The Cabinet Committee on Economic Affairs (CCEA) on Tuesday approved the $1.85-billion buyout of Bangalore-based Strides Arcolab’s injectables arm by Nasdaq-listed Mylan. All foreign investment proposals that exceed R1,200 crore are sent to the CCEA for approval.
The Mylan deal is the third-largest in the Indian pharma space after Daiichi Sankyo’s $4.6-billion acquisition of Ranbaxy Labs in 2008 and Abbott’s $3.7-billion takeover of Piramal Healthcare in 2010.
The foreign investment promotion board (FIPB) had given the deal its green signal at its August 27 meeting on the back of Prime minister Manmohan Singh directing ministries to clear all pending brownfield pharma FDI proposals.
The February 2013 bid had been kept "in abeyance" by FIPB, earlier, due to objections raised by the department of industrial policy and promotion. DIPP's view was that if foreign firms are allowed to buyout existing Indian units, specially the ones making specialised life-saving drugs, it would lead to lower production and increased pricing of these essential medicines, vaccines and injectibles.
Onco Therapies, a subsidiary of Agila (Strides injectables arm), specialises in cancer drugs in both injectables and solid formulations. DIPP, in its earlier dissent note to finance and health ministries, asked for the need to protect rare oncology facilities to service the country's interest in the form of assured supply of life-saving drugs at affordable prices.
However, the Competition Commission of India (CCI) had also cleared the Mylan-Strides deal in June this year after noting that it won’t have any “appreciable adverse impact” on competition in India since both firms have “insignificant presence” in the relevant Indian market.
India allows 100% FDI for greenfield pharma projects through the automatic route whereas in existing pharma businesses, while 100% FDI is allowed, the proposals have to be routed through the FIPB.
In the case of brownfield FDI, the government can impose three riders on the foreign firms acquiring domestic pharma firms. Firstly, the acquirer will have to maintain the quantitative level of essential medicines produced at the time of induction of foreign investment into the domestic unit for a period of five years. The level is defined as