The Hindu Business Line : Melting pot of fortunes for pharma cos

THERE has been a spate of international visitors from foreign drug companies prospecting the Indian market. And not without reason. In just a couple of days, India ushers in a new regime that would respect intellectual property rights.

Though the domestic drug industry will be tiptoeing into this new area with abundant caution, the new regime holds out mouth-watering prospects for multinational companies, in terms of a low-cost base for contract research, clinical trials and manufacturing.

In fact, the year gone by has seen initiatives in these segments and the estimated Rs 20,000 crore domestic pharma segment has been shoring-up on its clinical research and manufacturing strengths to face competition.

Local drug companies are investing in expanding manufacturing capacities, besides getting their production units approved by regulatory authorities abroad. Global regulatory approvals allow companies to export abroad and the overseas markets hold good prospects for Indian companies looking out. India has the largest number of the United States Food and Drug Administration (USFDA)-approved facilities (about 61 at last count) outside the US!

And while US continues to be the hot favourite, Europe is increasingly become the next most sought-after market. Not surprising then, that drug exports have been robust this year, in excess of Rs 14,000 crore.

An analyst tracking the segment feels that 2004 was good for domestic drug companies. Mid-segment companies such as Sun Pharma, Lupin and Unichem have been growing above the pharma industry average of 7 per cent, he said.

Segments growing well include antibiotics, vitamins, cephalosporins, cholestrol-reducers, anti-acne and anti-infectives. But anti-tuberculosis drugs, antibiotic ciprofloxacin and anti-depressant citalopram are some segments that have shown negative growth. The reason being, increased competition slices up the pie between too many players.

Further, he points out, Baddi in Himachal Pradesh is becoming a major hub for pharma companies. The tax sops offered will give domestic pharma companies a huge advantage.

Overseas acquisitions have been another high point this year, for example, Glenmark's acquisition of Laboratories Klinger in Brazil and Wockhardt's acquisition of German pharmaceutical company esparma, to mention just a few.

But another survival strategy adopted by pharma companies is to ink outsourcing deals with MNCs. A case in point being companies such as Dishman Pharma.

Glenmark Pharma created news of sorts when it inked a $190-million deal with Forest Labs to further develop its prospective asthma drug. The year also saw Nicholas Piramal India Ltd seal a series of collaborative export deals with MNCs, where the Indian counterpart would do some value-add to the product, as part of the deal.

While several licensing deals have been sealed this year, a couple have come unstuck too. Recently, Ranbaxy's deal with Germany's Schwarz Pharma for further development of its prostrate drug was terminated. A similar fate met Dr Reddy's diabetes drug that was out-licensed for development to Novo Nordisk.

Bad news also plagued the Indian AIDS drugs segment, with bio-equivalence issues putting a question mark on Ranbaxy, Cipla and Hetero's drugs. The companies have salvaged the situation by re-doing tests to establish their similarity and credibility.

The year 2004 has been a melting pot of fortunes for the domestic pharma companies. And they go into the new year with contentious issues such as span on control on drugs, trade margins enjoyed by drug companies and unresolved retailers and product-patent related issues.

But that is not to say that the multinationals will stay away. Top brass from Novartis, Eli Lilly and GlaxoSmithKline and Sandoz, to rattle of a few name, have touched base in India at some point this year.

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