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Adcock seals Indian buy Deal of the week – Adcock concludes 55 medicines deal

Jonathan Louw

SA’s second-biggest listed drugs firm, Adcock Ingram, has concluded the purchase of a portfolio of 55 medicines from India’s Cosme Farma, boosting its presence in one of the world’s fast-growing pharmaceutical markets.

The deal, announced in July, missed its October deadline for completion because of delays in approval by India’s regulatory institutions. This resulted in Adcock having to pay R745m for the acquisition instead of the original R708m, owing to a 5,3% decrease in the rand against the Indian rupee between July and December.

The range of products involved covers dermatology, gynaecology, gastro-intestinal medicine and orthopaedics. Adcock will assimilate from Cosme a sales force of over 1000 agents, which provides nationwide coverage to about 150000 physicians. The firm has distribution capabilities in 27 states in India.

In the short term, the deal isn’t a major breakthrough for Adcock, which desperately needs to grow its international footprint to counter ongoing pressure in the local over-the-counter drugs market. It will add just about R250m to the group’s R4,5bn annual turnover.

But Adcock is investing for the long term. Deputy CEO and finance director Andy Hall says the group is looking to develop a solid business in India, as a part of its endeavours to grow its international footprint.

Adcock first ventured into India in 2007 through a manufacturing joint venture with a local Indian pharmaceutical company. It scaled up in 2011 when it opened a regulatory and administrative support office in Bangalore to support its African operations and to facilitate the setting up of a domestic pharmaceutical business.

CEO Jonathan Louw previously told the FM that the group is attracted to India by the country’s big population and a growing disease burden.

In general, the Indian pharmaceutical industry has been attracting a lot of multinationals lately. It’s reputed for its strong research and ability to produce drugs at relatively low cost.

Global research firm IMS Health expects the Indian market to grow at a compound annual rate of 16% between 2011 and 2016. The country has over 5000 pharmaceutical companies.

Adcock is betting on Indian government plans to increase the availability of free generic medicine to its people. But it now has a wide scope, having established a solid base. Investors grumbling about the price it paid for the acquisition will surely expect a lot to come from this business.

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