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Indian pharma industry takes giant strides

Kanchana Suggu in Mumbai

Even as the global econmic slowdown had all industrial sectors gasping for breath during 2001, the Indian pharmaceutical sector shone in the pink of health.

Even as new drug policy continued to remain elusive throughout 2001, the over Rs 230 billion industry, catering to the world's fifth largest market, sought to consolidate and grow through mergers and acquisitions with some companies looking for expansion abroad.

Pharma sector also bucked the investment trend worldwide with funds continuing to flow in the sector at a time when major financial institutions were exercising restraint in other areas of economy.

Cashing in on this scenario, domestic players sought to consolidate themselves through mergers and acquisitions of brands or companies.

Lifex (the index comprising India's leading pharmaceutical companies and used by several analysts across the country) shows that although the BSE 30-share sensitive index shed 4 percent since April, while Lifex actually rose 16 percent from 1174 points on April 6 to 1365 points on December 5.

McKinsey's report for the Indian pharmaceutical industry says that it can grow from $5.5 billion in 2000 to $25 billion by 2010 by expanding the base through higher value initiatives and pursuing aggressive new horizons focused on innovation and research.

With Mumbai-based Reliance Life Sciences and Bangalore-based National Center for Biological Sciences figuring in the United States National Institute of Health's list of ten research institutions chosen worldwide to supply embryonic stem cells to American researchers, India seems to have taken a giant stride in this area.

RLS, whose initial investment in the cell biology facility was $5 million, now plans to invest $25 million over the next few years.

Says Dr Firuza Parikh, founder-director, Reliance Life Sciences, "Being listed on the NIH registry for having stem cell lines has focused attention that India holds a unique position having scientific talent, resources and genetic diversity."

At RLS, Parikh and a team of scientists work towards Reliance Industries' Vice-Chairman and Managing Director Mukesh Ambani's vision of translating research and development in various areas of stem cells and cellular biology into therapeutic applications to address some of the nation's medical needs such as thalassemia, anaemia, following chemotherapy, diabetes, heart disease and burns.

In September, when the anthrax fear gripped America, Indian drug manufacturers were immediately seen as a vast potential source of antibiotics.

On October 16, US Senator Charles Schumer telephoned the US subsidiary of New Delhi-based Ranbaxy Laboratories Ltd and asked if the company could ship the drug quickly to the US. "The government wanted to be ready for any eventuality. We said we could deliver 20 million pills a month from December," says Paresh Chaudhary, General Manager, Corporate Communications, Ranbaxy Laboratories.

Around 78 Indian companies, that turned out copies of German giant Bayer's Ciprofloxacin -- the only company holding a patent to produce Cipro till 2003 -- were in a position to sell two months' supply of Cipro equivalents for around $20, around one-thirtieth of the US price.

The anthrax scare in the US managed to strengthen the Indian pharma sector's argument that international trade rules should allow countries to open markets to generic substitutes during public health crises.

"Developing countries insist that the patent issue is secondary to public health. Had Bayer not reduced its price for Cipro in a crisis, it showed that governments can break the patents law," says Dilip Shah, secretary-general, Indian Pharmaceutical Alliance.

Shah says the anthrax scare helped India gain an important US position and highlighted the demands of Indian drug makers that in case of a national emergency, it is possible to defy patent laws by granting compulsory licensing to generic manufacturers.

In February, Cipla, a leading Indian pharmaceutical company shook the world by offering to supply anti-AIDS drugs to the world's poor at less than $1 a day.

"There is no question that patient rights should override patent rights. I think our offer woke up the world to the reality that there is a possibility of a cheaper access to medicines in case of an emergency," says joint managing director Amar Lulla, Cipla.

It was after getting around the patent laws, by using authority under compulsory licensing to meet an emergency, that the African countries were able to obtain an AIDS 'cocktail' from Cipla for as low as $350 a year per person.

On December 20, Ranbaxy Laboratories too received a $1.75-million order to supply anti-AIDS drugs to Nigeria.

"The developed world has been opposed to breaking a patent. It's an uphill struggle for us. But in the last two-year period, we have been able to bring the issue on the table," notes Shah.

Of late, Indian companies are also beginning to invest huge sums in research and development. Almost all leading Indian pharmaceutical companies allocate around 6-7 percent of their annual turnover for research.

In April, Hyderabad-based Dr Reddy's Laboratories became the first pharmaceutical company in Asia-Pacific (outside of Japan) to list on the New York Stock Exchange, and in August it became India's first pharma firm to get a 180-day marketing exclusivity for a generic product Fluoxetine in the US market.

Wockhardt, a leading Indian pharmaceutical company, in April this year became the first Indian company to manufacture and market Erythropoietin -- a drug which was being imported from other countries till then.

From the year 2005, India will have to start conforming to the World Trade Organisation rules on Intellectual Property. The rules of the WTO-administered Trade-related Intellectual Property Rights (TRIPs) agreement require members to protect patents for 20 years.

A rampant fear doing the rounds in the country is what happens after 2005? While there is an alarm that the WTO regime could result in many essential drugs being priced out of the reach of ordinary people in the country, some assert that the vital drugs for public health will not have exorbitant prices.

"I think it's a wrong notion that drug prices will go up 5-20 times. Indian patents law will make some provision for it," asserts Shah.

A relatively new and exciting area for Indian companies is the field of biotechnology (the use of micro-organisms to perform specific industrial or manufacturing processes) and genomics (the branch of genetics that studies organisms in terms of their genomes or full DNA sequences).

On November 20, Dr Reddy's Laboratories, Reddy US Therapeutics, a wholly owned subsidiary of Dr Reddy's and Incyte Genomics, a leading genomic information company signed a collaborative agreement allowing Dr Reddy's and Reddy US' access to LifeSeq Gold, Incyte's industry-leading gene sequence database and to ZooSeq, Incyte's animal model database.

"We aim to become a global integrated pharmaceutical company, meeting the highest standards of production, with leading brands in markets around the world and successful line of our own patented products, " says R Rammohan, Director, Corporate Communications, Dr Reddy's Laboratories.

Bangalore-based Strand Genomics, a bioscience knowledge management company committed to develop innovative solutions in the area of bioinformatics has bagged several research contracts from US companies.

Dr Srinivasan Seshadri, chief executive officer of Strand Genomics, says that the world market in genomics is about $1 billion and India can easily grab $100 million of that pie. His company is at present developing tools and products for genomics and proteomics (a spin-off of genomics).

Says Wockhardt chairman H F Khorakiwala, "We have already proved our capability to construct genes using three expression systems of yeast, mammalian cell and bacteria. We are the first movers in biotechnology. "

The year 2001 saw the world wake up to the Indian pharmaceutical industry. While the industry's demands of price deregulation, import concessions and stringent control on spurious brands have yet to be redressed, it hopes to be a major force to reckon with in the global arena.

Awaiting a new policy in the hope it would lift market restrictions to a great deal by limiting the scope of price control mechanism, the domestic players also took cudgels against global majors on patent issues in their resolve to help the African countries by providing anti-AIDS drugs at substantially lower prices.

At home, however, consumers suffered shortages of some common medicines like popular pain-reliever, aspirin, which were brought under price control mechanism, forcing some of the players to introduce paracetamol-based medicines as subsitutes.

In tune with the industry trend, Zydus Cadila acquired stake in German Remedies along with rights over a few of its brands.

Takeover giant Nicholas Piramal, while restructuring its home, took over Rhone-Poulenc.

In contrast with other sectors, where foreign investment had been restrained, pharma sector witnessed international investment with World Bank's private investment arm, International Finance Corporation, picking up stake in Chennai-based Orchid Chemicals.

On the brands front, Morepen Labs created a flutter by buying out old-time popular antiseptic brand 'Burnol' for its over-the-counter division, Dr Morepen, while announcing that it will go in for more acquisitions on formulations side as well as OTC.

The sector also witnessed some breakups with Eli Lilly buying out its joint-venture partner Ranbaxy's stake to form an independent company and Nicholas Piramal snapping its marketing joint venture with Reckitt Benckiser.

Ranbaxy joined hands with Cipla and Glaxo to market its once-day ciprofloxacin in the country while suffering the jolt of pared milestone and royalty payments from Bayer AG, which had bought rights for the new drug delivery system from it.

Multinational pharmaceutical major Glaxo SmithKline Beecham consolidated its Indian operations and completed its merger in line with its global merger.

Additional inputs: PTI

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