Comments
In the last 10 years in the pharmaceutical industry, no one has been “hungrier” than Mankind Pharma, so it comes as no surprise that it walked away with Bharat Serums and Vaccines Ltd (BSV), says an industry veteran, on the recently inked ₹13,630-crore deal.
Late last month, Mankind agreed to buy BSV from private equity (PE) firm Advent International, putting an end to months of speculation. In fact, Mankind had looked at BSV five years ago, reveals Rajeev Juneja, Mankind Vice Chairman and Managing Director. Today, it is a very different BSV, with the present management having turned around the biopharmaceutical firm into a competitive company with a portfolio of promising products, he explains.
Having slugged it out in the marketplace with OTC brands like Manforce and Unwanted-72, Mankind saw BSV as an opportunity to strengthen its place in the women’s health and fertility drugs market, besides giving it access to high-entry-barrier critical care and specialty products. The acquisition catapults Mankind from having a basket of street-savvy products into the big league of specialty ones.
In Juneja’s words, “over the past three decades, our bottom-up strategy has enabled us to grow our reach from smaller towns to major cities, establishing a strong distribution network. By understanding market trends, we gradually ventured into OTC (over-the-counter) business, where our brands such as Manforce, Prega News are market leaders. This success prompted us to further expand into consumer wellness with products, like AcneStar, HealthOK, Gas-O-Fast, which are also in a dominating position in the market. Our emphasis on consumer healthcare has elevated the Mankind Pharma brand and established it as a well-recognised household name.”
Super-specialty target
Mankind had ventured into the chronic segment in 2004, and five years ago, segmented its specialty business to cater to diabetes, cardiology, urology, neurology and respiratory care to strengthen the portfolio, Juneja recently outlined to investors.
In March 2022, Mankind acquired Panacea Biotec’s formulations business in India and Nepal, bringing into its fold its transplant and oncology portfolio. The climb up the specialty ladder continued through partnerships with multinationals and bringing in products including Symbicort, Inclisiran, Vonoprazan and Neptaz..., recounts Juneja. “Now our acquisition of Bharat Serum will enable us to foray into the super specialty products where entry barriers are very high and where there are complex and difficult to replicate products with less or no competition,” he expands.
The transaction is to be completed in three to four months, and the companies are going through regulatory clearances, shoring up funds for the buy, and so on. The company will generate ₹4,000 crore through internal accruals to fund the acquisition, and the rest would be a mix of debt and minority equity. Mankind expects the BSV acquisition to bring in synergistic benefits of ₹50 crore to ₹100 crore in 12-24 months.
For now, the focus will be on “Bharat Mankind”, says Juneja, on the integration exercise that lies ahead. On possible rationalisation of people and products, he says, there is “hardly any overlap”. BSV will run as an independent company, reporting to the Mankind board. However, TTK Healthcare’s human pharma business — acquired by then Advent-backed BSV about two years ago — would be absorbed into Mankind’s consumer healthcare, Juneja says.
Gutsy or over-stretching?
Industry watchers are ambivalent about Mankind’s journey from an FMCG-style, brand-focussed strategy, to a leap into the more rarefied space of specialty pharma products. Some of them applaud Mankind’s ability to take this “leap of faith” and buy a niche player given the challenges looming in the sector. Others say Mankind is punching above its weight, and may have paid too much to make this transition. But even they grudgingly acknowledge the company’s risk-taking ability with an eye on the future.
Explaining the backdrop to the acquisition, Vishal Manchanda, Senior Vice-President (Institutional Research) with Systematix Group, says, companies are increasingly “embracing growth portfolios”, realising they cannot continue with the generics-centric strategies of the past.
The test for Mankind will be on how it leverages the complex technology platforms for future products. Manchanda does not see the company making money in the near term and expects to see the impact of the transaction in the long-term.
An industry-insider observes that BSV set itself apart from other generic drugmakers in the country by showing that companies cannot just survive, but do well by focusing on research and specialised products. And its operations were made more efficient, with the entry of the private equity (PE), but there’s only so much a PE can do, he adds, in terms of strategic support.
Mankind has shown “desire, decision-making and drive” in going for BSV and for the same reasons, it will make it work, says an optimistic insider. Or as Juneja explained to investors, “Look at the history of Mankind. Five points were always there in our head. First was a bottom-up approach. Second was our OTC business. Third was to make the Mankind brand a household brand. Next was to focus on the chronic side. After that, we entered into specialty and then now super-specialty. So it’s like completing the pyramid, coming to the high end of the pyramid. And ensuring that we are on every side of the pharma market and growing at the fastest pace.”
On the challenges in the generic drugs segment, he says, “Whenever you bring some product out of patent, 50 to 100 competitors come immediately.” So clearly, the BSV buy was with the idea to be in a complex, difficult-to-make-products business. That’s where the advantage is. As Juneja explains, “Either you are alone... you have some kind of a monopoly or just one or two competitors..You can command the prices. You have more EBITDA margin. That basically is our hope.” On Friday, the share price of Mankind Pharma was ₹2,100.80, showing a steady rise in the last four days reflecting the market’s optimism in the company’s bet for the future.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.