Abbott Laboratories and GlaxoSmithKline could be sizing up Indian firm Wockhardt's nutritionals business, with products including Protinex health supplements and Farex, Dexolac and Nusobee pediatric nutrition brands, as a cog for emerging market growth.

Abbott, Glaxo and food product giant Heinz are among the firms bidding to acquire one of the most profitable divisions of the cash-strapped Indian drug maker.

However, all three multinational firms and Wockhardt declined to comment, citing their policies not to comment on "rumors or market speculation."

Consumer goods giant Group Danone also reportedly might join the fray.

Second Chance For Abbott?

Wockhardt is looking at a valuation in the range of $350 million to $400 million, a steep climb from when it agreed to sell the same division to Abbott in July 2009 for $130 million before backing out of the deal, according to an investment banker who claims knowledge of the negotiations.

Abbott's acquisition fell through when a consortium of Wockhardt's lenders, including hedge funds and financial institutions, objected to the details of the deal (Also see "Abbott, Wockhardt Terminate Nutritional Business Deal" - Pink Sheet, 5 April, 2010.).

At that time, Abbott spokesman Scott Stoffel said both firms jointly called off the deal because Wockhardt "was unable to resolve debt restructuring issues with some of its lenders." The firm stated it would continue looking for acquisitions in India.

Having funded Wockhardt heavily for its ambitious global expansions – mainly via subscriptions to foreign currency convertible bonds – the key lenders took Wockhardt to the Bombay High Court demanding at least partial payment for its outstanding debt, which had mounted to more than $600 million.

In a recent conversation with Elsevier Business Intelligence's PharmAsia News, Stoffel called India an important growth market for Abbott's nutrition business.

"Abbott will continue to explore strategies to advance the business there. We are continuing to make investments in all aspects of our operations in India and plan to introduce many of our global nutrition products to Indian consumers," Stoffel said.

Abbott made its commitment to the Indian market clear when it bought Piramal Healthcare's prescriptions business for $3.72 billion – the most expensive valuation for any merger or acquisition in the Indian pharmaceutical industry (Also see "Nepentes Buy Continues Sanofi Consumer Product Acquisition March" - Pink Sheet, 24 May, 2010.).

International sales drove the Abbott Park, Ill., health care firm's 5% global growth in its most recent earnings period, when U.S. revenues dropped 1.8% year-on-year as the September recall of Similac infant formula continued to affect the firm (Also see "Sales & Earnings In Brief" - Pink Sheet, 31 January, 2011., In Brief).

Steeper Value But Interest Stays High

Given the company's heightened enthusiasm about emerging markets such as India, Abbott still could be ahead in the race for Wockhardt's nutrition business – largely because the lenders seem to have agreed to proactively facilitate a transaction, according to a market analyst tracking the Indian company.

"There is a broad agreement in place that now allows Wockhardt to complete the deal, of which a part will be allocated to refund the debts to the lenders," said the analyst, requesting anonymity.

A similar interest is understandable from GSK Consumer Healthcare, which operates separately from parent company GSK Pharmaceuticals in India. GSK aggressively expanded its Horlicks franchise and now also includes products such as its nutritional noodles branded Foodles.

In Glaxo's most recent earnings call, CEO Andrew Witty said India and China are the emerging consumer health markets on which the firm will focus. GSK's fiscal 2010 fourth-quarter consumer health care sales grew 19% in India and 18% in China (Also see "GSK Divests Non-Core OTCs To Focus On "Priority Brands," Emerging Markets" - Pink Sheet, 7 February, 2011.).

U.S.-based Heinz also could look to expand into other areas as its flagship supplement product Complan is faced with increased competition from products such as Bournvita, according to a marketing consultant. Heinz entered India through the acquisition of GSK's food division there, including Complan, the Glucon franchise and other brands.

Once And Future Owners?

Wockhardt's leading brands have been linked to top multinational companies in the past. Dutch firm Dumex acquired Protinex from Pfizer and Farex from Heinz, which had bought it from GSK Consumer. Wockhardt purchased both brands in 2006.

"Ironically, all the companies are back to buy the same brands that they had once owned – under pressure to show better growth," said the senior marketing consultant.

[Editor's note: Additional coverage of Asian markets is provided at PharmAsia News, Elsevier Business Intelligence's Web site for Asian biotech and pharmaceutical news. Sign up now for risk-free, 30-day trial.]

By Vikas Dandekar

Abbott, Glaxo Bidding In India For Wockhardt's Nutrition Brands

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