Karnataka which has been a hub for global pharma production directly and through contract manufacturing route is now upbeat on the Union government consenting 74 per cent Foreign Direct Investment (FDI) under the automatic route in Brownfield projects and 100 per cent on Greenfield projects.

The state is home to several strategic global partnerships through 100 percent takeovers and equity stakes, besides direct investments. These include Kemwell acquisition by Sweden’s Recipharm AB for SEK 1.7 billion in April 2016. In 2014-2015, Medreich-Meiji took over which is the first 100 per cent acquisition of a pharma enterprise by a Japanese company in India. In November 2014, Jagdale Industries sold ORS-L brand to Johnson & Johnson Pte. Ltd., Singapore. Apotex is the Indian R&D wing of Apotex Inc, since 2004.

The government move, stated Sunil Attavar, president, Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA), will motivate MNCs to increase their investments in India, make further acquisitions and investments.
 
“We could see good inflows of FDIs in the near future. On one hand this is positive as international companies will bring in best practices and technologies and we hope to see much needed investments in R&D. On the other, this is a call to all Indian companies especially SMEs on the tough competition in the coming days and they need to prepare, upgrade, consolidate and be ready,” the KDPMA president added.

Harish K Jain, secretary, KDPMA and director, Embiotic Laboratories, said, “FDI move will definitely usher in big ticket acquisitions by foreign entities where promising SMEs will also be considered. US FDA controversies mellowed down with the positive steps taken by Indian pharma companies. This led global companies to be convinced about Indian pharma’s prowess in contract manufacturing and we are witnessing many global players to shift production operations to India”.

According to Kiran Mazumdar-Shaw, CMD, Biocon Limited, “The government's allowing automatic infusion of foreign equity of up to 74 per cent in Brownfield projects will, to a large extent, remove the uncertainty that has been deterring serious investments from coming in. Given the highly capital intensive nature of the pharma industry, substantial investment is needed to augment our global scale in R&D and manufacturing as well as to expand our commercial footprint worldwide.

“An investor-friendly regime will spur higher capital inflows into India's well-recognized pharma and bio-pharma sector that enjoys a strong global reputation in generic drugs and research services. Strategic foreign investments will give a boost to the government's mission of ‘Make in India, Innovate in India and market globally,’ providing a fillip to jobs in life sciences,” stated the Biocon chief.

Kanchana TK, director general, OPPI said, “Government’s decision to make changes to the FDI policy will provide an impetus to employment and job creation. The decision to permit upto 74 per cent FDI under automatic route in Brownfield pharmaceuticals and continuing with government approval route beyond 74 per cent will augur well with our members who are constantly exploring ways of ensuring new drugs and medicines are made available to Indian patients”.
 
Providing a perspective on the impact of FDI for the pharma sector, Rajat Mukherjee, Partner, Khaitan & Co stated, “A sticky issue for M&A deals has been the non-compete issue as non-compete proposals were not permitted without approval. The press release is silent, but one would hope that every aspect of the deal, including non-compete clauses, should be under the automatic route as long as the investment is 74 per cent or below.”