Founded in 2004, Aqua develops and markets dermatological drugs like Cordran lotion, Fluoroplex cream, Monodox capsules and Xolegel gel. RoundTable Healthcare Partners, a private equity firm focused on healthcare that manages $1.9 billion in capital, made a controlling investment in Aqua in 2010, and is now looking to exit the company.
A bid for the US company brings back in focus the aggressive moves by Indian pharma companies to firm up their presence in the worlds largest drugs market, the US, at a time when asset prices are low.
The US dermatology sector is worth nearly $8 billion, almost half the global market for drugs to cure acne, inflammations, blisters or wounds, making it a region Indian companies can hardly ignore.
Hyderabad-based Dr Reddys, which saw 30% of its fiscal first quarter revenues of Rs 2,540 crore come from the US, markets its dermatology products in that country through its wholly-owned arm Promius Pharma, and has three dermatology products in its US kitty so far. When contacted, a spokesperson for Dr Reddys said, "Dr Reddy's and Promius Pharma continue to evaluate all the strategic alternatives and viable options as we continue to grow and expand the business.
Lupin, which operates in the US through wholly-owned subsidiary Lupin Pharmaceuticals, gained 36% of its total revenues in the first quarter from the US, a growth of 40% over the previous fiscal. We keep on evaluating targets, and Lupin would look at inorganic growth wherever we see a strategic fit in keeping with our acquisition policy, said a Lupin spokesperson. Vinita Gupta, who heads Lupin Pharmaceuticals, has reportedly said it would acquire drug brands in the US, with dermatology being one of the thrust areas. As a strategy, the company is focusing on specialities where there is less competition and can command better prices like oral contraceptives (birth control), ophthalmology (eye diseases) and dermatology.
Gurgaon-based Ranbaxy Laboratories, now controlled by Japan's Daiichi Sankyo, has five prescription products in the skin disease segment in the US, including anti-fungal, anti-itch and topical steroids, and was also initially keen on a bid, sources said. A query sent to Ranbaxy remained unanswered.
The global dermatology market is estimated to be $19 billion and is growing at a rate of 5% said Sujay Shetty, director and Indian leader, pharmaceuticals, at PricewaterhouseCoopers. The sector is expected to touch $23 billion by 2016.
Pricing pressures notwithstanding, the US market continues to be a major money-spinner for other Indian pharma companies too. Sun Pharma, for instance, is now riding on the success of its acquisition of Israels Taro Pharma, which has a firm presence in the US. The performance of Taro is much better than what we anticipated and is driven by higher pricing on certain products, Dilip Shanghvi, MD, Sun Pharma, told FE in a recent interview, cautioning that this may not be sustainable.
Glenmark Pharma, meanwhile, which has 20 dermatology products in the US market, is looking to grow the business 20% every year, largely through products developed in-house. Stating that inorganic growth is not a core element of its growth strategy, a Glenmark spokesperson said, If there is a product opportunity in our core therapeutic areas is the US and if it synergises with our product portfolio, then we might consider studying the opportunity.
Indian companies have been extremely selective in deal-making in a tough business environment. The total value of outbound deals in the first half of 2012 was $2.1 billion (48 deals) compared with $5.9 billion (86 deals) in 2011, Grant Thornton said in a report last month.
Deals in niche sectors will continue to happen, irrespective of an overall slowdown, given that attractive assets are available in the US and elsewhere, said PwCs Shetty.