The Hindu Business Line : Big players eyeing pharma SMEs

Hyderabad/ New Delhi April 27 Small and medium enterprises (SMEs) in the pharma sector in the country's bulk drug capital - Hyderabad - seem to have caught the eye of big companies for strategic investments.

The recent moves by Ranbaxy Laboratories Ltd in picking up significant equity stake in at least three SMEs from here in less than a year is definitely a pointer in this direction.

Zenotech Laboratories, Krebs Bio and Jupiter Bioscience Ltd are the three small pharma companies, in which Ranbaxy has picked up equity stake between 10 per cent and 14.9 per cent.

According to Mr M. Narayana Reddy, President, Bulk Drug Manufacturers Association (BDMA), "It makes good business sense for big players to have control over SMEs. Of late, with increasing competition, ensuring continuous supply of raw materials has been a major concern for big players in the industry. As SMEs act like a sheet-anchor for supply of raw materials, it is safe for them to acquire stakes and have a say in supply of raw materials (like APIs),"

WIN-WIN SITUATION

From the SME's perspective also this is a good sign, feel industry experts.

"The very fact that the major companies are eyeing stakes in SMEs shows that there has been a recognition of SMEs' potential in the industry. They can always have a choice and decide what is good for them," felt Dr P.V.

Appaji, Executive Director, Pharmaceutical Export Promotion Council.

Responding to queries on the investments in the Hyderabad based companies, Mr Malvinder Mohan Singh, CEO and MD, Ranbaxy Laboratories Ltd, said, "We were looking at expanding our therapeutic portfolio, and we didn't want to take all the risks onto ourselves, and decided to go outside instead."

FAITH IN PARTNERSHIP

"We believe we have identified and tied up with good companies, with a strong manufacturing and research and development capabilities. We have partnered in the areas of bio-generics, oncology and peptides, and expect to file between 2008-2009, and hope to launch the products from the alliances between 2009-2011," the Ranbaxy chief added.

Krebs Biochemicals & Industries Ltd, one of the SMEs, is engaged in manufacture of APIs with its product portfolio comprising Statins (lifestyle drugs), nutraceuticals and anti-asthmatic groups and has considerable expertise in fermentation technology.

In Zenotech, Ranbaxy has taken a 10 per cent stake. There are benefits for both. While it gives Ranbaxy a presence in generic biopharmaceuticals, Zenotech would get to acquire softer skills as well as file for US FDA approvals, negotiations etc, explained Zenotech.

Zenotech, which has USFDA approved facilities on the city outskirts has also inked a marketing licence agreement with Ranbaxy recently to market generic formulations of 11 oncology products in the US and Canadian markets under its own label.

In the case of Jupiter Biosciences Ltd (JBL), a 10-year product marketing agreement along with a 14.95 per cent equity divestment has been agreed with Ranbaxy, said Mr Venkat R. Kolavakolanu, Chairman and Managing Director of JBL.

While JBL would get access to global markets for its peptide products through Ranbaxy's reach, the latter would be adding to its diversified strength by entering the peptide-based pharmaceuticals area, which promises bright future, he said.

More Stories on : Pharmaceuticals | SSI | Andhra Pradesh | Ranbaxy Laboratories Ltd

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