Even as multinational pharma majors are looking for new ways to squeeze costs along the whole value chain, joint ventures with Indian companies are increasingly becoming the norm, reports The Pharma Letter’s India correspondent.
Collaborations with India present a huge opportunity for foreign investors, both in terms of joint production for the global market and supply for the growing domestic market. The changes in the global landscape brought about by the increasing cost of health care, and drying R&D pipelines has also added to the momentum.
“Foreign companies are increasingly looking at local partners to work with, in order to increase their presence in India,” said Kamlesh Patel, chairman of the Gujarat chapter of the Indian Drug Manufacturers’ Association. “The Indian consumer’s rapidly increasing purchasing power and the country’s changing epidemiological profile is ensuring that Big Pharma can suitably improve their drug price and volume mix by being present in India,” he added.
Noting that there were issues of cost optimization that were troubling multinationals, Mr Patel said that most drug majors were eager to have their fingers in many pies. “For instance, generics or even vaccines, multinationals are eager to get into businesses that are different. They are also looking for profitable growth, for which there has to be a focus on emerging markets, which ensure good margins.”
Since Indian pharmaceutical exports are expected to cross $25 billion by the end of 2014, and the country is the third largest exporter of active pharmaceutical ingredients (APIs), global corporate entities are seeking cross border alliances to share the resources, opportunities and potential to deliver cutting edge work.
Gilead Sciences inking a deal with seven Indian generic drug makers to bring cheaper versions of Sovaldi (sofosbuvir) to 91 countries, at roughly 99% of the US price, is a case in point.
“Big Pharma has been pursuing joint ventures and alliances in India also with the objective to share investments and secure technological capabilities,” said Mr Patel, adding that they were not the only ones pursuing alliances.
Marketing alliances in emerging markets continue to be at the heart of the expansion strategy of Indian generic players too. He added that, for smaller firms overseas, Indian companies were providing the initial push.
Like Indian drug major Alembic Pharmaceuticals, which is to set up a joint venture in Algeria through its subsidiary Alembic Global Holding with Adwiya Mami, for its foray into the north African market. Adwiya Mami has a formulation plant to produce 1.2 billion oral solids per annum. The investment in Adwiya Mami would give Alembic’s subsidiary a quick entry into the attractive Algerian market, which has a market size of $3 billion for drugs, with generics contributing 70% and innovator 30%. Though group firm Alembic Ltd has seen some acquisitions in the past, including the non-oncology business of Dabur Pharma, this is its first inorganic expansion.
Dilip Shah of the Indian Pharmaceutical Alliance (IPA) noted that multinational drug majors were trying to augment their revenues by aligning with companies, inking deals or acquiring companies in the generics business, eg, Tatarstan from the Russian Federation, that is seeking strong deals with Indian pharma and chemical majors. Rustam Minnikhanov, Tatarstan president, told Anantha Kumar, Indian Minister for Chemicals and Fertilizers that health care was a major area of cooperation between the two countries.
Though the European Union and the USA have been the largest importers of Indian products, increased scrutiny from these regions has been threatening export revenues. Mr Minnikhanov said Indian companies would need to look at joint ventures in other markets such as the Commonwealth of Independent States (CIS), Japan, parts of South America, and the Gulf Cooperation Council.
Estimated to report double digit growth of 10% to 11% between 2012 and 2016, the pharma sector in Russia and other CIS nations would be good places for alliances, noted Utkarsh Palnitkar, head of Lifesciences at KPMG India.
He added that there was no national drug provision insurance system in Russia and CIS countries, resulting in high out-of-pocket expenditures comprising over 60% to 70% of all pharmaceutical sales. As India’s credibility and popularity in the field of pharmaceuticals and biotech rises, the CIS nations are exploring opportunities to build healthier trade relations with India, he said.
The same is the case with the pharma market in the Middle East and North Africa, currently at $12 billion and accounting for a mere 2% of the global market. Analysts expect the market to reach $23.7 billion by 2015.
Gujarat based Dishman Pharmaceuticals and Chemicals formed a joint venture company to manufacture APIs in Saudi Arabia with three partners, the Arab Company for Drug Industries and Medical Appliances, Spimaco, and the Capital Advisory Group.
Intas Biopharma is also looking to partner with companies in the region, which was first tapped by Biocon in 2007, when it entered into a joint venture with Abu Dhabi based Neopharma.
As IPA’s Mr Shah said, these outbound deals would continue, even as the world looks at India as an attractive investment destination with strategic advantages and lucrative commercial incentives. He added that the Indian economy is preparing itself for another round of aggressive growth.