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
Excerpts
The Deal
In mid-2006, there were speculations that Mylan was in the process of acquiring a majority stake in Matrix. Though the management at Matrix denied the reports, there was a 10 percent rise in the company's share prices in anticipation of the deal. These reports followed reports earlier in the year that the world's largest generic drugs company Teva was interested in acquiring Matrix...
Rationale Behind the Acquisition
Benefits for Mylan
Mylan acquired the majority stake in Matrix primarily to establish a global distribution network for its generic drug portfolio. This acquisition acted as an entry window for Mylan to tap the huge potential of emerging pharmaceutical markets such as India, China, and Africa, where Matrix already had a significant presence through its various strategic alliances...
Benefits for Matrix
The Mylan Matrix merger was expected to benefit Matrix as well. Experts felt that the merger would help in accelerating Matrix's expansion plans in India and abroad. As a part of Mylan, Matrix would benefit from Mylan's predominant presence in the US and their combined expanded production capabilities and manufacturing capacity, which would result in economies of scale...
The Other View
Though overall, the deal was expected to be a win-win proposition for both the parties, analysts were cautious about the long-term sustainability of Matrix's existing supply chain arrangements with other US generic players who would now become its direct competitors. Further, as Matrix had already been the second largest API supplier to Mylan since 2003, transfer pricing of drugs between Mylan and Matrix was also expected to be an issue of concern which would affect the potential top-line synergies expected from this deal in the near term...
Post Deal Developments
After the deal was completed, Coury and Prasad were appointed as the Non-executive Chairman and Non-executive Vice Chairman of the board of Matrix respectively. Mylan also established its Asian headquarters in Singapore for Prasad and his team. It was decided that Rajiv Malik (Malik) would continue to head Matrix, while Stijn Van Rompay, the co-founder of Docpharma, would continue to manage Docpharma...
Outlook
The acquisition of Matrix helped Mylan to expand beyond the US market and establish a global presence with 5100 employees in 10 countries. This deal was a landmark one, suggesting that Indian generic drug makers with FDA approved plants, a strong product pipeline, and a low-cost and robust manufacturing base were attractive takeover targets for global generic makers. Some analysts also expected Mylan's acquisition of Matrix to trigger more such M&A deals in the Indian pharmaceutical industry...
Exhibits
Exhibit I: Mylan: A Timeline
Exhibit II: A Note on the Global Generic Drug Industry
Exhibit III: Selected Financial Data of Mylan Inc.
Exhibit IV: Value Added by the Respective Companies to the Merged Entity (Matrix)
Exhibit V: Matrix: A Timeline
Exhibit VI: Contribution of Matrix's Business Segments
Exhibit VII: Matrix Laboratories Ltd. Financial for Fiscal 2006- 07
Exhibit VIII: A Note on the Indian Pharmaceutical Industry
Exhibit IX: Shareholding Pattern of Matrix
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