The most expensive pharma deal ever

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The most expensive pharma deal ever
June 7, 2010 |12:11 | By : Team X


It took four hours for Ajay Piramal to negotiate a whopping USD 3.7 billion valuation for his generics business with Abbott. Just how did he pull it off? The secret rendezvous was set at a hotel in Dubai early this year. Ajay Piramal, the chairman of Piramal Healthcare, India’s fifth largest pharmaceutical company, and his daughter Nandini had a two-hour meeting lined up at this carefully chosen neutral location. They met up with Miles White, chairman of USD 30 billion Abbott Laboratories.

The world’s seventh largest drug maker. A couple of weeks later, the Piramals met another senior Abbott executive Olivier Bohuon, executive vice president pharmaceutical business for a couple of hours. During his meeting with White, Piramal handed over a succinct three page note detailing his basis for the valuation. White would have to revert within a week, if the deal was to be consummated. Eventually, White did get back, and offered nearly as much as Piramal had asked for.

Today, most pharma industry watchers would die to get hold of a copy of that note. After all, it formed the basis for the Rs 17,500 crore deal that Piramal clinched for a business that he had started 22 years ago with a capital of just Rs 16.5 crore. This isn’t quite the biggest deal in the Indian pharmaceutical industry. In 2008, Japanese firm Dai Ichi paid USD 4.6 billion for a 50% stake in Delhi-based Ranbaxy Laboratories, India’s largest pharmaceutical company.

Yet the valuations would make it one of the most expensive, especially for a firm like Piramal which sells inexpensive, off patent drugs (also called generics). Abbott will eventually pay Piramal nine times the current sales, 60 % more than what the Delhi-based Singh brothers — Malvinder and Shivinder — got for selling their stake in Ranbaxy.