Merck in talks to buy Micro Labs

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SummaryAmerican drug maker Merck has begun talks with the Suranas, the promoters of the unlisted Micro Labs, to purchase the company, a person with direct knowledge of the development said.

American drug maker Merck has begun talks with the Suranas, the promoters of the unlisted Micro Labs, to purchase the company, a person with direct knowledge of the development said. “Micro Labs and Merck have shared information,” the person said.

Companies share information when they are willing to negotiate a future deal and are followed later by due diligence.

“As a policy we do not comment on rumours or speculations,” a Merck (named MSD in India) spokesperson said in an email response. Micro Labs did not respond to an FE questionnaire mailed to an address on its website.

Micro Labs, founded in 1973 by GC Surana, a pharmaceutical dealer, has a strong presence in active pharmaceutical ingredients (APIs) and finished formulations with a marketing and distribution network in both India and overseas. APIs refer to the raw materials used to make finished products.

The company, now managed by Surana’s two sons Dileep and Anand has been growing at a compound annual growth rate of 14% to achieve a sales of R1,500 crore, roughly one-fourth from exports, the company website said. The company has set a target to achieve sales of $1 billion by 2015.

A deal, if signed, could add strength to Merck’s therapeutic areas like cardiology, diabetology, ophthalmology and dermatology along with many US Food and Drug Administration-approved plants and dedicated research and development centres.

The New York-listed seventh largest drug maker by revenue and market value can also build scale to its global operations in 30 countries. Micro Labs operates and has access to 3,300 product registrations.

Micro Labs has plans to build critical mass in existing markets and develop business in new markets like the US, Eastern Europe, North Africa and South and Central America, the company said in a presentation on its website.

Drugs used in gynaecology, dermatology and pain treatment and analgesics have grown to 21% in 2011-12 from 9% in 10 years, global consultant PricewaterhouseCoopers said in a report titled "Global pharma looks to India: Prospects for growth". The report said the Indian pharmaceutical industry, which was worth $11 billion in 2008, will rise to $30 billion in 2020 and consolidation will be the path to growth as 1,000 companies collectively control 70% of the market. Exports, which was $8 billion in 2009, will also rise to $20 billion by 2020, the report said.

Multinational drug makers have been strengthening their presence by acquiring their Indian rivals. After

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