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P.T. Jyothi Datta

Competition, pricing-pressures worry Indian promoters

Mumbai , Aug. 28

For any player in the generic-drugs industry, it is a must to be in India, a top-executive with drug-maker Sandoz had said during his visit to India two years ago. And US generic-drugs company Mylan's acquisition of controlling-stake in Hyderabad-based Matrix Laboratories is a "long over-due" endorsement of that thought.

Promoter-precedent

But the deal may also set another precedent, of Indian promoter-families reducing the grip on their drug companies, says a pharma analyst. Indian drug companies need to look at a larger landscape and the Mylan-Matrix deal could get Indian promoters to think on such lines, he observes.

Pharma-company promoters have indicated to analysts that they would consider selling their stake to bigger or overseas players, provided they get "the right price." The reason for this willingness being the stiff competition, pricing-pressure and product-patent regime that confronts them. The Mylan-deal indicates that right valuations are taking place and companies now have a precedent, says the analyst.

It does set a benchmark, agrees another analyst. However, it may not trigger consolidation among local companies, he says. The decision to sell out will be an individual decision taken by each company and its promoter-family depending on what they get out of such a deal, he adds.

Coming in the midst of the spate of Indian acquisitions overseas over the last couple of years, the Mylan-deal could also mark the "reversal" of this trend, says another analyst tracking the pharma industry. The Matrix-acquisition indicates that multinational generic companies are not just talking about getting into India, but are actually putting their money on the table.

As Indian drug-makers take the price-battle into the backyard of US-based companies like Mylan, it is not surprising that big guns of the generics industry also seek to leverage the benefits of low-cost manufacturing available in India, says a pharma industry representative.

The biggest names in the pharma business, including Sandoz, Teva, Watson Pharma, Barr Laboratories, etc are reported to be harbouring acquisition plans in the Indian market.

India offers mouth-watering prospects not just because labour comes at a low cost, but also because of the manufacturing capacity in the country. India is home to the highest number of plants with US regulatory approvals, outside the US. Over 70 manufacturing plants have received approvals from the United States Food and Drug Administration, he points out.

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