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Since 1990, the global pharmaceutical industry has been witnessing a spate of consolidation. The following are the critical reasons:
* Rising R&D cost
* Decline in number of new product launches.
* Expiry of patens
* Need for improvement in sales and marketing
The key drivers for mergers and acquisitions are the desire for greater market share, enhance geographical expansion and increased technological capabilities. One of the reasons for a spate of mergers in the global big pharma industry is hunt for pipe lines and synergies in R&D. The increasing cost of cycle of development of new chemical entity and the drying pipe line of drugs forced companies to consider alternative options.
The merger of multinational giants Glaxo Wellcome and Smithkline Beecham Plc reflex the importance of research for survival of former companies. M&A often lead to synergy in scale and operations. The process of consolidation, a generalised phenomenon in the world pharmaceutical industry, has also been reflected in Indian context.
The future of the industry will be determine by the factors like how well it markets its products to several regions and hence distribute risk, its forward and backward integration, its R&D and consolidation through M&A and licensing agreement.
The Indian pharmaceutical market is relatively small, with an estimated size of $4.6 billion. The Indian pharma industry ranks fourth in terms of volume and 13 in terms of value globally.
The low market share with respect to value is due to relatively lower prices of drugs. This led to the emergences of numerous players, which resulted in the fragmented nature of Indian pharma industry. M&A have emerged has a strategy for overcoming this limiting factor of size for Indian companies. Indian pharma M&A accounted for about $250million in the past decades. Indian companies have been involved in over 15 overseas deals, of which 11 were in the last few years....
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