Cases

Business Plan for a Leading Business Group to Foray into the Pharmaceutical Generics Sector

Challenge

The client is a part of a leading business group with interests in IT software and hardware. The client has expressed interest to enter the pharmaceutical generics segment as a part of its diversification strategy. The pharmaceutical sector is undergoing a major change with the introduction of product patents in India, a growing use of generics globally and a large scale consolidation. The client has inadequate experience in the pharmaceutical sector to start a Greenfield project. Additionally, a medium-term investment horizon necessitates ‘acquisition’ to enter the pharmaceutical sector. The client is considering acquiring a strategic stake in a company offering an attractive growth potential over medium term. The top management was faced the following key questions considering the changes in the pharmaceutical sector:

  • Which opportunities are likely to emerge for Indian companies?
  • Which companies are best positioned to benefit from the opportunities?
  • Which company should be considered for acquiring a strategic stake?

Our Approach 

UC conducted extensive primary and secondary research on the changes in the pharmaceutical sector, taking the following steps:

  • Met industry associations, regulatory authorities, leading pharmaceutical companies and industry experts and analysed industry research reports
  • Analysed the opportunities and key issues facing the pharmaceutical sector
  • Based on the analysis, the team identified the need to answer 3 key questions -
    • Which generic segment is attractive in the pharmaceutical value chain?
      • Classified the industry players into 3 categories based on their position in the value chain viz. bulk drugs, formulation and composite player
      • Analysed the aggregate revenue and profitability characteristics of each category and identified the attractive category of the players
    • Which therapeutic segments are likely to grow?
      • Analysed the number and value of drugs going off-patent in each therapeutic segments globally, over the next 10 years
      • Determined the existing size and growth potential of each segment based on disease proliferation
      • Identified the top 9 attractive therapeutic segments
    • Which company is well poised to take advantage of the evolving landscape?
      • Based on the emerging opportunities e.g. contract research, contract manufacturing, marketing etc., identified an ideal business model poised to take benefit of the evolving landscape
  • Further prioritised and shortlisted companies on the indications of their willingness to divest
  • Facilitated an initial round of meetings between the client and the prospect
  • Defined a strategic road map for acquisition

Impact

The client received a shortlist of potential companies on the basis of turnover and equity holding pattern, presence in top therapeutic segments, strategic focus, existing operations and management quality from a long-list of about 2,500 companies.

UC recommended 4 companies as priority companies to initiate a dialogue with, out of the 9 shortlisted companies.