India’s top pharmaceutical majors in talks to buy Pharmarack

A consortium of India’s top pharmaceutical majors, including
Lupin, Sun Pharma, Cadila Healthcare, and Torrent Pharma, is in advanced discussions to acquire the business-to-business healthcare platform Pharmarack, according to several people familiar with the progress directed at creating a digital-first pharma distribution business.

Regulatory filings by the four companies last week show that each has invested Rs 40 crore for 20% in the newly formed venture ABCD Technologies, with the stated purpose of aiding efficient goods distribution and digitizing healthcare.

This new entity, expected to be renamed IndoHealth Services, will acquire Pune-based Pharmarack, sources aware of the development told ET. The digital platform, having onboarded 3,000-4,000 distributors and 100,000 retailers, will offer the technological backbone to companies planning to build their own online B2B marketplace and, eventually, an online pharmacy, according to people in the know.

“They (Lupin, Sun, Torrent, and Cadila) are acquiring (a) B2B marketplace for pharmaceuticals, Pharmarack. The primary reason they are doing this is that it’s getting competitive with Tata, Reliance, and everyone else entering the sector,” said one person mentioned above.

Another person directly involved in the deal verified that ABCD Technologies was in the process of buying out 100% equity in Pharmarack and that the deal would be closed soon. The exact size of the deal could not be ascertained.

The consortium has appointed KPMG to draft a strategy for establishing an online pharmacy to compete in the online pharmacy segment. There has been consolidation, with Reliance Industries acquiring a majority stake in Chennai-based Netmeds, Tata group in the final stages of acquiring a majority stake in 1mg, Amazon venturing into the segment with its largest seller Cloudtail, and Apollo Pharmacy rolling out its own online platform.

These players are expected to expand their private label portfolios in the coming years, increasing competition for traditional pharma companies.

“Reliance, through Netmeds, has already started working on its own private label brands. Apollo Pharmacy already has a strong private brand portfolio and other large retailers are also expected to do the same, as it’s a highly lucrative business,” said multiple sources.

While Sun, Cadila, Lupin, and Torrent are the only four companies to have revealed their investment in ABCD Technologies so far, more pharmaceutical companies are expected to buy-in. People in direct knowledge of the deal said Alkem Laboratories was another possible investor, but this could not be confirmed.

Lupin, in its admission to the bourses on March 25, said, “There are other leading pharmaceutical companies who would be joining the LLP. The proposed structure would ensure transparent and effective competition to the benefit of patients in India.”

An executive of a competing firm who was aware of the developments said the consortium intends to combine India’s pharma distribution, which is necessary. He added that the players would have to maintain the neutrality of the platform to get other pharmaceutical majors to work with Pharmarack.

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