Mylan's Acquisition of Matrix
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Case Code: BSTR279 Case Length: 20 Pages Period: 2005-2007 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.400 Organization: Mylan, Inc., Matrix Laboratories Ltd. Industry: Pharma and Biotech Countries: USA; India; Global Themes: Mergers, Acquisitions, Strategic Alliances, Growth Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"This is an extremely complementary transaction that accomplishes a number of Mylan's key objectives. Mylan is executing on its commitment to establish a global platform and expand its dosage forms and therapeutic categories. Additionally, this acquisition deepens Mylan's vertical integration and enhances its supply chain capabilities. The transaction will allow Mylan and Matrix to strengthen and expand their core businesses and competencies, while creating significant opportunities for global expansion and growth."
- Robert J Coury, Vice Chairman and CEO, Mylan Inc. in 2006.
"A player has to decide how he can stay in the field for as long as possible. Matrix, as a significant API supplier, needed a bigger playing field. Partnering with Mylan gives us that."
- Nimagadda Prasad, Executive Chairman, Matrix Laboratories Ltd. in 2006.
"Clearly, we're seeing a trend in the industry toward acquisitions and consolidation... This is a continuing trend to move more sourcing and manufacturing overseas and to own it as opposed to just contracting it."
- Martha Freitag, an industry analyst at Argus Research Corp., in 2006.
Benefits Beyond Global Expansion
Mylan Inc. (Mylan), one of the largest US generic drug makers, acquired a 71.5 percent stake in Matrix Laboratories Ltd. (Matrix), India, a leading API supplier, globally in January 2007 for a cash and stock deal of US$736 million. The Mylan-Matrix deal was the largest acquisition in the Indian pharmaceutical industry and was viewed by analysts as a step toward backward integration for Mylan.
On completion of the deal, Robert J Coury (Coury), Vice Chairman and CEO of Mylan, said, "Today's announcement marks the successful closing of the transformational Matrix transaction, and it also marks the beginning of a new era at Mylan where our organization is continuing to expand beyond our well-established position as a leading domestic generic pharmaceutical company toward our objective of establishing Mylan as a world leader in generics and specialty pharmaceuticals.".
According to analysts, the deal was a winning proposition for both the parties to the transaction. Where Mylan was concerned, Matrix's takeover helped it to enter the global generic markets beyond the US market. In particular, this acquisition helped Mylan to enter the emerging pharmaceutical markets of India, China, and South Africa, given Matrix's presence in these regions. Second, the deal would also aid Mylan enter the high-margin European markets through Matrix's subsidiary Docpharma NV (Docpharma), which was already operating in the European markets.
In addition to this, Matrix would also act as a low-cost product sourcing platform for Mylan given Matrix's strong pipeline of APIs. Jim Miller, president of PharmSource Information Services, Inc.10, noted, "What is most striking about the deal is that although Mylan is the buyer, Matrix is clearly the more sophisticated global player. Matrix has built a sophisticated supply chain that sources early-stage intermediates in China, converts them to APIs in FDA-approved plants in India, formulates the APIs into finished dosage forms, and sells them in Asian and European markets. Mylan, by contrast, manufactures only drug products and operates largely in the United States. Matrix's global capabilities are likely to have much greater value to Mylan in the generics and branded generics markets than they are in contract manufacturing."....
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