M&A Trends in Healthcare and Pharmaceutical Sector

Mergers and Acquisitions (“M&A”) are financial transactions for undertaking business restructuring wherein ‘merger’ involves consolidation of two or more entities to form a single entity and ‘acquisition’ refers to acquiring the business, assets or shares of an entity to gain ultimate control of the said target entity and its affairs. M&A activities in India are primarily governed by the Companies Act, 2013, the Indian Contract Act, 1872, the Competition Act, 2002, the Foreign Exchange Management Act, 1999 and the Securities Exchange Board of India (“SEBI”) Act, 1992 and require approvals from the board of directors, shareholders, and authorities including the regulators under the aforementioned laws. 

Global M&A activity in the healthcare and pharmaceutical sector has witnessed a surge as entities seek to expand and strengthen their market position, fill gaps in their product portfolios and spike revenues. Amidst the progressive landscape, the Indian healthcare and pharmaceutical sector also witnessed prominent M&A activity in recent years, particularly in the post-pandemic era. As per the recent reports, 24 M&A deals were announced in the first quarter of 2024, estimating to a total value of $456.3 million[1]. With the introduction of favourable government policies, rapid advancements, disruptive innovations and increasing consumer expenditure, the healthcare and pharmaceutical sector attracted significant attention from foreign investors as well. This article provides insights into the M&A trends in the Indian healthcare and pharmaceutical sector along with key drivers and predictions for the next decade.

Key Drivers of M&A in Healthcare and Pharmaceutical Sector:

In the Indian healthcare and pharmaceutical sector, several factors drive M&A activities, which include:

1.     Medical Infrastructure and Technology

One of the primary reasons for M&A in any sector is technological and infrastructural advancements. Digital health solutions, health monitoring devices, electronic health records, use of blockchain technology in supply chains, and other emerging technologies are reshaping the healthcare and pharmaceutical sector thereby resulting in improved patient outcomes and availability of healthcare facilities at a reasonable cost. However, with the surge in population and increasing population, M&A will play a crucial role in the improvement of the healthcare and pharmaceutical sector thereby allowing entities to unlock access to advanced and innovative technologies, function with enhanced research capabilities and add innovative products to their portfolios gaining a competitive advantage in Indian and international markets.

2.     Regulatory Landscape

The regulatory framework governing M&A is dynamic and has been constantly evolving over a period of time. The specific regulatory authorities may also vary depending upon the nature of the transaction associated with such M&A. Competition assessment in accordance with the provisions of the Competition Act, 2002 is essentially required to be undertaken by the major companies undergoing M&A which may require approval from the Competition Commission of India and National Company Law Tribunal. Further, in case the M&A activity involves the acquisition of shares, voting rights and control in listed companies, beyond the specified thresholds are regulated by SEBI, the same may require approvals from SEBI and relevant stock exchanges.

Further, M&A activity in the pharmaceutical and healthcare sector is subject to the sectoral caps under the Foreign Direct Investment (“FDI”) policy, wherein the pharmaceutical sector has been further categorised into greenfield (new facilities) and brownfield (purchasing or leasing an existing facility). For greenfield pharmaceutical projects 100% FDI is allowed under the automatic route whereas for brownfield pharmaceutical projects, up to 74% FDI is allowed under the automatic route, and for investments beyond 74% approval from the government is required. Although the present environment involves various procedural requirements, a multitude of cumbersome regulatory approvals have been reduced and integrated to promote the ease of doing business.

3.     Access to Intellectual Property Rights

Intellectual property rights hold great significance for pharmaceutical and healthcare companies as they facilitate the identification, planning, commercialization, and protection of their inventions. Further, these rights also act as an important medium of protecting investment, time, and effort and securing exclusive rights to market the products and prevent others from manufacturing, selling and making the protected inventions. M&A in the healthcare and pharmaceutical sector is significantly driven by companies seeking to acquire companies with innovative technologies to accelerate their product development.

4.     Portfolio Diversification and access to Research & Development (“R&D”)

M&A activity in the healthcare and pharmaceutical sector is largely driven by the goal of portfolio diversification and improved access to R&D resources and includes focusing on novel therapeutic areas such as immunology, vaccines, biosimilars, and rare diseases. Access to R&D resources is crucial for pharmaceutical companies to stay competitive and innovative. Partnering with other companies, academic institutions, and research institutions allows companies to leverage their expertise and resources while also gaining access to the target company’s product portfolio thereby staying ahead of the curve and capitalizing on emerging trends and improving their R&D resources.

Latest Trends and Future Outlook

The Indian healthcare and pharmaceutical sector witnessed significant M&A activity in recent years, as leading players seek to bolster their market presence, expand capabilities, and capitalize on the sector's immense growth potential. The industry aspires to reach US$ 130 billion by 2030 and US$ 450 billion by 2047 as part of the India @100 vision[2]. Against the backdrop of evolving consumer preferences, technological advancements, and regulatory changes, growth initiatives have become crucial for companies to stay ahead of the curve and solidify their competitive positioning. Some prominent M&As in India include:

1. Acquisition of Manipal Health Enterprises Private Limited (“Manipal Hospitals”): In April 2023, Singapore's sovereign wealth fund Temasek acquired a 41% stake in Manipal Hospitals, thereby increasing its stake from 18% to 59%. The $3.6 billion landmark transaction represented one of the largest private equity investments in the Indian healthcare sector[3]. However, in February 2024, Temasek sold 8% of its stake[4], reducing it to 51%, while retaining its position as the majority shareholder. Recent acquisitions by Manipal Hospitals include the acquisition of AMRI Hospitals, the acquisition of Columbia Asia Hospitals' Indian assets and the latest acquisition of an 87% stake in Kolkata-based Medica Synergie in a deal valued at around $180 million[5].

2. Acquisition of 1MG Technologies Private Limited (“1mg”)[6]: In June 2021, Tata Digital Limited, the 100% subsidiary of Tata Sons Private Limited (“Tata”) acquired a majority stake in 1mg, a leading player in the Indian eHealth sector. Tata’s investment in 1mg strengthened Tata’s market position and marked its entry into the e-pharmacy and e-diagnostics space through a technology-led platform.

3. Acquisition of Symbiomix Therapeutics: In 2024, the Indian pharmaceutical company Lupin Limited (“Lupin”) announced the acquisition of Symbiomix Therapeutics, a US-based speciality pharmaceutical company focused on women's health, for $150 million[7]. This strategic move aligns with Lupin's focus on expanding its presence in the high-growth women's health segment, which is a key pillar of the company's growth strategy and provides Lupin with a differentiated product and strengthens its position in the US pharmaceutical market.

In the upcoming budget, the healthcare industry is expected to witness an increase in allocation of funds, including allocating requisite funds for research and development activities, promotion and inclusion of schemes for the pharmaceutical and medical devices sector and focus on digital health initiatives. Additionally, the government is likely to introduce policies offering direct and indirect tax benefits to encourage research and investment in the pharmaceutical industry to position India as a global quality benchmark for pharmaceutical products through a focus on quality and innovation. These anticipated improvements and benefits for the healthcare and pharmaceutical sector are expected to drive M&A activity in India further, positioning it as the most favourable destination globally.

Conclusion:

As India has retained its title as the ‘pharmacy of the world’, industry experts predict increased M&A activity in the healthcare and pharmaceutical sector in segments like consumer healthcare, speciality pharmaceuticals, and digital health solutions. Emerging technologies such as artificial intelligence, big data analytics, and telemedicine are expected to overtake traditional business models and create new avenues for innovation and efficiency. To capitalize on these opportunities, companies must adopt a forward-thinking approach, prioritize agility and adaptability, and forge strategic alliances that leverage complementary strengths and capabilities. By staying updated and aligned with the latest industry trends and aligning their growth strategies with the evolving needs of patients and healthcare providers, Indian healthcare and pharmaceutical firms can solidify their position as global leaders in the years to come

[1]  M&A activity in the pharmaceutical industry in India increased in 2024 (pharmaceutical-technology.com)

[2] https://www.ey.com/en_in/health/pharma-and-healthcare-for-india-100-a-century-of-change-on-the-horizon

[3] Temasek Holdings: Singapore's Temasek buys majority stake in Manipal Hospitals for $2 billion - The Economic Times (indiatimes.com)

[4] Temasek sells 8% stake in Manipal Health to Mubadala, others | Mint (livemint.com)

[5] Manipal Hospitals acquires 87% majority stake in Medica Synergie (apacnewsnetwork.com)

[6] https://www.tata.com/newsroom/business/tata-digital-1mg-healthcare-marketplace

[7] https://www.genengnews.com/news/lupin-acquires-symbiomix-therapeutics-for-150m/