Foreign pharma deals snag on new Indian rules

Pharma companies are seeing the fallout from new M&A rules adopted by the Indian government. Late last year, Indian officials introduced a new deal-review process that has replaced the automatic-OK previously governing acquisitions in the pharma sector. Foreign companies looking to buy an existing drug company now must gain government approval.

For the first 6 months, that meant a review by the Foreign Investment Promotion Board. After that, the Competition Commission of India will take over deal approvals. These rules were hammered out over months of debates, some of which focused on the relative merits of the FIPB and CCI as M&A arbiters. As Rediff now reports, some pharma companies rushed to get their proposed acquisitions reviewed by the FIPB, apparently figuring the board's OK might be easier to come by.

Whether that's the case remains to be seen, but what is certain is that the FIPB review is holding up some deals. U.S.-based Akorn wants to buy an Indian-controlled affiliate, Akorn India, and use that entity to acquire assets and manufacturing rights from two other Indian companies, Kiltech Drugs and NBZ Pharma. Spain's Chemo España has organized a buyout of a pharma marketing and distribution company, Ordain Healthcare. And Par Pharmaceuticals agreed to buy Edict Pharmaceuticals, which exports products to the U.S.

The board has quibbles with each of these proposed deals, Rediff says. FIPB sees "no value addition" in Par's buyout of Edict, and figures that Chemo España's proposal would provide no gain to the Indian pharma industry. Meanwhile, Akorn's buyout may affect the affordability of critical drugs; therefore, it merits further study, the board says. At this point, how long that further study will require is anybody's guess.

- read the Rediff piece