For a while now, India’s cherished malted drink brands—Horlicks and Complan—have been caught in a race. Not just for market share, but to find new owners.
That race ended last month, when Ahmedabad-based pharma group Zydus scooped up Complan from consumer goods company Kraft Heinz. A mirror story is expected to play out when pharmaceutical company GlaxoSmithKline India sheds its Horlicks brand, which has been on the auction block since March. Horlicks has a host of non-pharma suitors—Pepsi, Coke, Unilever and Nestle. While its parent, GSK Plc, has signalled its intent to double down on the consumer health business by buying out Novartis’ share in their consumer health joint venture for $13 billion, it’s cropping its consumer health portfolio in India.
Serious swapping, selling, and shedding of assets have been the hallmarks of Big Pharma in the past year. Germany’s Merck sold its consumer health business to Proctor & Gamble. In India, this amounted to selling one of the largest vitamins and supplements businesses for Rs 1,290 crore ($177.9 million). Others, too, have pared their consumer business—where the profits are inherently not as high as pharmaceuticals—having been squeezed due to fickle retail’s reversals and creative rebirth.
Big Pharma, in general, is facing a challenging environment for gaining reimbursement for high-priced medicines in developed markets. Lawmakers, patients and doctors are paying closer attention to price increases, while insurers are pushing back against expensive medicines.
Most companies are using the proceeds of these sales to prop up their pipelines and go back to basics—innovate and launch new drugs. The ricochets in India mean multinationals are reassessing their bets. Quite a few have been quietly downsizing, laying off workers by the hundreds; something Big Pharma has rarely done in over a decade in India. Especially since 2005, when the new World Trade Organisation-compliant product patent regime kicked in. Many like Bristol-Myers Squibb, Boehringer Ingelheim, and MSD set up their subsidiaries just around that time. The lure was the growing domestic market and the promise of India as a cost-effective R&D post with new IP protection.
The champagne has now gone flat. The Christmas tree, as it were, is off to be mulched. Industry insiders say even long-termists like Pfizer, GSK, and AstraZeneca—who have seen a decline in revenues (or even de-growth)—are letting people go. This downsizing at private companies like Bristol-Myers Squibb and Roche Products is reflected in the 30-40% decline in their employee benefits expenses. India corporate filings show gallows sensibilities—margins down to low single digits, operational revenues growth are anaemic at best.
“Each Big Pharma company is looking for its own equilibrium and is, therefore, realigning its priorities.