Even as brownfield FDI in the pharmaceutical space continues to vex policymakers with the influential department of industrial policy and promotion asking that such proposals be put in abeyance, a $1.6-billion buyout of Strides Arcolabs injectables arm by US major Mylan seems set to get the green signal next week. With the Competition Commission of India (CCI) approving the February 2013 agreement between Mylan and Strides wholly-owned arm Agila Specialties last week, the Foreign Investment Promotion Board (FIPB) is likely to clear the deal on July 5, sources privy to the matter said. If the FIPB gives the nod, this would be the first major brownfield FDI to cross all regulatory hurdles in India after the DIPP, the nodal agency for foreign direct investment policy, put its foot down.
The Mylan-Strides deal will be the third-largest acquisition in the pharma sector after the Daichii-Ranbaxy ($4.6 billion in June 2008) and Abbott-Piramal ($3.72 billion in September 2010) deals.
Sources said the CCI finding that the Mylan-Strides deal wont have any appreciable adverse impact on competition in India since both firms have insignificant presence in the relevant Indian market would come handy for the FIPB to clear the proposal. The CCI vets M&As for their potential adverse effect on competition based on criteria of turnover and assets of the merging entities to assess the combined entitys market strength. It, however, has a special (more intrusive) dispensation for mergers in the pharmaceutical sector, given the concerns and inter-ministerial scuffles over how to regulate brownfield FDI in this sector.
US pharma giants are showing an active interest in Indian injectables producers given the shortage in their home market after a regulatory crackdown on some of the major local manufacturers. Strides is known for its world-class manufacturing facilities and is a major player in the US too.
Sources said that with both Mylan and Agila having a small presence in the domestic injectables market, the DIPP also may not have any problems with the FIPB approving the deal. The DIPP insists on rigorous regulatory assessment of brownfield pharma FDI proposals as it fears that these could result in not only higher prices of medicines but also shortage of essential products in many therapeutic areas.
While India allows 100% FDI in the pharma sector, any foreign investment in existing pharma companies requires an FIPB nod.
Meanwhile, the FIPB will take up a total of 10 pharma M&A proposals in