CRISIL rings Warning Bell for Indian Pharma Companies

A new Crisil report  made it clear how fast the Indian pharma sector needs to shift away from export-oriented manufacture of generics and the just process improvement  exercise, towards investing in R&D to develop new molecules and biosimilars  

Sellers of copycat drugs in developed markets may see exports fall by 10-12% in the next five years as fewer drugs go off-patent in these markets,  compare to  CAGR  of 19% seen in the last decade. CRISIL Research said. The deceleration likely to be much more post 2020.

Between 2011 and 2015, Indian companies accounted for an average of 37% of all abbreviated new drug application (ANDA) approvals—which enable a company to sell generic versions of innovator molecules —in the US market. This was about  similar   to 40%  share held by US companies, but way ahead of the next competing countries—Israel and Germany—which had 5% each.

Non availability of any   further off patent  block buster  and  fall  in growth rate  of   US generic market, the writing on the wall for Indian drug-makers is clear: They have to move up the value-chain, from making cheap copies of off-patent drugs to creating and owning intellectual property through new discovery and biosimilars. To be sure, they have increased R&D spending significantly over the years. Top 30 companies research spending was 6.5% of revenues in FY15, compared to 3.8%  a decade back. However, this pales in comparison with global majors, who spend close to 16%.

Moreover, the Crisil report points out, much of the Indian companies’ expenditure is  for launching generic therapies, changing product mix in generics, and process development. Besides, the atmosphere of doubt over drug quality—in the wake of the FDA’s crackdown—further dampens Indian generic-makers’ export-prospects. 

CRISIL Research analysis indicates that 14  Indian companies together have 39 products in various stages of clinical development. These companies have adopted various approaches—such as in-house development, joint development and out-licensing—to manage the risk-return trade-off.  However, no one has launched a new molecule in a regulated market such as the US.

Thus far,  it is  disappointing in NCE effort  but  39 product in the pipeline should be an encouraging sign for Indian pharma’s prospects. The key challenge will be to uphold drug-quality and pass the approval hurdles in well-regulated jurisdictions like the US.

Key Features of Indian Budget 2016- 2017

·  TAXATION

o   Will not resort to retrospective taxation in future; one time tax dispute resolution proposed for retrospective taxation

o   To rationalise corporate tax for new manufacturing companies

o   To implement general anti avoidance tax rule from April 1, 2017

o   Security transaction tax on options raised to 0.05 percent

o   Proposes to levy infrastructure cess of 1-4 percent certain  models of cars  (1 % on small petrol, LPG, CNG cars, 2.5% on diesel  cars of certain capacity and 4% on other higher engine capacity vehicles

o   Raises factory gate tax on various tobacco products by 10-15 percent.

o   Proposes to abolish 13 different levies

 INVESTMENT

o   100 percent foreign direct investment to be allowed in food processing industry

o   Promises further reforms in foreign direct investment policy in insurance, pension, asset recast companies

DISINVESTMENT

o   Total stake sales in 2016/17 seen at 565 billion rupees

o   To encourage central public enterprises to divest own assets for raising resources for new projects

o   Strategic divestment seen at 205 billion rupees

 FISCAL DEFICIT

o   Fiscal deficit seen at 3.9 percent of GDP in 2015/16

o   Fiscal deficit seen at 3.5 percent of GDP in 2016/17

o   Plan expenditure seen at 5.5 trillion rupees in 2016/17

o   Proposes to set up panel to review fiscal responsibility management act

 RURAL ECONOMY

o   Rural jobs programme allocated 385 billion rupees ($5.61 billion) in 2016/17

o   Farmer welfare budget to total 359.84 billion rupees

o   Rural road development to get 190 billion rupees

o   Target of agriculture credit at 9 trillion rupees

o   Interest subvention towards farm loans at 150 billion rupees

o   To set up dedicated irrigation fund worth 200 billion core

o   Allocates 55 billion rupees for crop insurance programme for 2016/17

 POLICY REFORMS

o   Bankruptcy code for financial firms to be introduced in parliament in 2016/17

o   RBI act is being amended for implementing monetary policy framework

o   To list general insurances companies on stock exchanges

BANKING REFORMS

o   Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find resources for additional capital for banks if required

 INFRASTRUCTURE

o   Allocates 2.21 trillion rupees for infrastructure development for 2016/17

o   Allocation for roads and highways development at 550 billion rupees

o   Capital expenditure on roads and rail development at 2.18 trillion rupees

 Budget Highlights :  Click  to download.

Largest U.S. chemical companies to combine in megamerger. Could spark more deals!!

Two American  Chemical giants and possibly among the oldest,  DuPont and Dow Chemical  have agreed to combine in an all-stock merger valued at $130 billion  which  would be the 18th largest deal ever.

 

Dow Chemical Co. and Dupont Co. that are 118 and 213 years old, respectively, announced the blockbuster, tax free  deal that would take two years to complete.  Following the completion of the deal's in 2016, the  merged entity  would eventually    will  break up  into  3 separate, publicly-traded entities focusing on Agricultural products, Material sciences, and Specialty products.

The deal, the fifth-largest corporate merger of 2015, would certainly receive scrutiny from federal regulators, especially regarding the new companies  place in global agricultural production, including seeds, insecticides, and pesticides. Executives from both companies  however said the agrochemicals businesses have little overlap and any asset sales would likely be minor.

By revenue, the material sciences company – which makes products for the packaging, transportation, and infrastructure industries, to name a few – will be the largest. Its combined revenue in 2014 was around $51B on an adjusted basis. It will compete with the likes of corporate titans BASF, Honeywell, and 3M.

The specialty products company, with a combined revenue of $13B in 2014, would sell materials to the electronics and communications industries, among others.

The agriculture company, focusing on seeds and chemicals, would have a combined adjusted revenue of $19B overtaking BASF as the leader in agrochemicals. In the seed industry, DowDupont is pitted against behemoth Monsanto.

Dow shareholders would own 52 percent of the new company after preferred shares are converted, the companies said. The agreement includes a $1.9 billion termination fee under specified circumstances, such as rejection by shareholders.

The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation

Prior to the merger, Dupont said in a statement it will slash $700 million in costs, with ten percent of its workforce "impacted" by the move, while Dow is expected to drop $300 million in costs.

As per Dealogic , this   merger would represent the 18th largest corporate deal of all-time. It would trail the 2015 deals made by Allergan and Pfizer, Anheuser-Busch InBev and SABMiller, BG Group and Royal Dutch Shell and Time Warner Cable and Charter Communications.

Dow and Dupont have a combined annual revenue of around $83 billion, with operating profit of about $15 billion.

Marriott books Starwood to create biggest hotel company !!!!!!

US-based Marriott International announced Monday that it will acquire Starwood Hotels & Resorts Worldwide in a $12.2 billion deal that will  catapult it to become the world’s largest hotelier by a wide margin.

The two companies had combined revenues of nearly $19 billion in 2014 and currently have 5,500  properties  and about 1.1 million rooms worldwide. The combined company will dwarf number-two global hotelier Hilton, which has 4,500 hotels and 735,000 rooms.

The agreed merger unites Marriott brands, which include Ritz-Carlton, Renaissance,JW Marriott, Fairfield Inn and Starwood marks like Westin, St. Regis, W and Sheraton. The merger will give Marriott 30 brands and more leverage with corporate travel departments. Frequent business travelers will also be closely watching the deal. Starwood has a beloved frequent guest program with partnerships with American Express, Delta Air Lines and Uber. Marriott has a much larger programme with partnerships with Chase, United Airlines and several others.

Starwood shareholders will receive 0.92 shares of Marriott International, Class A common stock and $2.00 in cash for each share of Starwood common stock, a joint statement from the companies read.

Starwood shareholders will separately receive about $7.80 per share from a transaction set to close prior to the Marriott-Starwood merger closing — the spin-off of the Starwood timeshare business and its merger with Interval Leisure Group, which has an estimated value of approximately $1.3 billion.

Marriott said it expected one-time transaction costs of $100 million-$150 million related to the deal. The company expects to deliver at least $200 million in annual savings in the second full year after closing.