Mylan attempts to allay India's Agila concerns
This article was originally published in Scrip
Mylan has put forth a set of facts and projections to assuage the Indian government's concerns over its acquisition of Strides Arcolab's injectables arm, Agila Specialties, suggesting that is keen not just to build its domestic presence but also to invest in people and manufacturing capacity in the country.
Mylan's submission to the department of industrial policy and promotion (DIPP) comes amid general concerns over brownfield foreign direct investment (FDI) proposals that may have an impact on India's future medicines security.
The DIPP has been keen to put in place certain "enforceable" riders for complex brownfield FDI proposals (scripintelligence.com, 20 May 2013). It is thought to be primarily concerned about two verticals – vaccines and injectables – and certain complex transactions along the lines of deals such as Abbott's $3.8bn acquisition of Piramal Healthcare's domestic formulations business in 2010, which it believes requires different "guidelines". The DIPP's proposed riders are also expected to be discussed by the Prime Minister's Office (PMO).
According to a local media report, Mylan has highlighted how, post the Agila deal, it expects domestic sales to rise by almost 12-fold by 2018, with manufacturing capacity increasing to 600 million units from 180 million units and also how it expects to emerge as the biggest local supplier of certain injectables. The report, which cited Mylan's submission to the DIPP, also noted that about half of the American multinational's global workforce of 20,000 people was now in India.
However, some well-placed industry experts said that while Mylan had undoubtedly increased investments in manufacturing and employment in India, a significant part of this appeared geared to meet export requirements. "I'm not sure if this will cut any ice with the government," one official, who declined to be identified, told Scrip. Experts have in the past referred to concerns that against the backdrop of general shortages of injectables, including oncology drugs, in large markets such as the US, Indian facilities could essentially be used to meet requirements there at the expense of the domestic market.
Mylan's $1.6bn-plus acquisition of Agila announced in February this year is among the two proposals in the pharmaceutical sector that India's Foreign Investment Promotion Board (FIPB) kept in abeyance at its 5 July meeting till the DIPP finalizes the policy on FDI in brownfield projects that involve a transfer of control. The other proposal concerns the Indian company Symbiotec Pharmalab. While details on the proposal are not very clear, the private equity firm Actis is known to be eyeing around 25% in Symbiotec, a manufacturer of corticosteroids, for INR3.3bn ($54.2 million). The Mylan-Agila deal, though, had earlier been cleared by the Competition Commission of India, albeit with some revisions in the non-compete clause therein (scripintelligence.com, 8 July 2013).