Fosun agrees to acquire Gland Pharma for USD1.26 bil.

Fosun Pharmaceutical (China) has agreed to buy an 86% stake in Gland Pharma (India) backed by KKR & Co in a deal worth up to USD1.26 billion, according to Bloomberg. Gland Pharma has a strong portfolio of injectable products that are widely used medicines administered through vials, syringes, bags, and pumps. This portfolio is dominated by harder-to-make medicines. The acquisition is considered the largest purchase of an Indian company by a foreign firm this year. KKR purchased a 38% stake in Gland Pharma in 2014, paying about USD200 million for it, according to The Wall Street Journal.

Fosun stated that it would raise up to USD800 million in loans from financial institutions to provide the funding for this deal. Fosun's total revenue for 2015 was USD1.9 billion. In the past couple of years, Fosun has grown rapidly through acquisitions (see Israel: 27 November 2014: Fosun Pharma to search for Israeli partner and China - Portugal: 17 October 2014: China's Fosun buys Portuguese health provider ESS for USD590 mil.). Fosun's portfolio includes treatments for liver diseases, diabetes, and tuberculosis, and diagnostic products, and it is the leading provider of anti-malaria medicines globally.

India's government last month allowed up to 74% foreign direct investment (FDI) in existing pharmaceutical companies through an automatic approval process (see India: 21 June 2016: Indian government allows automatic approval of 74% FDI in existing pharma companies). This change is one of a series of measures relaxing rules on foreign investment in India. Previously, these deals required government approval, leading to long delays. However, the transaction is pending regulatory approval in China and the United States, according to Fosun's statement.

Outlook and implications

Despite paying a high premium, there are substantial positives in the deal for Fosun. Gland Pharma's patents of its injectable products, valued at USD16 billion, will expire in 2019. The acquisition is expected to boost market-penetration opportunities, particularly in the US market, for Fosun. In the last couple of years, opportunities for injectables in the US have attracted large pharmaceutical manufacturers. Moreover, it is estimated that the US injectables market will grow about 10% annually in the next five years, according to The American Pharmaceutical Review newspaper.

Fosun is also interested in opportunities in the United Kingdom and Europe, according to its press release. Recently, Chinese pharmaceutical companies have made increasing efforts to diversify internationally as macroeconomic growth slows in China. At the same time, merger and acquisition (M&A) activity into China is also expected to increase as pharmaceutical multinationals intensify efforts to accelerate access to the market (see China: 4 May 2016: Chinese healthcare M&A activity surges in 2015 as Big Pharma acquires small domestic players).