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Piramal buys US pharma analytics firm for $635 m

Continuing its ?string of pearls? strategy of acquiring firms to create a global presence, Ajay Piramal-owned Piramal Healthcare on Wednesday said it will purchase Decision Resources Group, a US-based company in the $5.7-billion healthcare information segment, for around $635 million.

Continuing its ?string of pearls? strategy of acquiring firms to create a global presence, Ajay Piramal-owned Piramal Healthcare on Wednesday said it will purchase Decision Resources Group (DRG), a US-based company in the $5.7-billion healthcare information segment, for around $635 million (R3,400 crore).

DRG, which counts American Forrester Research, the Gartner Group, Thomson Reuters and Reed Elsevier as rivals, provides web-enabled research, predictive analytics (a statistical technique to predict future market movements) and consulting services to pharma companies. The debt-free company, which has grown at a 20% compounded annual growth rate in the past five years, has projected revenues of $160 million for 2012, and has 48 of the top 50 global pharmaceutical companies as its clients.

?We are getting into spaces where we know we can add value by creating a new business portfolio,? said Piramal, dubbed ?takeover tycoon? by the media as he executed 25 deals in two decades to build his pharma empire, before selling off the domestic drug business to Abbott Laboratories a year ago for $3.8 billion (around R16,500 crore then). At the time of the sale, Piramal had said the money would be channelled into businesses that provide high returns, and that ?opportunities were everywhere?. Since then, the company has also made two ?opportunistic? investments in mobile telephony company Vodafone India, taking up 11% in the Indian subsidiary of the British company.

?We are targeting long-term growth and margin potential with IP (intellectual property) and other proprietary advantages, in areas where India can play a significant role in the global value chain,? Piramal said on Wednesday. The transaction, which will be concluded by June this year, will be funded through an equal mix of debt and equity. PE firm Providence Equity Partners had invested in DRG six years ago and will exit the company with this deal.

?The valuation of DRG is at the lower end of its Ebitda (or operating profit, an indicator of the firm?s profitability),? Piramal said when asked about the high cost of acquisition. Shares of Piramal Healthcare, which has a debt of R2,000 crore on its books, closed 0.95% down at R427.60 each on the BSE on Wednesday.

The DRG acquisition comes a month after Piramal Healthcare acquired the worldwide rights to the molecular imaging research and development portfolio of Bayer Pharma for an undisclosed sum as part of its efforts to build a strong portfolio under its drug discovery programme. The purchase was made through Piramal Imaging SA, a newly created arm of PHL.

?The allied sector growth mirrors the growth in healthcare and pharmaceutical industry worldwide,? says Hitesh Sharma, partner & national leader (life sciences) at consultancy firm Ernst & Young India. ?With research getting more uncertain, more analytics and data are required for companies to get their strategies right in the market.?

?Piramal?s acquisition of DRG is an innovative move,? said Sandeep Sinha, director (healthcare) at consultancy firm Frost & Sullivan. ?The healthcare IT market is purely driven by industry needs, government policies, compliances and regulations. The market has huge potential.?

The $840-billion global pharmaceuticals industry and the $350 billion global medical devices industry are growing at a CAGR of 5%. ?There is a clear shift towards specialty drugs and high value analytics,? says Piramal.

?We have a two-pronged strategy ? to invest in opportunities in India and to look at global companies in the developed world,? Piramal, who has already invested in a variety of industries over the years ? textiles, pharma, glass, engineering, real estate and telecom ? had told FE in an earlier interaction.

Consultants said the latest deal by suits the Piramal portfolio. ?Piramal?s latest buy and the one in May seems fair, as these are niche,? said a Mumbai-based consultant. ?They are moving in a familiar market, so they know they can influence.?

?There would also be opportunities to offshore some of these services to India,? he added. He or his firm does not talk about specific companies.

DRG, which is looking to expand its footprint in markets like India, Brazil and Russia, has over 500 employees. The company has offices across Belgium, Canada, England, Japan.

Barclays Capital advised DRG on the deal while Ajay Piramal and his team led the negotiations.

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First published on: 17-05-2012 at 04:15 IST
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