$1.3bn Fosun-Gland Pharma deal was kept in abeyance for almost a year

Mumbai: There’s more to the government’s stalling of Chinese conglomerate Fosun’s $1.3-billion bid to buy Hyderabad-based Gland Pharma than meets the eye. Sources told TOI the twin ministries of health and pharmaceuticals had reservations about the deal as it did not offer much, and was a mere “transfer of ownership”, while a section of the industry feels the rejection was mostly due to geo-political reasons and not because Gland Pharma owns “proprietary and niche technology”.

Initially, Gland was a key manufacturer of a critical drug heparin, also its flagship product used in major surgeries. But industry experts say its share has now reduced to 20-25% of the heparin market, with several players having come up, including Biological Evans, Samarth Lifesciences and Swiss Parenterals. China, which controls a major supply of key raw materials and intermediates for manufacturing drugs, would have also accessed “key technology” and become a major competitor (for India) in formulations, the person quoted in the first case said.

TOI studied a clutch of pharma deals over the recent years and found — though delays (in approvals) are pretty routine (Mylan’s takeover of Strides Agila unit) — this case does seem a bit unusual and could have been kept in abeyance due to “complexities” at play. In a similar acquisition recently, US-based Baxter acquired generic injectables business of Claris Lifesciences for $625 million.

The deal faced issues from the start and was kept in abeyance for almost a year, mainly because the government was using it as a “negotiating tool” in their scheme of “give and take”, two people familiar with the deal said. India, for long, has been trying to establish a drug regulatory office in China — a request which has been ignored by the Chinese. TOI could not, however, confirm this, as health and pharma ministry officials were not available for comments, and calls made by TOI were not returned.

A standard evaluation for what an FDI proposal brings in terms of foreign investment, employment and technology, has to be done before giving any approval. “In this case, the ministries felt there was none,” with these concerns somehow getting lost with the FIPB being wound up, the person aware of the development added.

The government could have become “edgy” with India losing control over a critical injectable, a CEO with a leading player said, adding, it’s better to keep a “hostile country” away. The border tensions between the two countries may have added “fuel to fire”, an industry expert said.

A majority of industry players whom TOI contacted said on condition of anonymity that they do not consider the Hyderabad-based company “a flag-bearer of intellectual property, or of any niche, hard-to-access technology”. Its strengths are its four US FDA-approved facilities, which would help the Chinese conglomerate to access high-quality manufacturing (of Gland) to get a toehold in the highly lucrative US and other developed markets.

The deal was cleared by FIPB in March this year, while the Competition Commission of India had approved it earlier in December 2016. It is learnt that Fosun has extended the deal till September 26 after the initial deadline of July 27 expired.