Abbott buys unit of Piramal Healthcare for $3.7B

MUMBAI, India – Abbott Laboratories has agreed to buy the domestic healthcare business of India's Piramal Healthcare Ltd., a leading branded generics company, for $3.72 billion, the companies said Friday.

The deal is part of Abbott's drive to establish itself as a leading emerging market pharmaceutical player and reflects the growing global importance of generics as well as the rise of India's consumer market for drugs.

Illinois-based Abbott will pay $2.12 billion up front, plus $400 million annually for four years.

The deal will vault Abbott past market leaders Cipla and Ranbaxy to number one in India's fast growing market, with a 7 percent market share.

"They achieve leadership across all the product categories. Take the two companies together, they're number one now," said Sujay Shetty, who leads PricewaterhouseCoopers' pharma practice in India.

Abbott expects pharma sales in India, which are on track to hit $8 billion this year, to more than double by 2015.

Piramal has India's largest sales force, with a strong network across fast-growing rural areas. Together, the companies will have over 7,500 employees in India.

Abbott said it expects its Indian pharma business with Piramal, which will be incorporated into a new Abbott division created to boost sales outside the U.S., to grow by 20 percent a year, with sales topping $2.5 billion by 2020.

Abbott said it plans to fund the Piramal acquisition with cash from its balance sheet and does not expect it to impact earnings guidance.

"Emerging markets represent one of the greatest opportunities in health care," Abbott chief executive Miles White said in a statement.

Emerging markets now account for over 20 percent of Abbott's business.

Last week, Abbott said it would license at least 24 products from India's Zydus Cadila to sell in emerging markets.

In February, Abbott closed its $6.2 billion acquisition of Belgium's Solvay Pharmaceuticals, which brings it about $850 million a year in emerging markets sales across Eastern Europe, Latin America, the Middle East and Asia.

Abbott is not alone in pushing into places multinational pharmaceutical companies once feared to tread.

"Almost all big pharma companies have decided emerging markets will constitute 30 to 40 percent of growth in the coming decade," Shetty said.

Japan's Daiichi Sankyo paid $4 billion for a majority stake in India's Ranbaxy Laboratories in 2008 and GlaxoSmithKline has acquired exclusive rights to the pipeline of India's Dr. Reddy's Laboratories, which has over 100 generics for sale in emerging markets.

The cross-border friendship between such traditional foes — big pharma and generics makers — has bloomed as cost-conscious markets like India grow and a new appreciation for affordable drugs sweeps cash-strapped Western capitals, analysts say.

Big pharma's main markets — North America, Europe and Japan — are under serious pressure from slowing growth, a raft of patent expirations, and pending policy changes that would promote the use of more affordable generics.

The deal with Abbott, which is still subject to shareholder approval, leaves Piramal Healthcare to reimagine its future.

Piramal is hiving off the most valuable part of its healthcare business, comprising rights to about 350 brands and trademarks, about 5,000 staff, and a factory in the northern state of Himachal Pradesh. It has also agreed to an 8-year noncompete period for branded generics.

What's left for Piramal Healthcare is an assortment of things like custom manufacturing, over-the-counter consumer products, vitamins, diagnostic devices and services and an affiliated drug discovery company called Piramal Life Sciences Ltd.

Ajay Piramal, head of the Piramal group, sought to reassure shareholders as his stock tanked in Mumbai trading Friday.

Piramal Healthcare closed down 11.8 percent in an otherwise flat market.

He said the company planned to use Abbott's money, after paying 22 percent capital gains tax, to invest in existing and new businesses and would consider a special shareholder dividend. He emphasized that Piramal would continue to push novel drug discovery.

"We can play in the domestic market by launching patented products," he told reporters. "Today there is not a single company that has launched a novel discovery product."

British Airways reports record annual loss of £531m

LONDON (AFP) – British Airways on Friday posted a record annual pre-tax loss of 531 million pounds (609 million euros, 765 million dollars) on slumping sales but forecast it would break even this year.

BA, which faces a cabin crew strike next week, said its net loss widened to 425 million pounds in the 12 months to March from 358 million pounds in the previous year. Revenues tumbled 11.1 percent to 7.99 billion pounds.

"This is our second consecutive year of record losses but we take heart from the fact that, while our revenue has fallen by one billion pounds, so have our costs," Chairman Martin Broughton said in a statement.

Market expectations had been for a larger pre-tax loss of 600 million pounds after the group had a smaller shortfall of 401 million pounds in the previous 2008/2009 financial year.

The airline, which is slashing costs and merging with Spanish rival Iberia in a bid to return to profitability, has been hammered by the global economic downturn which has hurt demand for air travel.

Other airlines have also suffered badly, with peer Air France-KLM earlier this week announced record losses of 1.55 billion euros in its year to March.

BA said Friday that it cut almost 3,800 jobs, or about 9.4 percent of its total workforce, during the 2009/2010 financial year. Since September 2008, it has axed more than 6,000 positions in total.

British Airways said it was aiming to break even in the current 2010/2011 financial year.

"Market conditions are showing improvement from the depressed levels in 2009/10," the company said.

"Cargo is showing significant signs of improvement. Passenger revenue is recovering, with increased corporate activity, particularly across the Atlantic.

"On the basis of these market improvements, we are targeting revenue growth of some six percent and breakeven at the profit before tax level."

BA cabin crew plan to go ahead with a five-day strike next week after a court upheld their right to stage the action on Thursday, according to officials at the Unite trade union.

The strike is set to begin Monday. Two further five-day strikes, starting on May 30 and June 5, will also go ahead if the dispute is not settled.

Unite won an appeal on Thursday against a court injunction which had blocked a planned stoppage in the long-running row over pay and conditions.

Group chief executive Willie Walsh lashed out at Unite.

"Returning the business to profitability requires permanent change across the company and it's disappointing that our cabin crew union fails to recognise that," he said in the results statement.

"Structural change has been achieved in many parts of the business and our engineers and pilots have voted for permanent change."

But joint Unite leader Derek Simpson fought back, telling BBC radio on Friday that there was a "total lack of confidence" in BA management.

Cabin crew staged walkouts in March which were marked by sharp disagreements between the union and BA over the impact of the industrial action.

Walsh added Friday that the Iberia merger was on track to complete in late 2010 and would lead to annual cost savings of 400 million euros after five years.

The combined company will be known as International Airlines Group, with both BA and Iberia retaining their separate operations and brands.

The results did not show the impact of the volcano ash chaos which occurred after the end of BA's financial year.

BA said earlier this month that passenger numbers fell by almost one quarter in April as a result of travel chaos sparked by a huge ash cloud from an Icelandic volcano.

"The current financial year could hardly have had a worse start with the unprecedented closures of UK airspace following the eruption of the volcano in Iceland," Walsh said.

"This added to the aviation industry's current financial woes while highlighting its crucial contribution to the economy.

"We are pleased that the European Commission has agreed that national governments can compensate airlines for the losses incurred."

Airspace across Europe was closed for up to a week last month after Iceland's Eyjafjoell volcano began spewing a cloud of ash on April 14. The shutdown was the biggest in Europe since World War II.

Rand Paul: Obama's criticism of BP 'un-American'

WASHINGTON – Kentucky's Republican Senate candidate Rand Paul criticized President Barack Obama's handling of the Gulf oil spill Friday as putting "his boot heel on the throat of BP" and "really un-American."

Paul's defense of the oil company came during an interview in which he tried to explain his controversial take on civil rights law, an issue that has overtaken his campaign since his victory in Tuesday's GOP primary.

"What I don't like from the president's administration is this sort of, 'I'll put my boot heel on the throat of BP,'" Rand said in an interview with ABC's "Good Morning America." "I think that sounds really un-American in his criticism of business."

Paul appeared two days after a landslide primary victory over the Republican establishment's candidate, Trey Grayson. He had spent most of the time since his win laboring to explain remarks suggesting businesses be allowed to deny service to blacks without fear of federal interference. On Friday said he wouldn't seek to repeal civil rights legislation.

On the oil spill, Paul, a libertarian and tea party darling, said he had heard nothing from BP indicating it wouldn't pay for the spill that threatens devastating environmental damage along the coast of the Gulf of Mexico.

"And I think it's part of this sort of blame-game society in the sense that it's always got to be somebody's fault instead of the fact that maybe sometimes accidents happen," Paul said.

The senate candidate referred to a Kentucky coal mine accident that killed two men, saying he had met with the families and he admired the coal miners' courage.

"We had a mining accident that was very tragic. ... Then we come in and it's always someone's fault. Maybe sometimes accidents happen," he said.

The political novice came under blistering scrutiny little more than 24 hours a landslide Republican primary victory. He defeated a rival recruited by Senate GOP leader Mitch McConnell, and invited Obama, who never enjoyed popularity in the state, to campaign for Kentucky's Democratic candidates as a strategy toward a Republican win in November.

Paul, 47 and an eye surgeon, is making his first run for public office, and his emergence as a favorite of tea party activists has been one of the most striking developments of the early months of the midterm election campaign. In an appearance on primary night, he credited their support with powering him to his victory, and the first opinion poll since then shows him with a commanding lead over his Democratic rival, Jack Conway.