Pharma M&As set to gather more steam in 2013: report

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SummaryThe activities on the M&A street in the pharma space in the recent past are likely to gather more steam through 2013, says a research report.

The activities on the M&A street in the pharma space in the recent past are likely to gather more steam through 2013, says a research report.

"M&A momentum in pharma is gathering pace, as domestic companies tap acquisitions of brands, niche technologies and front-end marketing set-ups in overseas markets.

"Besides inorganic initiatives, the industry is also stepping up its organic investments, as it moves to create building blocks for the future," Avendus Securities analyst Monica Joshi said in a report.

It can be noted that the last three years, before the flurry of M&As (mergers and acquisitions) started during second half FY13, the pharma sector did not see any deals of considerable size.

The optimism comes from the fact that the five frontline companies, Cadila Healthcare, Cipla, Dr Reddy's, Lupin and Sun have on an average proposed to deploy 2.2 per cent of their combined average m-cap in FY13 on acquisitions.

The estimated value of new acquisitions by five frontline companies is estimated at 2.2 per cent of the total market capitalisation, the report said.

Along with organic investments, capital deployment is at its highest level, as the industry builds blocks for future growth, Joshi said.

Investors' reactions to M&A announcements have been mixed, but not overtly so as the reward to grow inorganically has probably been tempered down, to an extent, by the costly failures of the past, says the report.

Nevertheless, the industry's net cash position, along with scope for fund raising, supports an M&A theme through 2013, she said.

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