The ease-of-doing-business sentiment in India has been high, given that global firms remain equally keen, if not more, as compared with last year. Moreover, 2023 is even more promising in respect of catalyst factors such as the increase in demand within domestic markets and the lucrative financials of various entities across industry sectors.
At the same time, one needs to factor in the geopolitical arena where economies globally are reshaping their financial appetite to sync with the dynamic demand and supply waves. However, such anxieties do not appear to have clouded India’s investment aspirations. Technology being the frontrunner across all development and investment-oriented projects, the country seems poised for flourishing growth, opening sectors such as media, entertainment, banking, and e-commerce for successful mergers and acquisitions (M&A).
According to a recent report by Deloitte, the year 2022 witnessed a growth spurt of 40% over the previous year, with the overall M&A deal values crossing $160 bn. While Private Equity (PE) nosedived by around 38% in 2022, the M&A deal count reached 126, doubling the 2021 record. The dampened PE figures caused a further dip in valuations, escalating inflation, and market uncertainty. With the 2023 trend marking steady recovery, investors expect strategic M&A activity. While India’s pharmaceutical, life sciences, and healthcare sectors look encouraging for M&A attorneys, it would be detrimental to ignore the impact of the West, especially the US. As is clear, the price cap is a secure net across the medical devices and pharma sectors, controlling the entire play in the healthcare domain. The US government’s recently-announced reduction in drug prices is expected to have a ripple effect on India’s export rush as also its import-input costs. This could also trigger serious competition between manufacturers in India and abroad.
The overall deal value in the pharma, healthcare, and biotechnology sectors doubled in 2022 as compared with 2021. From Biocon Biologics’s acquisition of Viatris Inc., Torrent’s buyout of Curatio, to Mankind’s acquisition of Panacea’s domestic formulations, the M&A wall of honours in 2022 is crowded with accolades. Yet another interesting deal is Abu Dhabi Investment Authority’s plunge into Intas Pharmaceuticals. It would be naïve to ignore the Department of Pharmaceuticals’ significant number of approvals in the brownfield projects in 2022: approximately 21 FDI approvals worth Rs 46.8 bn.
Industry prosperity and growth depend largely on how governance, regulatory mechanisms, and policy initiatives balance stakeholders’ requirements. The exchange of energies between government and industry is rarely harmonious. However, in the healthcare and pharmaceutical space, critical regulatory waves have been ranging from the New Drugs, Medical Devices and Cosmetics Bill (“DMC Bill”) in July 2022 to several other policy announcements. The Bill aims to update the age-old laws governing various principles of import, manufacturing, sale, distribution, etc., for all areas of the sector - whether drugs or medical devices, or even cosmetics. This one-legislation-for-all approach has been criticized ad infinitum without any attempt to break down this legislation into a relevant application of laws to the individual domains of drugs, medical devices, or cosmetics. This corrective measure would also need updating the Drugs and Cosmetics Act 1940, which would entail taking care of the mushrooming vast segment of e-pharmacies, which need a totally different legislation. After long and focused deliberation and debate, the ‘siblings’ of the sector now have the comfort of their own space when it comes to being regulated by laws.
The Government’s efforts in equipping the sectors with various boosters and catalysts need consideration. Some of the noteworthy ones include the new National List of Essential Medicines, which aims to promote the legitimate use of medicines with regard to related factors such as cost, safety, and overall relevance or efficacy. Yet another praiseworthy set of submissions is the one by the Parliamentary Standing Committee on Chemicals and Fertilisers that sought a waiver of customs duty on enablers related to COVID-19, whether medicines or even medical devices.
Similarly, in the case of medical devices, a special report was tabled in the Rajya Sabha for overall regulation and control over the sector while assessing the need to upgrade the manufacturing environment in India itself. The National Medical Devices Policy 2022 was also released to streamline the regulatory aspects and upgrade the sector’s current technological benchmarks. In addition, the Ministry of Commerce and Industry has set up the National Medical Devices Promotion Council to ensure a focused and sustained approach towards Medical Devices as a segment.
Above all, the industry’s attention was arrested by the ‘Strengthening of Pharmaceutical Industry Scheme’, which promises a contribution of Rs 5 bn for financial assistance to SMEs, MSMEs, etc through the period 2022-2026 to boost the sector’s infrastructure health.
Disclaimer: Sidharrth Shankar is an M&A Partner at JSA, Advocates & Solicitors. Views are personal.