Shifts in global pharma: Why did Piramal Healthcare acquire Decision Resources?

Piramal Healthcare, a global business conglomerate stationed in Mumbai, Indian, is acquiring Decision Resources, a US-based intellectual property and knowledge-based business, for $635 million. Piramal Healthcare specializes in contract manufacturing and generic, over-the-counter drugs, but it has recently diversified into a broad range of technology and health care markets.

In an interview with The Times of India, Chairman Ajay Piramal discusses how Piramal Healthcare has dropped many of their generic, over-the-counter businesses to focus on research and development of drugs on the global scale. To further this goal, Piramal also acquired several business portfolios, like the medical device company BioSyntech and a portion of Bayer's research and development portfolio, which have intellectual property and patent rights to several products with global appeal. Piramal Healthcare is hoping to acquire Decision Resources for two reasons: (1) Decision Resources provides sustainable revenue stream and (2) the company’s research and analysis of future trends in the health care industry.

As a revenue stream, experts believe that Decisions Resources will earn 160 million dollars in 2012, and they value the company at over four times that amount. Decision Resources has also grown at an impressive rate of 20 percent a year for the past five years. Moreover, Providence Equity Partners, the US based equity firm that is selling Decision Resources to Piramal Healthcare, apparently made two times their initial investment of 193 million dollars in Decision Resources. Therefore, Chairman Ajay Piramal is hoping that Decisions Resources will continue to provide a steady stream of revenues and cash to allow his company to transition into a global leader in research and development of innovative drugs and treatments.

This need for sustainable and diversified revenue streams reflects the changing pharmaceutical industry in India. India is developing quickly, and the Indian government is trying to regulate the market to produce a competitive industry by adopting many of the standards of more developed countries. This is driving up research and development cost.  Moreover, advances in research are driving up cost of equipment, and the lack of academic participation in pharmaceutical development is also driving up research and development cost. Researching new drugs is very expensive in India, and the rather new innovation and research-based companies, like Piramal Healthcare, are not expected to be commercially viable for years.

Of course, Piramal Healthcare’s desire for Decision Resources is also based on the company’s market research. Decision Resources has proprietary databases and information analysis techniques that allow the company to predict market trends in the health care industry. Piramal Healthcare is hoping to create a global business and has already bought or invested in businesses in Asia, Europe, and the United States. Piramal Healthcare’s chairman, Ajay Piramal, is hoping that Decision Resources information will provide Piramal Healthcare an edge in predicting emerging markets.

For the next several years, the pharmaceutical industry is expected to become a more global enterprise by entering many of these new, emerging markets. If Piramal Healthcare wishes to be a global leader, or even a regional leader, it must have an edge in this arena. Decision Resources is the company’s new weapon in dealing with increased globalization.

So Piramal Healthcare is trying to acquire Decision Resources to sure-up their revenue streams and access to Decision Resources’ proprietary databases. This acquisition is expected to be completed in June, and it seems to be a good purchase for a company that wishes a more global presence.