Fosun Pharma Cashes in $211 Million from Gland Pharma Stake Sale, Retains Control

On June 20, 2024, Fosun Pharmaceutical announced that its controlled subsidiary, Fosun Pharma Singapore, sold 9.9 million shares of Gland Pharma (representing approximately 6.01% of the total outstanding shares of Gland Pharma as of June 19, 2024) through block trades at an average price of INR 1,771.81 per share (pre-tax). The total consideration for the transaction amounted to INR 17.541 billion (pre-tax), equivalent to approximately USD 211 million (pre-tax, or about RMB 1.4 billion). The transaction price per share represented a discount of approximately 3.69% compared to the closing price of Gland Pharma shares on June 18, 2024.

Upon completion of this transaction, Fosun Pharmaceutical Group will hold approximately 51.83% equity interest in Gland Pharma (compared to approximately 57.84% prior to the transaction), maintaining its controlling stake in Gland Pharma, which will remain a subsidiary consolidated within Fosun Pharmaceutical Group’s financial statements. Based on current market capitalization, the market value of Fosun Pharmaceutical’s shareholding in Gland Pharma following the sale will amount to USD 1.819 billion.

In October 2017, Fosun Pharmaceutical acquired the Indian pharmaceutical company Gland Pharma for $1.091 billion (equivalent to RMB 7.258 billion). This figure ranked second among pharmaceutical acquisitions in 2017, trailing only the $1.4 billion acquisition of German plasma product manufacturer Biotest by Kerry Group, the actual controlling shareholder of Shanghai RAAS, which took place in April of the same year.

Pursuant to the terms of the transaction documents and their amendments, the acquisition of a controlling interest in Gland Pharma was completed on October 3, 2017. Following the closing, Gland Pharma became a non-wholly owned subsidiary indirectly held by Fosun Pharmaceutical and Fosun International. Fosun Pharmaceutical and Fosun International (through Fosun Pharmaceutical) indirectly hold approximately 74% of the equity interests in Gland Pharma, and the financial results of Gland Pharma will be consolidated into the financial statements of Fosun Pharmaceutical and Fosun International.

Gland Pharma, founded in 1978 and headquartered in Hyderabad, India, is a generic injectable pharmaceutical company with capabilities in the research, development, and manufacturing of both innovative drugs and formulated products. Currently, it primarily provides manufacturing services for generic injectables to major pharmaceutical companies worldwide. Gland Pharma was the first Indian injectable drug manufacturer to receive approval from the U.S. FDA, and it possesses the capability for regulatory filing and commercialization in regulated markets, with its products mainly exported to the United States and Europe.

This is the profile of Gland Pharma as published on the official website and in announcements of Fosun Pharmaceutical. This Indian pharmaceutical giant is rarely mentioned on Chinese-language platforms, with its few appearances largely tied to its close association with Fosun Pharmaceutical. Nevertheless, its rise to prominence and its transformation—from a small heparin manufacturer into a complex injectables producer after becoming part of a Chinese-owned enterprise—are both noteworthy.

PVN Raju, the founder of Gland Pharma, is a legendary figure in his own right. He graduated with a degree in Chemistry from Presidency College, Madras, and earned a postgraduate degree from the Indian Institute of Chemists. He received training at Evans Medical, a British company, and Pharmacia, a Swedish biopharmaceutical enterprise. After returning to India, PVN Raju established Gland Chemicals in 1974, followed by Gland Pharma in 1978.

This visionary technologist pioneered the development of heparin technology in India in 1960 and established India’s first state-of-the-art facility for low-molecular-weight heparin (LMWH) pre-filled syringes (PFS) in 1998. Under his leadership, the facility received FDA approval in 2003, marking another milestone for India. Mr. PVN Raju has served with organizations and associations including the Indian Pharmaceutical Association (IPA), the Parenteral Drug Association (PDA), and the International Society for Pharmaceutical Engineering (ISPE), where he is a Life Member. His accolades include the Professor Y. Nayudamma Memorial Gold Medal and a Special Recognition Award from the South Asian Society on Atherosclerosis and Thrombosis (SASAT).

Ravi Penmetsa, another founder of Gland Pharma, is the son of PVN Raju. After obtaining his Bachelor of Medicine degree from Osmania University in India, Dr. Ravi pursued advanced medical studies at the Brody School of Medicine at East Carolina University in the United States. Following seven years of clinical practice, he joined Gland Pharma in 1992 as an Executive Director. In 1999, Dr. Ravi assumed the role of Managing Director, steering the company through two decades of rapid, multi-dimensional growth. He played a pivotal role in establishing comprehensive R&D infrastructure (covering analytics and formulations) and developing contract development and manufacturing organization (CDMO) capabilities for various injectable dosage forms. These efforts enabled Gland Pharma to undertake collaborative projects worldwide and meet diverse regulatory requirements across multiple countries.

Srinivas Sadu, the current Managing Director and Chief Executive Officer, officially assumed his role in 2019. He joined Gland Pharma in 2000 and was promoted to Chief Operating Officer in 2011. Mr. Sadu holds a Master’s degree in Industrial Pharmacy from Long Island University (New York), an MBA from the University of Maryland, Baltimore County, and a Master’s degree in Finance and Management from London Business School. He brings over 23 years of experience in business development, manufacturing operations, supply chain management, and strategic planning. Under his leadership, Gland Pharma has achieved continuous growth in revenue and profits, while simultaneously expanding its business operations.

Currently, Gland Pharma has vertically integrated its operations across three key areas: API facilities, formulation facilities, and research and development (R&D), while establishing a rigorous quality control system, extensive experience in regulatory processes, and a mature marketing and distribution infrastructure.

Gland Pharma operates four state-of-the-art, cGMP-compliant formulation manufacturing facilities in India, ensuring the production of various injectables under either aseptic filling or terminal sterilization conditions. Meanwhile, its two advanced R&D centers in Hyderabad, India, specialize in formulation development, analytical method development, API process development, and stability studies.

It is worth noting that, in its effort to expand into the global market as much as possible, Gland Pharma’s formulation manufacturing facilities have sequentially obtained certifications from regulatory authorities including the U.S. FDA, the UK MHRA, Germany’s BGV, Brazil’s National Health Surveillance Agency (ANVISA), the Australian Therapeutic Goods Administration (TGA), South Africa’s Medicines Control Council (MCC), the World Health Organization (WHO), and Health Canada.

Leveraging its long-accumulated resources, Gland Pharma has established a profitability model centered on out-licensing, technology transfer, and collaborative marketing within India. Furthermore, as its products demonstrate therapeutic equivalence to originator drugs and are manufactured using aseptic processes compliant with US cGMP standards—without any major cGMP violations—Gland Pharma has earned a strong reputation in the global market.

On September 18, 2017, Fosun Pharmaceutical announced that it planned to invest no more than USD 1.091 billion to acquire approximately 74% of the equity interest in the Indian pharmaceutical company Gland Pharma, including contingent consideration of up to USD 25 million payable by the acquirer based on the U.S. market sales of enoxaparin. This equity acquisition ratio represents a decrease of approximately 12 percentage points compared to the plan announced one year earlier: In July 2016, Fosun Pharmaceutical announced its intention to acquire 79.997% of the equity interests held by existing shareholders of Gland Pharma and subscribe for 6.083% of the convertible preferred shares issued by the target company. Upon completion of the transaction, Fosun would have held 86.08% of the equity interest in the target company. The deal was originally scheduled to close on January 27, 2017, but was delayed by six months due to review by the Cabinet Committee on Economic Affairs of India and remained incomplete.

At that time, according to a report by Yicai, Fosun Pharmaceutical and Gland Pharma were set to directly complete the closing on October 3 of the same year, after reducing their shareholding ratio in compliance with the Indian Cabinet Committee on Economic Affairs (CCEA) regulation that “foreign direct ownership in Indian companies shall not exceed 74%.”

Gland Pharma’s financial report shows that for the fiscal year ended March 31, 2016, the company’s total revenue was approximately RMB 1.358 billion, with a net profit of RMB 314 million, positioning it as a leader among its peers in India. In fiscal year 2017, Gland Pharma achieved revenue of INR 14.916 billion (approximately RMB 1.5 billion), a year-on-year increase of 9.9%, and a net profit of INR 4.137 billion (approximately RMB 400 million), a year-on-year increase of 31.9%. Meanwhile, the company has more than 20 products marketed in the United States, primarily in injectable dosage forms, covering major therapeutic areas with large market sizes such as cardiovascular and cerebrovascular diseases, oncology, anti-infectives/antibiotics, psychotropic and anesthetic agents, and pediatrics.

Fosun Pharmaceutical’s acquisition is primarily driven by its strategic considerations for global market expansion. By acquiring Gland Pharma, Fosun Pharmaceutical can leverage its production facilities and regulatory registration platform to enhance its international brand presence, thereby facilitating its entry into overseas markets, including the United States, while also advancing the upgrading of its pharmaceutical manufacturing operations.

Furthermore, Gland Pharma’s business scope covers cardiovascular and cerebrovascular diseases, anesthesia, anti-infectives, and diabetes. Its core products span multiple therapeutic areas, including heparin sodium, enoxaparin sodium injection, rocuronium bromide injection, vancomycin, and recombinant human insulin. By integrating these resources with Fosun Pharmaceutical’s existing innovative drug portfolio, the company can further advance the localization of its pharmaceuticals in India and expand its market presence, thereby scaling up Fosun Pharmaceutical’s operations.

Gland Pharma, now officially a Chinese-owned enterprise, has continued to maintain rapid growth.

In 2020, Gland Pharma officially announced its initial public offering (IPO), which was regarded as the largest IPO by an Indian pharmaceutical company. Fosun Pharmaceutical, the largest shareholder of Gland Pharma, along with other shareholders, offered 43.2 million shares, raising up to 64.5 billion Indian rupees. Meanwhile, Gland Pharma stated that it would invest 12.5 billion Indian rupees to establish a new active pharmaceutical ingredient (API) manufacturing facility in Visakhapatnam, the most populous and largest city by area in Andhra Pradesh, India, and expand its existing plant near Hyderabad.

Gland Pharma continues to adhere to its B2B CDMO model and remains committed to the quality of generic drugs.

Furthermore, Gland Pharma’s business model is increasingly becoming hybrid. To date, on one hand, the company owns intellectual property rights, enabling it to capture a share of profits akin to an innovator company; on the other hand, it supplies products to multiple partners like a CDMO, thereby achieving economies of scale that are directly reflected in its revenue.

Between 2019 and 2020, approximately two-thirds of Gland Pharma’s revenue came from the United States, the world’s largest pharmaceutical market, while about 18% originated from India. In fiscal year 2020, the company reported revenue of INR 27.724 billion and profit of INR 7.728 billion, with all income derived from the production of injectable medications. Over this three-year period, Gland Pharma achieved an average revenue growth rate of 27.4% and a profit margin of 36.9%.

However, it is not without hidden risks.

On one hand, competition in the injectable drug market is becoming increasingly fierce, accompanied by overcapacity. With the continuous emergence of novel drugs and innovations in treatment modalities, the variety and application areas of injectable solutions are expected to further expand, meeting growing clinical demands; however, short-term growth remains sluggish and time-consuming.

On the other hand, in 2020, when Gland Pharma went public, the company acknowledged in its prospectus that escalating tensions in China-India relations had become a risk factor. The company stated that political tensions between India and China could lead to higher tariffs on Indian imports of Chinese products, export restrictions imposed by India on China, and boycotts by Indian citizens against various foreign enterprises, including those with Chinese investment. Avinash Gorakshakar, Head of Research at the Indian securities firm PROFITMART, pointed out: “The issue is that the primary driver of Gland Pharma’s growth will be the Chinese market. Given the strained trade relations between the two countries, Gland Pharma’s performance in the stock market may face intense scrutiny.”

Despite optimistic forecasts suggesting that Gland Pharma’s generic drugs would benefit from a surge in demand in the Chinese market, its shares listed on the Mumbai Stock Exchange fell by approximately 54% in 2022, bringing its market capitalization to around $3.5 billion. It was also in that year that Fosun Pharmaceutical began evaluating the potential sale of its stake in Gland Pharma, a process that was formally executed in late June 2024.

Regarding Fosun Pharmaceutical’s divestment announcement, Fosun Pharmaceutical holds a 51.83% equity stake in Gland Pharma (down from 57.84% prior to this transaction) and retains controlling interest, with Gland Pharma remaining a consolidated subsidiary within Fosun Pharmaceutical’s financial statements. The proceeds from this transaction will be primarily used to supplement Fosun Pharmaceutical’s working capital and repay interest-bearing debts.

However, this does not mean that Fosun Pharmaceutical will halt its global market expansion. When Fosun Pharmaceutical acquired Gland Pharma in 2017, Chen Qiyu, Co-President of Fosun Group and Chairman of Fosun Pharmaceutical, stated, “The core of Fosun Pharmaceutical’s internationalization strategy is to ultimately enter markets such as Europe, the United States, and Japan. This acquisition is crucial for our future entry into the Indian market and, subsequently, the global market.” In the second half of 2024, the industry may still witness significant moves by Fosun Pharmaceutical in this regard.

References:

How the Chinese-owned Gland Pharma transformed from a small-time Heparin maker to complex injectable manufacturing