cost.
In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations
and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs
were exported, mostly to the United States and Russia. Most of the players in the market are smallto-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to
the 1970 Patent Act, multinationals represent only 35% of the market, down from 70% thirty years
ago.
In terms of the global market, India currently holds a modest 12% share, but it has been growing at
approximately 10% per year. India gained its foothold on the global scene with its innovatively
engineered generic drugs and active pharmaceutical ingredients (API).
There are 74 US FDA-approved manufacturing facilities in India, more than in any other country
outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the
FDA are expected to be filed by Indian companies. Growth in other fields notwithstanding, generics
are still a large part of the picture. London research company Global Insight estimates that Indias
share of the global generics market will have risen from 4% to 33% by 2007.
Source: www.dipp.nic.in
THE INDIAN PHARMACEUTICAL

INDUSTRY - COMPETITION
OVERVIEW
Before
liberalization, Domestic manufacturers and imports from china were

the main competitor in Indian Market.
With liberalization and new patent regulations, lots of MNC invested in
Indian Pharmaceutical industry due to large market potential.
FDI in pharmaceutical provide capital, R&D and technology to Indian
domestic industry, which helped them gain competitive advantage against
various MNCs.
MNCs have technological advantage, so domestic industry invested in
additional human and physical capital, in order to raise productivity and to
be able to compete with the MNC.
The entry of a foreign affiliate can create or intensify competitive pressure on
local firms and stimulate them to use existing resources more efficiently .
SOME OF MAJOR COMPETITOR IN MARKET

GovernmentOwned
Companies
Indian Drugs and
Pharmaceuticals
Hindustan
Antibiotics
Limited
Bengal
Chemicals and
Pharmaceuticals
Limited
Bengal Immunity
Limited
Smith
Stanistreet
Pharmaceuticals
Limited
Indian Private
Companies
Foreign
Companies
Alembic Chemicals
Aurobindo Pharma
Abott India
Aventis Pharma
India
Ambalal Sharabhai
Limited
Cadila Healthcare
Astra Zeneca
India
Cipla , Dr. Reddys

IPCA Laboratories
Glaxo SmithKline
Merck India
Jagsonpal Pharma,
J.B. Chemicals
Novartis
Lyka Labs, Nicholas

Piramal
Ranbaxy Labs,
Matrix Laboratories
Wyeth Ledele
India
Orchid Chemical and

Pharmaceuticals
Pfizer Limited
BurroughWellcome
FDI PHARMACEUTICAL INDUSTRY

- GOVERNMENT POLICIES
FDI upto 100% is permitted under Government approval route for Brownfield
investments (i.e. investments in existing companies) in pharmaceuticals sector.
FDI, upto 100%, under the automatic route, is permitted for Greenfield investments.
Some drastic changes in policy from 1950 to present
Policy initiatives that have been imposed to liberalize the economy in respect of FDI are
for example; industrial decontrol, simplifications of investment procedures and
commitment to safeguarding intellectual property rights.
Source:
FDI PHARMACEUTICAL INDUSTRY

- GOVERNMENT POLICIES
Despite liberalization and deregulation of the pharmaceutical industry, foreign capital in

the industry is still quite low.
Due to the weak patent regime, price control and rigid labour laws, the firms tend to
outsource a large part of their production and do not invest much in R&D. Example
GlaxoSmithKline outsources 70% of its production.
Some Big deals in pharmaceutical sector:
Currently the government is actively considering a proposal to have a separate policy for
allowing 100 % FDI in the manufacture of medical devices, through the automatic route.
Source: http://www.
economictimes.indiatimes.com/
MERGER BETWEEN SUN PHARMA AND DAIICHI

SANKYOS SUBSIDIARY RANBAXY
Recently, Daiichi Sankyo Company, Ltd. announced in a release dated April 7,
2014, pursuant to a merger transaction, whereby it has agreed with Sun
Pharmaceutical Industries Ltd. in favor of Sun Pharmas acquisition of Ranbaxy
Laboratories Ltd.
Following is the main timeframe of the merger :
TIME
EVENT
April 6, 2014
Resolutions regarding the

merger agreement and
other matters made at the
Boards of Directors
meetings of Sun Pharma
and Ranbaxy
June, 2014
Merger approval from

Indian securities exchanges
August, 2014
Extraordinary meetings of
shareholders at Sun
Pharma and Ranbaxy
December, 2014
(estimated)
Merger completed with

approval from high courts
in India and other
FOLLOWING ARE THE MAIN POINTS

RELATED TO MERGER :
1. Significant step of becoming the fifth-largest specialty generics company in the world and the
largest pharmaceutical company in India for Sun Pharma and an opportunity to pursue new
development in its hybrid business model through the new partnership for Daiichi Sankyo.
2. Ranbaxy will be merged with Sun Pharma by means of a share swap.
3. 0.8 shares of Sun Pharma will be allotted for each share of Ranbaxy.
4. After applying various methods of valuation, Daiichi Sankyo judged that the share swap ratio (1:
0.8) is an appropriate level.
5. The merger is expected to close by the end of December 2014, pending shareholder, court and
regulatory approvals and other customary conditions.
6. Daiichi Sankyo will have the right to nominate one Director to Sun Pharmas Board of Directors
post completion of merger.
Source:http://www.daiichisankyo.com/media_investors/media_relations/press_releases/detail/006111.ht
ml
FDI PHARMACEUTICAL
INDUSTRY - IMPACT ON
COMPETITION
Today Indian pharmaceutical market is

today highly competitive with a large
number of foreign players who have
features such as research orientation,
product portfolio, production capability
and marketing and distribution network
Invest more in marketing and Field
because of absence of cost advantage.
Domestic players replicating to
compete with foreign players.
With introduction of patents the

market has become all the way more
competitive with small scale finding
difficult to survive.
It leads to reduction of inefficient
firms.
There are government interventions
and support to help small scale firms
in up-gradation with efficient abilities.
Also both FDI greenfield and FDI
portfolio helps domestic players to
FUTURE TRENDS
India hopes to tap on its cheap human resources and low cost of
innovation.
Differentiating pricing stratergy to increase market reach.
Try to become a major player in outsourced clinical research as
well as contract manufacturing.
Open up new avenues for joint collaborative research for new
drug discoveries along with having joint intellectual rights.
Source: http://www.pharmatutor.org/articles/future-growth-pr
ospects-of-indian-pharmaceutical-industry
CONCLUSION
Pharma industry plays a very important role in implementing the

welfare of the state of the people by providing cheap and effective
medicines to the masses.
India still needs large amounts of fdi inflows and its spillover
effects to grow .
Six major indian companies had been acquired by mncs in the
time span of 2006-10.
Major policies like the FIPB and CCI have been put in place to
watch over the market competition leading to price rise.
CCI must ensure that it brings about the needed changes to the
competition act of 2002.

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FDI in Pharma (Final)

Uploaded by

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Available Formats

Presented byGroup 5

FOREIGN DIRECT INVESTMENT

A foreign direct investment is an acquisition or

POSITIVE SPILLOVER EFFECTS

Imitation and demonstration effects.

Ownership structure of foreign firms.

THE INDIAN PHARMACEUTICAL INDUSTRY HISTORICAL PERSPECTIVE

THE INDIAN PHARMACEUTICAL

liberalization, Domestic manufacturers and imports from china were

SOME OF MAJOR COMPETITOR IN MARKET

Cipla , Dr. Reddys

Lyka Labs, Nicholas

Orchid Chemical and

FDI PHARMACEUTICAL INDUSTRY

FDI PHARMACEUTICAL INDUSTRY

Despite liberalization and deregulation of the pharmaceutical industry, foreign capital in

MERGER BETWEEN SUN PHARMA AND DAIICHI

Resolutions regarding the

Merger approval from

Merger completed with

FOLLOWING ARE THE MAIN POINTS

Today Indian pharmaceutical market is

With introduction of patents the

Pharma industry plays a very important role in implementing the

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