The Hindu Business Line : Pharma: Some agony, not much ecstasy

IF the domestic pharmaceutical industry will remember the year 2005 as the watershed year of the patent regime and sightings of growth opportunities, it will also not forget the other heartburns that came along. The much awaited pharma policy is also yet to come out.

An issue like the MRP-based evaluation of central excise at 16 per cent hit the bread of small and mid-sized contract manufacturers. The big fish had their own problems and agendas, such as fighting MNCs' patent infringement suits; going after new markets, tie-ups, acquisitions, most of the time with their eye on the $ 60-billion generics market emerging worldwide in the next two years.

The year 2005 saw a majority of small and mid-sized companies completing their upgrading to comply with good manufacturing practices under Schedule M of the Drugs & Cosmetics Act. Even as they looked ahead for good orders, the MRP-based excise duty regime hit their livelihood almost to 70 per cent, according to industry sources. The large companies froze a bulk of orders while many shifted production bases to excise havens in the north.

The notification of the MRP-based excise duty era, according to Mr Jatish Sheth, Secretary, Karnataka Drugs & Pharmaceuticals Manufacturers' Association, became a major issue that snowballed into loss of cash flow and turnover for many small and medium companies. He estimated the flight of capital and business to mainly Himachal Pradesh and Uttaranchal could be of the order of Rs 22,000 crore.

Larger players Nicholas Piramal, Glenmark, Unichem, Torrent Pharmaceuticals, Strides and Matrix Labs went in for acquisitions and equity buys in India and abroad. Bangalore's Strides Arcolab and Hyderabad-based Matrix Labs explored a merger that would have created a seventh largest pharma entity in the country, but called off the plan within months.

Innovator companies Ranbaxy Labs and Dr Reddy's Labs were slapped with patent infringement suits from multinationals. Ranbaxy alone faced a slew of them, two from Pfizer over its generic version of Pfizer's cholesterol-lowering atorvastatin, Lipitor, in the US market; and again over Pfizer's anti-hypertensive drug quinapril. AstraZeneca plc went to court against Ranbaxy in defence of its ulcer drug Nexium (esomeprazole), while Boehringer Ingelheim moved to defend its prostate enlargement drug against Indian giant's new drug application in the US.

The bird flu spreading to new countries brought forth opportunities and issues of generic supplies for companies such as Cipla, Ranbaxy and Hetero Drugs. At stake is a huge market for Swiss major Roche's patented drug Tamiflu.

The year also saw some major investments in R&D. Dr Reddy's Labs floated a new Rs 230-crore triangular drug discovery venture, Perlecan Pharma, with ICICI Venture Funds and Citigroup Venture. Dr Reddy's announced its tie-up with Denmark-based Rheoscience A/S to jointly develop and market a new diabetes drug.

Bangalore-based ayurveda major Himalaya Drug Co firmed up plan for a Rs 160-crore facility for pipeline drugs targeted for the regulated markets. Biotechnology and biopharmaceuticals major Biocon Ltd tied up with US-based Bentley Pharmaceuticals to co-develop an intra-nasal insulin spray. It is also pitching for intellectual property assets of its bankrupt US R&D partner Nobex. Its subsidiary, Clinigene, has a strategic tie-up with SCIREX of US, which has plans to pick up a share in Clinigene.

Dedicated clinical trials companies such as Quintiles, Pharmanet and Pharmolam have also entered the country, which is emerging as global destination for clinical and contract research.

All said and done, "2005 is nothing to write home or cry about," Mr Sheth said. "The patent law has come but no bomb has hit us yet, it has spurred R&D investments."

According to pharma consultant, Mr V.R. Kannan, 2005 has mostly been a dull and `status quo year' although the pharma industry turnover has grown 11 per cent to touch Rs 36,000-38,000 crore. No mega brand is to be seen in 2006 either.

The growth rate started picking up from September this year, rising sharply from a stagnant 2 per cent until August to 26 per cent in September. Many segments such as antibiotics and anti-diabetics took a beating due to a fragmented and crowded field.

Though large companies posted negative growths, the flip side has been positive. India has been visible for quality, growth and opportunity. An Assocham forecast estimates the pharma sector to touch Rs 60,000 crore by 2007.

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