Niche play medicine

Differentiate or die. That seems to be the key message Indian pharma players seem to be sending out through some of the deals they are getting into. And there have been a spate of them since January: Recently, in a matter of a month, Dr Reddy’s pulled off three outbound acquisitions; Ranbaxy Labs, too, has been on overdrive with alliances and partnerships over the past six months. Other pharma firms, too, have been in the thick of M&As or alliance building efforts: Zydus Cadila in January announced a collaboration with Prolong Pharmaceuticals, a US drug delivery and development company; last year, Lupin bought out a Japanese company (in addition to a Baroda-based pharma firm); and in the space of contract resarch & contract manufacturing services, Jubilant Organosys in April this year picked up a Canadian company which, among other things, offers an entry into the radiopharmaceutical business in North America that is apparently worth close to $2 billion.

Jubilant also acquired Specialty Molecules, a niche manufacturer of specialty intermediates with facilities on the outskirts of Mumbai. The drivers in most cases are either to acquire a niche asset, technology or both. If not, then the driver is entry into a key market or to gain a key customer. All to either spread the reach or gain speed to market. Take the case of Dr Reddy’s. “We look for geographies where we do not have a presence; then we buy a small vehicle and then build up our pipeline on that and grow the business,’’ explains G.V. Prasad, Vice Chairman & CEO, Dr Reddy’s. And there’s Ranbaxy. “We have undertaken strategic initiatives that include partnering with companies focussed on research and manufacturing in specialty and niche areas,” says CEO & MD Malvinder Singh.

Differentiation and niche play is also a route to ensure survival in an increasingly commoditised US generics market. “In every commodity market there are value plays and it depends on how smart a company is (to tap this),’’ says Prasad. What must, however, be said is that the basic strategy and approach has not changed and regulated markets (US and Europe) are still viewed as important, though now there is higher growth expected out of emerging markets, including India. Which is perhaps why, analysts today point out that leading Indian companies like Ranbaxy, Dr Reddy’s and Sun Pharma will continue to be active in trying to tap the opportunities in generics, resulting from an estimated $40-odd billion (Rs 1.72 lakh crore) worth of patent expirations in 2008 and 2009.

Even as a clutch of Indian drug firms keep themselves busy in the US generics market, a few are making their moves in Europe. Glenmark Pharmaceuticals, for instance, plans to establish 4-5 distribution frontends in Western European markets in the next three to five years, organically or inorganically.

For Sun Pharma, the US will continue to be the promised land. Says Uday Baldota, VP, (Investor Relations), Sun Pharma: “No doubt, the US market has become commoditised but there are two facets to competing in this environment: One, a tight handle on costs; and, two, offering a comprehensive range with a mix of high-volume products, complex products and some where one may hold exclusivity!’’

—E. Kumar Sharma