Piramal Healthcare To Acquire Another Business

A Piramal Group company, Piramal Healthcare has announced that it will acquire the US-based Decision Resources Group (DRG) for a sum of USD 635 million (Rs 3,400 crore). DRG is a three decades’ old privately owned company which is mainly engaged in research publications, consulting and advisory services. DRG provides analytical services to the pharmaceutical, biotech and financial services industries. It has about 300 employees worldwide with offices in the US, Belgium and Japan.

This deal is in the pharma and healthcare space but the business is not in drug manufacturing since it deals with analytical and information services. According to the information supplied by the company to the stock exchange, DRG is a fast growing healthcare information business company having a five-year CAGR of 20 per cent. Its clients include 48 top pharmaceutical companies across the world. In the same note it also says that the healthcare information business has a total size of USD 5.7 billion. A giant multinational company called IMS Health also operates in this market and we believe that it has a lion’s share in this sector. DRG has projected revenues of USD 160 million which means that it holds a little over 2.5 per cent share in this market.

In April this year the company bought the Molecular Imaging Development portfolio of Bayer Pharma. During that time the company had said that it would focus more on the protected patents which will limit the competition seen in the generic segment. This is very much in contrast to the scenario with the Indian pharma companies which are focusing more on the drugs that have or will lose patent cover. The branded generics have given a wide room to the Indian pharma companies and Piramal’s plans seem to play against the tides.

Besides this acquisition, Piramal has also acquired a 5.5 per cent stake in telecom company Vodafone (Rs 5,864 crore). After selling its formulation business for USD 3.72 billion in 2010 to Abbott Laboratories, the company has been on an acquisition spree. The company currently has huge reserves due to the Abbott transaction which as of March 31, 2012 stand at Rs 11,140.78 crore while the total cash position is at Rs 13.24 crore.

In the year FY12 the company posted a topline boost of 38 per cent to Rs 1,096 crore on a standalone basis. On a consolidated basis it saw its revenues growing by 28 per cent to Rs 2,083 crore. The profit before tax and exceptional items for the year however declined due to the high borrowing costs. It is not clear why the company is not paying all its debts which stand at Rs 648 crore as per the consolidated balance-sheet.

After the acquisition of Vodafone shares, its scrip had sharply risen by 8 per cent over the earlier day’s closing price. After the Molecular Imaging Development Portfolio acquisition its shares remained subdued while after today’s news its intraday shares declined by about 1 per cent in value. While the normal business growth looks good there is no clarity how the company will capitalize on the acquisitions made in the pharma space.