United Health Care

MUMBAI | BANGALORE: Fortis Healthcare has emerged as the front-runner to acquire a substantial stake in the unlisted Wockhardt Hospitals, people familiar with the development said.

Fortis' promoters have reached a broad agreement with Wockhardt's founder Habil Khorakiwala on a possible deal to acquire up to 74% in the hospital chain for close to Rs 750 crore, valuing the business at over Rs 1,000 crore, the people said. Wockhardt Hospitals is a 100% subsidiary of pharmaceutical company Wockhardt.

Private equity firms General Atlantic and Advent were also in the race, but Fortis is close to clinching the deal, they added.

Investment bankers said if the deal materialises, Fortis, which is run by Shivinder Singh — the younger brother of Ranbaxy's MD and CEO Malvinder Singh — is likely to invest Rs 400 crore in the first phase for a 40% equity holding, and plans to subsequently increase its stake. But a formal deal is yet to be sealed, with both parties in the process of ironing out differences, including those over branding the hospital chain.

When contacted, a Wockhardt spokesperson refused comment. A Fortis Healthcare spokesperson said: "We are in the market. We cannot comment on market speculation or any individual deals."

Bankers told ET that Fortis' promoters and Mr Khorakiwala had reached an agreement almost 10 days ago. One banker said Fortis is valuing the hospital chain at over Rs 1,000 crore, which is substantially lower than the proposed IPO valuation, arrived at almost 15 months ago. In February 2008, Wockhardt had sought to divest 24% for Rs 800 crore. The issue had to be withdrawn because of lack of demand.

Since the time Fortis entered the fray, investment banking circles have been wary of 'control' issues. The group has, in the past, walked out of deals with other hospitals over differences on management rights.

"A staggered deal could be a way out," said an analyst, who argued that selling some pharma assets and a strategic dilution in the hospital business was critical to Wockhardt's fiscal restructuring plans. On Monday, the Fortis scrip ended marginally lower at Rs 66 on the BSE in a weak market.

Fortis currently manages 3,000 beds with a network of 26 hospitals, which it plans to increase to 40 by 2012. It will add 1,200 beds soon at new facilities in Vashi in Navi Mumbai, Shalimar Bagh in Delhi and Gurgaon.

Industry analysts feel rising incomes and a demand for quality healthcare — with an efficient government-run health delivery system not in place — are fuelling the growth of hospital chains in India. The sector grows at an estimated 10% to 15 % a year.

Wockhardt Hospitals, which runs 17 facilities, is planning more at Kolkata, Mumbai and Nashik, which will start functioning within a month. If the deal materialises, Fortis will obtain easy entry into Maharashtra, Bangalore and Kolkata. The deal will take its network strength to 43.

Fortis Healthcare is in the process of raising Rs 1,000 crore through a rights issue. The company had said the money would be used to fund its greenfield projects and restructure the balance sheet, besides being utilised for other investments.

Additionally, the company plans to raise money through issue of warrants, but the details are yet to be decided.
In January this year, it had bought a controlling stake in Mauritius-based hospital, Clinique Darne, in a joint venture with Mauritian industrial group CIEL that operates in agro-industry, textiles and equity investment.

AHMEDABAD: Zydus Cadila, the Ahmedabad- based Rs 2300 crore pharma major, eyes large chunk of revenue generation from its new drug discovery pact with global drug giant Eli Lilly. Zydus believes that it would receive potential milestone payment of up to $300 million and also royalties on sales upon the successful launch of any compounds derived from the research programme.

In a company release, Zydus informs that it has signed a new drug discovery and development agreement with Eli Lilly for cardiovascular research. The collaborative research programme may continue for a span of up to six years.

Zydus will work to discover and develop potential molecules against a novel target, primarily in the area of cardiovascular research. Zydus will initiate the drug discovery, lead identification and optimization, and conduct preclinical studies and clinical trials up to Phase II Human Proof-of-Concept.

While Eli Lilly will provide chemical starting points as well as expertise and feedback regarding toxicology, ADME, chemistry, biology, clinical and regulatory aspects as needed to potentially increase the probability of success of the programme. As part of the agreement, Lilly will have an option to license any resulting molecules at different stages.

Describing the research agreement as a new paradigm for global alliances in drug discovery and development, chairman and managing director of Zydus Cadila, Mr. Pankaj R. Patel said, “We are delighted to embark on this programme with Lilly and create a new benchmark in collaborative research programmes.”

The Zydus Research Centre (ZRC), the dedicated research arm of the group, has a team of over 350 research professionals, spearheading the quest of creating healthier and happier communities globally. The centre is engaged in new drug discovery, novel biologics and NDDS research.

The group has a strong research pipeline of 6 NMEs in various stages of clinical trials of which, five NMEs are targeted at cardiometabolic disorders.

MUMBAI: A unit of India's Cadila Healthcare Ltd has signed a drug development deal with Eli Lilly and Co that could earn it up to $300 million in milestone payments plus royalties, driving its shares up nearly 16 percent on Monday.

Zydus Cadila said it would earn royalties from any drugs for cardiovascular diseases developed by the partnership, which could run for up to six years.

Zydus Cadila will be responsible for identifying potential drug candidates and developing them through to mid-stage clinical trials. Lilly will provide the potential molecules and expertise and feedback for clinical, regulatory and research work.

Global drug giants, faced with thinning new drugs pipeline and stiff competition from generic drugs, are increasingly outsourcing drug development work to firms in countries such as India to help cut costs and shorten the time for a drug launch.

Lilly has struck partnerships with other Indian firms, including Piramal Life Sciences, Suven Life Sciences and Jubilant Organosys.

Cadila shares rose as much as 15.6 percent of 297 rupees on the news, its highest in almost six months. At 12:51 pm 0721 GMT, its shares were up 6.3 percent at 273 rupees in a Mumbai market down 4.2 percent.

BANGALORE: Speciality hospitals, which once confined their loci of operation to niche referral cases, are now extending their services to a wider patient-base. These hospitals are joining hands with local healthcare providers to create satellite centres of specialised healthcare which offer a comprehensive package to patients.

Recently, cardiac-care chain Wockhardt Hospitals partnered with 100-bed Bangalore-based Deepak Hospital to set up a satellite heart centre in the latter. Wockhardt had set up seven such centres - both mid-size hospitals and nursing homes - across Bangalore, Hyderabad and Maharashtra in 2008.

Pacts with the neighbourhood medical centres have helped many hospital chains provide timely attention to patients. Says Vishal Bai, CEO of Wockhardt Hospital, “In the case of cardiac emergencies, the first call always comes to the closest institution. While the revenue comes from consultation fees for our cardiologists, it creates a strong referral system for us in the case of higher intervention treatment and follow up.”

Bangalore-based cancer care chain Health Care Global Enterprises (HCG), which has 15 centres in India, is in final stages of discussions to set up a 60-bed oncology centre in a multispeciality hospital in Bangladesh. “We are finalising the business model, which would most likely be through the franchisee route,” chairman of HCG, Dr BS Ajai Kumar, said. Such alliances bring expertise in radiation therapy and medical oncology to add to the surgical competence that most hospitals already have.

Dr Devi Shetty-led Narayana Hrudayalaya also manages a cardiac centre in Bangalore’s MS Ramaiah hospital and has recently invested about Rs 8-10 crore for a centre at Sri Dharmasthala Manjunatheshwara hospital, Hubli. “We expect these tie-ups to grow many fold this year,” the hospital spokesperson said. Delhi-based Fortis Healthcare’s Escort Heart Institute and Research Centre has been setting up 12 centres in places like Chhattisgarh, Nagpur, Gurgaon and Jodhpur over the last few years.

The revenue sharing model being followed here is on a case-by-case basis. Besides a franchisee model, where the speciality hospital handles the management on the back of infrastructure provided by the local hospital, a lease-rental model is also being followed. Certain hospitals are looking at floating special purpose vehicles with the stakeholders splitting profit.

Established hospitals are keen on this model as it offers them a market entry strategy and exit option without much risk. “Big players use it as a direct marketing tool, and it helps them leverage the brand of the local player. It also allows them to examine smaller markets for further growth and expansion opportunities,” partner, health sciences practice, Ernst & Young India, Ajit Mahadevan, said.

While the host hospitals benefit by the brand association, resource sharing and support to increase patient base, the patient gains from better access to specialised services. “Speciality hospitals are not uniformly distributed in the country, which is why such collaborative arrangements will grow. In the long run, it could decongest the requirements of larger hospitals,” Fortis Healthcare’s director of marketing, Sudarshan Mazumdar, said.

According to Mr Mahadevan, these partnerships stem from the fact that the public health care system is focused on communicable diseases. This is because the management of non-communicable diseases is expensive and the infrastructure available is inadequate.

Industry analysts say this trend is becoming visible across urban and semi-urban areas as a means to support better disease management, optimise existing infrastructure and attract more patients.

NEW DELHI: GE Healthcare on Tuesday said it has completed the acquisition of medical products manufacturer, Vital Signs Inc and its subsidiary Breas medical AB.

The acquisition of Vital Signs would help the company in expanding its product folio in the home health solutions, GE Healthcare said in a statement.

"Home Healthcare is largely untapped, this global acquisition is consistent with GE's strategy to invest in high technology, innovative business that delivers top-line growth and earning expansions.

This acquisition takes us one step closer to our vision," GE Healthcare South Asia President and CEO V Raja said.

GE Healthcare is 17 billion dollar unit of General Electric Company and it employs more than 46,000 people globally.