Risk Aversion in Indian Deal-Making the Result of Regulatory Compliance Concerns

Global pharmaceutical companies-and in particular western pharmaceutical companies-are shying away from buying or partnering with Indian generics manufacturers because of quality and compliance issues, write WSJ journalists Namrate Nandakumar and C.H. Unnikrishnan.

Companies, including Pfizer, Sanofi-Aventis, and Daiichi Sankyo have been hit with fines, delays, or both after acquiring or partnering with Indian generics manufactures. 

Daiichi Sankyo, for instance, was hit with a $500 million dollar fine after subsidiary Ranbaxy Laboratories was forced to settle a dispute with the US Food and Drug Administration over quality issues in return for market access for its generic version of the blockbuster drug Lipitor.  Daiichi has already suffered a loss of half of their investment in Ranbaxy as a result of the fine and decreased market valuation.

The hesitations could extend beyond India as the global supply chain grows larger. "These apprehensions [about quality compliance] are not specific to India as quality and drug safety are concerns in every country," said Sanofi's managing director for India, Shailesh Ayyangar.

Risk-aversion may also lead to an increased emphasis on due diligence, site visits, and audits before any acquisitions, making regulatory a primary-instead of secondary-consideration instead in deal-making.

(Live Mint - Compliance, quality issues cast shadow on pharma deals)