Brazilian Nikkho Acquired by Cadila: Zydus Way to Be Global

Posted: 25 Mar 2008

Date Written: March 23, 2008

Abstract

Prologue: Young technocrat Mr. Pankaj Patel, CEO of Zydus Cadila, in its mission to create healthier communities globally was musing on deciding strategy path at beginning of 21st century. His father, also a great technocrat and self made entrepreneur, founded Cadila as a small manufacturing unit in 1952. By 1995 the company became second largest pharmaceutical company in India, while in a restructuring exercise the company was vertically split. Cadila Healthcare Limited, under the aegis of the Zydus group was lead by Patels. During the time, as a WTO treaty signatory, Indian patent regime changed which compelled Indian pharmaceuticals to redefine strategies if one would like to survive and grow.

Zydus had proven expertise in manufacturing and marketing different dosage forms; the wide therapy coverage carried through three multi-therapy divisions and eight specialty divisions, shaped by a passion for innovation, commitment to partners and concern for people to create healthier globally communities. To be a leading global healthcare provider through robust product pipeline, sales was projected $1 billion by 2010, $3 billion by 2015 and research-based pharmaceutical company by 2020. The sale in 2007 was little less than half billion $.

Pharmaceutical being typical business segment, the company that want to become global player, should take care of special key factors like licensing & legal cum health care requirement in a particular country. To be successful global player, company should penetrate profitable product range suitable to a country. Zydus thought more appropriate strategy to acquire existing units in regions where potential market exists. Brazil is the eleventh largest market in the world for pharmaceutical products, with revenues of over $8 billion. This may make Brazil one of the key markets for Zydus Cadila and a hub for its operations in Latin America. Zydus Healthcare Brasil Ltda, a subsidiary of Zydus Cadila was registered in Sao Paulo. Zydus Cadila made acquisition of Quimica e Farmaceutica Nikkho do Brasil Ltda, popularly known as Nikkho through its local subsidiary in Brazil for $26 million (Rs107 crore). Founded in 60s, Nikkho catered Brazilian prescription drugs market with sales force of 125 and a wide product portfolio.

Objectives of Research: This case study is related to Cadila Healthcare Limited, a leading Indian Pharmaceutical firm. Case study is for teaching purpose fit for audience like Management Graduates & Working Executives in courses related to Merger & Acquisition, Corporate Strategies, Strategic Management and Strategic Financial Management. Objective of the study is to provide platform to ponder:

1. What is long term strategy of firm to be global leader 2. What are the challenges before firm in implementing strategy 3. Why a mid-sized firm (Nikkho) has been acquired in Brazil 4. What synergy is expected by acquiring Nikkho and how it could be realized

Research Strategy and Method: The research will review secondary data in form of Annual Reports of company, documents submitted to regulatory authorities, press statements, research reports and available literature. It will also analyze primary data using appropriate statistical tools. The case study will be sequenced in logical order after prototype testing.

Time & Assignment Questions: The case is expected to take 1.5 hour for teaching and will generate different set of questions keeping in mind who are the participants, their learning objective & level.

Bibliography: · National Stock Exchange of India website · Company Annual Reports (1996-2007) · The Emergence of India's Pharmaceutical Industry and Implications for the U.S. Generic Drug Market, US International Trade Commission · The Indian Pharmaceutical Industries, Expansion & Ambitions by espicom · UNCTAD world Investment Report-2006 · Wikipedia website: Mergers and Acquisitions

Keywords: merger, acquisition, patent, pharmaceuticals

JEL Classification: G34

Suggested Citation

Sapovadia, Vrajlal K., Brazilian Nikkho Acquired by Cadila: Zydus Way to Be Global (March 23, 2008). Available at SSRN: https://ssrn.com/abstract=1112450

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