The Hindu Business Line : Indian pharma cos' shopping spree timely, say analysts

INDIAN pharma companies are out with their shopping bags in the European market, but Wockhardt Ltd's acquisition of German pharma company esparma GmbH could not have come at a better time, observe analysts.

And here's why. "The German generic market is the world's third largest, after the United States and Japan. While the US continues to be the most lucrative, it is a difficult market in terms of regulations and litigation. Japan comes with its own set of peculiarities in terms of matching medicines to the population profile. Given the European Union coming together as one large economic block, getting a foothold in Germany makes ample sense.

"Several Indian companies either have forayed into these markets or are scouting the European market in general and more specifically the German market for acquisitions," they point out.

Ranbaxy had set the ball rolling in the recent past, when it acquired Basics GmbH — Bayer's generics business, in 2000. This was followed up by its acquisition of Procter and Gamble's anti-hypertensive product under the Veratide brandname.

Other companies that have a presence in the European market include Zydus Cadila, Unichem and Wockhardt, which had in the past acquired two companies in the UK — Wallis Laboratory and CP Pharmaceuticals.

"Wockhardt is at present consolidating its UK acquisitions under a single entity. Given that it has a manufacturing facility in the UK, the German acquisition is attractive since it comes with a marketing team and without the manufacturing plant. At Rs 49 crore, the price paid for the acquisition makes it attractive since the company clocked a sales of 90 crore in 2003," the analyst said.

On Thursday, Dr Reddy's Ltd (DRL) too announced its acquisition of a US company, Trigenesis Therapeutics Inc, also for a consideration of Rs 49 crore.

Some analysts feel that the acquisition would give DRL's operations in the US a shot-in-the-arm, following the set back from losing the anti-hypertensive drug Amlodipine-related case with Pfizer.

However, a section of analysts feel that DRL's recent acquisition could be time consuming. "Indian pharma companies are at present developing new drug delivery platforms and licensing it out to global majors. In this case, DRL has acquired a company that will develop these delivery platforms and this could consume both time and money."

Nevertheless, given that DRL would get an access to the dermatology market worldwide, estimated to be in excess of $6 billion, it could be a worthwhile acquisition in the long-term, he added.

Mr D.G. Shah, Secretary General, Indian Pharmaceutical Alliance observes : "By 2007, India is expected to corner one-third of the global generic market estimated to be $57 billion. If India were to clock $19 billion sales, only about $ seven billion would come from sales in the country. The remaining $12 billion would come from foreign markets.

"And just about every significant pharma company in the country is interested in getting into these regulated, remunerative and stable markets."

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