The Hindu Business Line : Indian pharma cos look to Chinese booster

THE pill that you pop may just have a Chinese connection. So, during the Chinese Premier, Mr Wen Jiabao's state visit to India, the domestic pharmaceuticals sector is hoping to get a booster dose by forging new alliances with Chinese pharma companies.

Officials of pharma companies are likely to be part of the 100-member delegation travelling with the Chinese Premier. Indian pharmaceutical companies already have ties with Chinese companies and have been sourcing intermediaries as well as bulk drugs from there.

According to Mr Sanjiv D. Kaul, Management Advisor, ChrysCapital, "Most of the domestic pharma companies are sourcing intermediaries from China, be it the basic penicillin used for antibiotics or other inputs for anti-retroviral drugs." For instance, Aurobindo Pharmaceuticals has a stake in a fermentation facility in China. Ranbaxy Laboratories, Dr Reddy's Labs and Orchid Chemicals and Pharmaceuticals are also among the domestic companies having a presence in that country. Dr Anji Reddy, Chairman, Dr Reddy's Labs, told Business Line that China is important for the company and it already has a manufacturing facility there. "We could even look at doing some research and development work in China at a later stage," he added.

The reason why importing intermediaries from China is cost-effective is because the country does not levy any duty on naphtha, a basic ingredient. In India, the chemical industry has to pay a 10 per cent customs duty on this product. "As long as the Indian Government does not bring this down to zero, China will continue to have the cost advantage," said Mr D. G. Shah, Secretary General, Indian Pharmaceutical Alliance. Cheap power and good infrastructure add to China's advantage.

Industry analysts said that if India and China come together, they could be a formidable force. "China's capabilities are in manufacturing bulk drugs, while India is well-known for its formulations. This is evident from the number of Drug Master Files and the Abbreviated New Drug Approvals filed by the two countries. Hence, there are opportunities in the areas of co-marketing," said Mr Kaul.

Meanwhile, Indian companies could also look at China for clinical research. The gene types of the population in both the countries are different. "If clinical trials are conducted in both the countries, the trials will get greater legitimacy," said a company official.

The Chinese market, per se, also provides a huge potential for pharmaceutical companies. It is the seventh-largest pharmaceutical market in the world, generating revenues over $8 billion. It is estimated the Chinese market will be worth $14 billion by 2006 and $24 billion by 2010.This would make China the fifth-largest medical market in the world by then.

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