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Oct 10, 2011, 05.34 PM IST
The past few years has seen several multi national pharmaceutical companies come to India looking to make acquisitions. One such company is Sanofi-Aventis who's chief executive officer Chris Viehbacher believes 'India is one of the most exciting countries in the world at this stage.'
“We have been growing our business both organically and now and then through acquisition and we are going to continue to do that,” he said in an interview to CNBC-TV18’s Shereen Bhan. He further adds that his emphasis is on growing the business organically.
Below is an edited transcript of his interview. Also watch the accompanying videos.
A: Well the India story just gets better and better. As you know we have been investing in growing our business in India for over 50 years. I think it’s one of the most exciting countries in the world at this stage and we clearly want to be a part of it. We have been growing our business both organically and now and then through acquisition and we are going to continue to do that. This is my third trip in two years. I have got half the executive committee with me to really make sure everybody in our company understands the importance of India to Sanofi.
Q: You have been worrying about the market rates here in India; is that sort of growth sustainable? Also, if you were to capture market share aggressively, it would probably has to be done through the inorganic route and there has been lots of speculation the deal with Universal Medicare in the OTC space. But I understand that you have told analysts that you will need to take long hard look before you actually get a deal done in India. Is that because of the kind of valuations that we are seeing in India?
A: There’s a lots of ways of growing you business. We actually aren’t looking at acquisition as a market share gain. We look at acquisitions as ways to build onto our business, to bulk onto our growth platforms and possibly look at where we got holes in the business that we can’t fill organically. But the whole marketplace is growing significantly.
One of the real advantages of Sanofi is this that we are able to produce locally. That means we have a cost base that matches the marketplace. We could sell a generic line through Herckst, we have a broad range of products. Shantha was an extremely important acquisition for us because it gives us a low cost high quality waxing platform, not just for India but globally and certainly for other emerging markets. Universal was our strategy of being a part of consumer health. We weren’t very strong there and the deal allowed us to take the Universal set of products and go globally with them.
We may consider more deals of that nature but for the moment my real emphasis is growing the business organically and I think our local team has been doing a fantastic job about it.
Q: Andrew Witty (CEO of GlaskoSmithKline) was here very recently and he said that he is not willing to pay the kind of strategic premiums that we have seen being discharged in the Indian market; nine time sales was the last big deal that got done. What are your thoughts on the valuations as far as the Indian market is concerned?
A: I think anytime you want to do a deal, the best thing you could do is create value for both sides of the transactions. There are obviously going to be multiples where as a buyer you are not really driving any value out of that and we are not going to be interested in those types of deals no matter where we are in the world.
That having been said, a lot of the deals that Sanofi has done have been companies that nobody’s heard of until we did the deal. You don’t get into the auction process where you are actually interested in building onto you business versus trying to get higher up in the lead tables of market share. Then you actually confine a lot of deals.
I think Universal is a good example of that. This is a deal where I don’t think we overpaid for it. This is an opportunity to grow our business outside of India which I think the company couldn’t do on its own. But equally, this is also important from the point of view of the promoters because we are looking at other things. We are very specialized in gel capsule business for example, so we are looking at line extensions. It’s another way of actually growing the business organically, but there was a strategic nature to it. We weren’t just buying businesses to add sales. There is very much a sense of partnership and collaboration and I think you see that behind our Shantha acquisition as well.
Q: Since we are speaking about the Shantha acquisition, can give us an update of where things really lie as far as Shantha is concerned because it was a deal that’s run into trouble with the WHO, on account of the recall and destruction of the SHAN5 vaccine. So where exactly do things currently stand as far as Shantha Biotech is concerned and how concerned are you?
A: I am right here in Hyderabad and I have an opportunity to review Shantha with the entire team and I can tell you I am as excited about the strategic importance of Shantha as I have ever been. We did have a setback with the recall, but this is where you could see the strategic nature of partnerships. There is fantastic plant and equipment, there is great team in place, but we can drop on some of the expertise of Sanofi pass it to our vaccine companies to really deal with some of the production issues. We are investing significantly in research and development at Shantha. We have a number of vaccines under development that we don’t have anywhere else in the Sanofi Group and those will come to the market over the next 2-3 years.
The World Health Organization gave us a pre-qualification on our Cholera vaccine Shanchol as well as our tetanus vaccine and they had already reviewed the quality system that underlie SHAN5 the product that had been recalled. So this gives us huge amount of confidence that the team has really cracked the manufacturing issues and I think we are going to be back manufacturing vaccines for the world out of Shantha very soon.
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