Abbott Laboratories realigns India business to boost growth

The group has made India an exclusive business region reporting directly to the headquarters
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First Published: Wed, Jul 10 2013. 11 33 PM IST
The US parent has also appointed Bhaskar Iyer as its new country head to oversee its three existing pharma units in the country. Iyer will explore synergies among them as well as other areas such as nutrition, diagnostics and medical devices that it operates within the group.
The US parent has also appointed Bhaskar Iyer as its new country head to oversee its three existing pharma units in the country. Iyer will explore synergies among them as well as other areas such as nutrition, diagnostics and medical devices that it operates within the group.
Updated: Thu, Jul 11 2013. 12 26 AM IST
Mumbai: US drug maker Abbott Laboratories, which bought the India formulations business of Piramal Healthcare Ltd in 2010 for $3.72 billion, is planning to realign its India business in order to boost growth to a level that justifies the investment.
The price that Abbott paid was almost nine times Piramal Healthcare’s annual sales at that time. The company said it’s not worried about the pace of growth of its Indian businesses as the acquisition was part of a long-term strategy.
As part of the recast, the group has made India an exclusive business region reporting directly to the headquarters of its established pharmaceuticals business in Basel. The US parent has also appointed Bhaskar Iyer as its new country head to oversee its three existing pharma units in the country. Iyer will explore synergies among them as well as other areas such as nutrition, diagnostics and medical devices that it operates within the group.
“India plays a very important role in Abbott’s established pharmaceuticals or branded generics business in the emerging markets,” Iyer said in an interview on Tuesday. “We want to enhance India’s contribution further by substantially accelerating growth in the next four years.”
Emerging markets, mainly Brazil, Russia, India and China, contribute at least 40% of Abbott’s overall revenue.
Iyer was formerly president, India and emerging markets, at Wockhardt Ltd, and before that with AstraZeneca Plc and GlaxoSmithKline Plc earlier.
Abbott is the largest pharmaceutical company in the country by market share. The three units include Abbott India Ltd, the listed subsidiary of the group that has been in existence since 1910. The other two units, Abbott Healthcare Pvt. Ltd and a rural business entity, 100% owned by Abbott Laboratories, were reporting separately to the Asia regional headquarters in Singapore until now.
The entire branded generic businesses of Abbott in India will now come under the newly formed established pharmaceuticals division headed by Iyer.
Analysts said growth has been below expectations.
“The market growth of Abbott’s pharma business in India during the last three years has been in the range of 12-13%, which was far below the estimated growth of above
20% that was envisaged at the time of the Piramal Health business purchase,” said a sector analyst with a foreign brokerage.
Iyer said, “We have been growing above the industry average. But the main objective of the realignment, which is a two-pronged strategy, is to accelerate the growth at a much faster pace.”
The drug industry, which has grown by an average 11-12% in the last few years, has seen its lowest growth in the past six months due to various issues related to pricing policy and economic gloom.
Pharma market researcher IMS Health estimated that Abbott’s monthly average turnover in India slowed to 8.3% as of March, with total drug formulations sales touching Rs.4,369 crore for fiscal 2013.
The task before the company in the Indian market is more challenging with the new price control regime in place, analysts said.
“Currently, Abbott India’s seven products are under price control and another two will added under the new pharmaceutical pricing policy with an expected revenue impact of Rs.88.9 crore or 4.7% of calendar year 2013 revenue,” Ranjit Kapadia, senior vice-president, institutional research, pharma, Centrum Broking Ltd, said in a June research report.
“Our new strategy will involve increasing visibility of many of our legacy brands both from Piramal as well Abbott portfolios by investing in people and promotion, and also to come up with new brands by strengthening the development efforts at its Indian research facility and
also penetrating into newer markets both in terms of geographies and therapies,” said Iyer.
The Abbott-Piramal deal was one of the largest in India’s drug industry in the recent past. Another large deal was Japanese drug maker Daiichi Sankyo Co. Ltd’s $4.6 billion purchase of the promoters’ stake in Ranbaxy Laboratories Ltd. Ranbaxy faces substantial revenue impact over regulatory compliance issues in the US market.
Abbott managed to sustain its local business, although the investment recovery period may be prolonged due to slow growth. That doesn’t worry the parent, Iyer said.
“It’s a long-term investment that Abbott has done in the market, and we have several well-established brands which have large growth potential,” he said.
As per IMS Health’s March 2013 data, 17 Abbott brands are in the list of top 300 sold in the country, contributing about 32% to the company’s local revenue.
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First Published: Wed, Jul 10 2013. 11 33 PM IST
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