indian pharma news update nov 1 - 15 2009

8/8/2019 Indian Pharma News Update Nov 1 - 15 2009

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There is a significant differenc es between India and China - in the political system, in the decisionmaking processes, in the complexities of the processes and in the continuity. I think India haspotential but things take longer to get done. It may come as a surprise but China has madetremendous progress in IP and is enforcing IP in pharmaceuticals, he said.

Mr Vasella said IP protection is the crux of any investment for pharma companies. IP is veryfundamental to our business and any investment we make without it is a no go. Now Indiancompanies are also investing in research and I believe they would create something more of anintellectual basis.

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Section IV: Developments

Pharma club seeks protection from foreign predators

1st November, 2009. Business Standard.

The Indian Pharmaceutical Alliance (IPA), the association of the country's leading domestic drugproducers, has sounded the alarm bells against foreign companies acquiring homegrown players. In

fact, it has sought financial assistance from the government to make business more sustainable fordomestic entrepreneurs.

There have been six such instances (see table) in a little over a year. It all started when DaiichiSankyo of Japan acquired Ranbaxy Laboratories, Indias largest pharmaceut ical company, from theSingh family.

In a letter to the department of pharmaceuticals, IPA has said the paucity of funds and the enormouschallenges faced by the domestic industry abroad have driven promoters to sell their companies.The IPA complaint turns significant in the backdrop of increasing talk about foreign companies buyinginto Dr Reddys, Piramal Healthcare and Aurobindo.

According to IPA, all the acquired companies were engaged in intensive research and wereattempting international expansion. It has cited the example of Dabur Pharma, Ranbaxy and ShanthaBiotech.

The association has pointed out that the financial trouble at Wockhardt was triggered by the need formore funds. In a bid to develop a global infrastructure and accelerate entry of its value-addedproducts in the regulated markets, it relied on funds from elsewhere and had to suffer as there is nofunding mechanism in the country to meet the needs of the larger companies, it said.

These sell-outs have highlighted the needs for appropriate funding mechanism to meet thechallenges faced by big and successful Indian companies and have exposed the limitations of thecurrent policy framework providing weighted deduction for R&D and meagre amounts under theMarket Development Assistance programme, the association said.

FAMILY SILVER LOST Year Acquirer company Target company Jun08 Daiichi Sankyo Co Ltd Ranbaxy Laboratories Aug08 Fresenius Kabi AG Dabur Pharma

Jun09 Pfizer(Animal HealthBusiness)

Vetnex Animal Health Ltd(earlier ICICI Venture acquired from Ranbaxy)

Jun09 Vetoquinol SA Wockhardt (Animal Care Subsidiary) Jun09 Abbott Laboratories Wockhardt (Nutrition Business)

Jun09 Sanofi Aventis Through Merieux Alliance ShanthaBiotech (hiked stake from 60% to 80%)


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Perrigo will then move production of active pharmaceutical ingredients (APIs or the key therapeuticsubstance in a drug) from its sites in Germany and Israel to India.

There are many mid-tier firms like Perrigo with similar plans for India. They may lack the "sex appeal"of Big Pharma, but global drug makers such as Teva Pharmaceuticals, Watson Pharma, Lonza, EisaiPharmaceuticals, Ethypharm and Astellas are now quietly making India a major manufacturing andresearch and development centre for their global operations. Their strategy is to either set upgreenfield facilities or acquire small companies or plants in which they will invest further.

It is a conscious st rategy of these companies as they are new entrants into India and will prefer tolearn and test the market for a few years with small investments. Once they get established, theymay look at large acquisitions or big investments in greenfield facilities, said V K Singh, chiefexecutive of Ethypharm India.

The parent company, Ethypharm of France, is the largest new drug delivery system (NDDS orcutting-edge chemistry innovations like one tablet instead of three) developer in the world and isamong the first such European companies to enter India with a manufacturing and research anddevelopment centre in Mumbai.

Now, Ethypharm is making its Indian subsidiary the most important centre outside France for NDDSactivities, mainly complicated chemistry NDDS products required for big pharma. Already, the Indiansubsidiary contributes 10 per cent to its global turnover. The company will soon expand the capacityof its existing facility and will lease more facilities, with a view to double turnover and triple profitswithin three years, said V K Singh, a former Ranbaxy executive and a veteran industry professional.

Astellas Pharma, Japan's second-largest drug company with a turnover of $10.5 billion, is planning toenter India with a similar strategy.

Astellas is now recruiting sales executives to launch its first product in India, its $2 billion flagshipbrand Prograf, used to prevent rejection in organ transplant patients. The product will reach themarket in a few months.

We aim to become market leaders in Ind ia within the next five years in various specialities in whichwe will launch our products. Our focus is to establish our own sales and marketing strength for thetime being and we are not looking at local production for the next few years, said Himanshu Dave,Astellas' director, sales and marketing.

Astellas has every reason to initially tap the local market with its own imported products. India'spharmaceutical market will expand by more than 12 per cent a year to reach $20 billion by 2015,according to a McKinsey & Co analysis.

Meanwhile, Eisai Co, another leading Japanese company with annual sales of $8 billion, is makingIndia a major manufacturing hub. Eisai, which entered India in a small way in 2004, is now setting upa huge API and drug and formulation research facility at Jawaharlal Nehru Pharma City SEZ inVisakhapatnam, Andhra Pradesh.

The facility, at an investment of $300 million to $400 million (Rs 1,400 crore to Rs 1,900 crore), willbe operational by 2011. Eisai hoped to supply drugs to markets throughout Asia, Russia and Africafrom this facility, said sources.

Expertise in process chemistry-related drug development and the ability to make drugs at one-fourththe cost incurred in US and Europe have made India one of the most preferred destinations for drugmanufacturing in the changing global pharmaceutical landscape, industry analysts said.

The Indian API manufacturing industry is the worlds third largest and is expected to record exports of $2.8 billion by 2010, with an average yearly growth rate of 19.3 per cent, according to estimatesPricewaterhouseCoopers (PwC).


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Take the case of Watson Pharma, the second largest US-based generic drug maker. It acquired amanufacturing plant of Dr Reddys Laboratories in Goa in 2005, and bought Mum bai-based APImaker Sekhsaria Chemicals within a year.

After this, Watson sold its manufacturing units in Miami and divested an injectable drug making unitin Arizona. Soon the company will close another unit in New York and will move most of theproduction to India.

Plans are to make India the manufacturing hub for one-third of its global drug requirements. Watsonnow employs close to 1,000 people in India at Goa and Mumbai. The company also has a decades-old supply agreement with domestic major Cipla for many of its products sold in the US market.

The Goa facility will produce over one billion tablets and capsules annually for the US market, saida Watson India executive. Israels Teva Pharmaceutical Industries, the worlds largest manufacturer of generics drugs with over $11 billion sales, is also making India as a major manufacturing base.Teva, which opened an API research and development centre near Delhi a couple of years ago,bought over 100 acres of land near Gwalior in Madhya Pradesh last year. Plans are to set up APImanufacturing facilities at this site that will match the production capacity of leading Indiancompanies.

Tevas plans are to invest close to $1 billion in India, including $300 -400 million in greenfieldmanufacturing facilities.

Regent Drugs, a small company that it acquired from JK Industries in 2003 with its API business, nowacts as a supplier to Tevas global drug requirements. Further, the company sources a goodpercentage of its global drug requirements from four or five suppliers in India, industry sources said.

In the last five years, the company was attempting a major acquisition in India, but could not succeeddue to valuation issues, said investment banking sources. Teva considers India an interestinggeographical re gion and is looking to broaden its activities in the country, Shir Altay, companyspokesperson for Teva had said earlier on their India plans in an e-mail to Business Standard.

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Chemists Gang Up To Form Offbeat Firm

3 rd November, 2009. Hindustan Times.

As many as 550,000 pharmaceutical retailers and 60,000 stockists from across the country havecome together to form an offbeat company.

The firm AIOCD Ltd, will help government planners, pharma companies and non-governmentalorganisations working on community health by gathering statistics and creating it into a database.

The data to be collated from monthly sales figures from wholesalers would be disseminated tovarious stakeholders for appropriate action as well as to keep a tab on demand levels in various parts

of the country.

The company, in a joint venture with Trikar Medi Infotech, has introduced PharmaTrac, an onlinedatabase of region wise pharma consumption figures, which the Indian pharma industry and policymakers were looking for. So far they have been getting data from various sources available in themarket but now they would get accurate data much faster and accessible anytime anywhere.

"This initiative is going to change the market dynamics of the pharma industry," said J.S. Shinde,chairman, AIOCD Ltd. "Our authentic data would be vital for business planning and to faceinternational competition."

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Sikkim turns into a pharma hub

4 th November, 2009. The Economic Times.

Early this year, when Mumbai-based pharma major Unichem Laboratories was planning to expand itscapacity, it was in a fix. The company's existing plants at Goa, Ghaziabad and Baddi were alreadyrunning at full capacity and acquiring additional land in these places would have meant a pretty highinvestment. At that point of time, the company started to evaluate Sikkim as another potential

destination.

Bingo! It took very little effort and time for Unichem to decide on its next manufacturing hub. It wasSikkim. The tax incentives which this hilly state offered on the table was quite attractive and easilycomparable to the so-called pharma-hub, Baddi, at Himachal Pradesh. Unichem at one shot decidedto invest Rs 30 crore to set up an ultra-modern formulation plant. The plant is now expected to beoperational in a couple of months.

Today, Sikkim is home to as many as 14 major pharma companies, which have significantinvestments in the state. These include the who's who of Indian pharma sector - Cipla, Sun Pharma,Zydus Cadila, Alembic, IPCA, Alkem Lab, Intas Pharma, Torrent Pharma and of course, Unichem.Industry grapevine suggests even the likes of Lupin is also evaluating the state.

Believe it or not, Sikkim - which is the least populous state in the country and the second-smallestafter Goa - has already attracted pharma investment upwards of Rs 2,500 crore. After Gujarat, Goaand Baddi, Sikkim is now attracting the most attention. This could have big implications, consideringthe fact that the country is the world's fourth largest producer of pharmaceuticals by volume.

"Sikkim is a peaceful state and has huge potential for the manufacturing sector. There is minimalinterference by the state government. It's true the state took some time to develop and attract thepharma companies. But now it is surely at a tipping point," says Ramesh Kumar, who heads the Ciplaplant at Sikkim. The Cipla unit is spread over 12 acres and has gone on stream since April 2008.

Mumbai-based drug major Sun Pharma completely buys the view. The company has plans to convertits Rs 50-crore Sikkim plant, which became operational since April this year, into a majormanufacturing base. Sun Pharma manufactures solid oral finished dosages (read tablets andcapsules) of its popular brands like Glucored, Gemer and Cardivas.

"Since the Sikkim plant is expected to be an important supply point for our Indian finished dosagebusiness, going forward, it will be manufacturing a part of our top products too," exclaims a SunPharma spokesperson.

The company is also finding labour, power and overall cost of manufacturing to be lower in Sikkim ascompared to states like Gujarat and Maharashtra.

Sikkim's attractiveness lies in the multitude of tax benefits it has on offer. The inclusion of Sikkimunder the Centre's 'North East Industrial and Investment Promotion Policy, 2007' in April 2007 did thetrick. As part of this, all new units as well as existing units which go in for substantial expansion inSikkim will be eligible for incentives for a period of ten years from the date of commencement ofcommercial production. Check out some of the incentives.

There's 100% excise duty exemption on finished products manufactured there, 100% exemption onincome tax, capital investment subsidy of 30% on the investment in plant and machinery, interestsubsidy at 3% on working capital loan and even reimbursement of 100% insurance premium. On thetop of it all, Sikkim also offers attractive freight subsidy.

"The benefits which we get in Sikkim are truly attractive and in some cases even better than that inBaddi. However, the freight benefit may not have a huge impact on the pharma industry as freightcost in the domestic market accounts for just 1-2%," says Unichem Laboratories vice president(finance) Rakesh Parikh.


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The scale of benefits at Baddi, such as excise, had eventually come down. In fact, the pharma sectormade a beeline for Baddi around 2004-05 to cash in on the tax incentives. As many as 180 pharmaunits had since then set up base in Baddi. Can, then, Sikkim match up to Baddi?

While the likes of Sun Pharma feel it is still early days to truly compare Sikkim and Baddi, no one iswilling to completely write off the state's potential. "Even if we forget the excise benefits at Sikkim assuch benefits are now also available in several states, the biggest draw for the state is its ten-yearincome tax holiday. This could mean a lot for profitable companies like us," claims Parikh.

However, a section of the industry feels the state needs to work on certain grey areas to emerge as amajor pharma cluster. "Infrastructure is still the biggest concern in Sikkim. However, the good news isthat the government is now emphasising on this. The state is also addressing the power situation.The recent announcement of constructing the rail link in Sikkim will provide a further fillip," saysCipla's Kumar.

Agrees Daara B Patel, the secretary-general at Indian Drug Manufacturers' Association (IDMA) - theapex body of Indian pharma companies. "Certain vital factors are still missing in Sikkim. The stategovernment needs to come up with a dedicated policy to support the pharma industry. Plus, there areissues with availability of skilled workers which again the state government can address by setting uptraining institutes," Patel says.

Be that as it may, analysts feel the Indian pharma companies always prefer to flock together. It hadhappened in Goa, Baddi and now Sikkim should not be an exception. More so, since the big gunshave already tested the waters. The state has another latent edge - the Silk Route of India or theNathu La Pass. The industry believes this could act as a shortcut for the Indian industry to tap thehighly potential Chinese and CIS countries.

The pitch seems to be perfect for the next-phase expansion. "Poor marketing is a handicap which theEast has perennially been suffering from and Sikkim is no exception. And it is here that Baddi hadscored trumps. If Sikkim can effectively market itself and the benefits it offers, there can be no reasonwhy it cannot emerge as the next Baddi," adds a senior executive of a Gujarat-based pharmacompany, which has invested in the state.

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US health bill to benefit local generic firms

10 th November, 2009. The Economic Times.

The US healthcare bill, which has been passed by the US House of Representatives and is awaitingnod from the Senate, holds a lot of promise for generic drug manufacturers from India. Withemphasis on increasing the coverage and reducing healthcare costs, the bill is going to provide a bigfillip to the usage of low-cost generic drugs.

The bill seeks to bring an additional 40 million US citizens under medical insurance coverage. Thiswill open up a big market for generic drug makers. Besides, even for the existing population underinsurance coverage, there is likely to be a shift in the usage from patented to generic drugs.

Indian pharma companies - most of them being exporters of generic drugs and intermediates to theUS, the world's largest drug market - are going to gain by passing of this bill. While the impact is longterm in the form of increase in procurement of generic drugs by the US, it is nevertheless a positivesign. One other major aspect of the bill, which is likely to be important for Indian pharma companies,is the provision in the bill on bio-similars.

The bill has provided for a data exclusivity protection period of 12 years for biologics innovatorcompanies. This is much longer than the period of five years, provided by the US government in caseof chemical drugs. This provision, while throwing some light on the pathway to launch bio-similars inthe US, will slow down the long-term growth of bio-similars in the US.


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However, the good news is that this would not impact the immediate pipeline of Indian biotechplayers. Most biologic drugs were developed between 2000 and 2004 in the US. Indian companies,which are developing bio-similars for these biologics, will just be ready with their products by 2016 -the time when the 12-year protection period ends for the biologics in the US. However, Indiancompanies will have to go slow on future product development in bio-similars.

The bill also has provisions that impose restrictions on the Para IV settlements done between theinnovator and generic companies. While the settlements have not been banned altogether, therestrictions may bring some deterrence to go for settlement.

The bill, however, is facing a lot of resistance and protests in its current form. It will be too naive tothink that large insurance companies and big pharma firms in the US would take these sweepingchanges lying down. This may lead to several compromises before it sees the light of the day as apiece of legislation.

Even in a truncated and compromised form, it is likely to benefit generic players. And Indiancompanies (aggressive that they are on the generic front) are likely to be natural beneficiaries.

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Watch out for US recovery, new products13 th November, 2009. The Economic Times.

Robust growth in profits despite modest rise in revenues characterised the performance of the Indianpharma sector for the latest quarter ended September 2009. The analysis of aggregate results ofleading 18 pharma companies reveals an 83% Y-o-Y rise in net profit, while net sales grew at amodest rate of 10%. Savings on raw materials, cost management, and absence of forex losses haveprimarily resulted in doubling of profits over the previous year.

This has also led to expansion of operating and net profit margins. The growth in revenues has beenlowest ever, as some leading companies like Ranbaxy and Sun Pharma reported flat growth, as theirrevenues from the US business have been affected due to the regulatory actions by US FDA. Thesector has managed to log a robust Y-o-Y performance in terms of profits for the quarter ended

September 2009 when compared to the performance in the preceding quarters.

However, a disappointing sign is that the aggregate revenue growth of pharma companies has beenon a steady decline since past four preceding quarters.

Among leading companies, Dr Reddy's Labs (DRL) and Cipla posted robust jump in earnings. DRL,Sun Pharma and Ranbaxy pleased the Street posting betterthan-expected results. DRL and Ranbaxyhave started showing signs of stability.

However, in case of Ranbaxy, pending issues with US FDA still keep its future performanceuncertain. Among mid-sized companies, Lupin and Cadila Healthcare reported good numbers -continuing the momentum in their earnings growth.

Among players in the contract research and manufacturing services business (CRAMS), almost allplayers reported disappointed results. Jubilant Organsys, the largest CRAMS player, reported flatsales on account of poor performance of its chemical business. Dishman Pharma, Divi's Laboratoriesand Piramal Healthcare have witnessed a hit on their revenues on account of poor performance intheir CRAMS business.

For many companies, subdued growth in revenues from the US has been compensated, to an extent,by growth registered in emerging markets of Eastern Europe , LatAm and CIS countries. Companieslike Ranbaxy, Piramal Healthcare and Cipla have also gained from good growth shown by the over-the-counter branded consumer healthcare products in the domestic market.

Savings on raw material costs due to high base year effect will vanish from the current quarter


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onwards. This will remove the extra growth in profits commanded by companies during last fewquarters. Going forward, recovery in the business conditions in the US, stance of the US FDAtowards compliance related issues and company's product pipeline are the factors to watch out for.

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Novo Nordisk looks to make India hub for South Asia

15 th November, 2009. Business Standard.

Denmark-based Novo Nordisk, a world leader in diabetes care, is looking at India as a hub formanufacturing insulin for the entire sub-continent. The company today inaugurated a dedicatedfacility with a capacity of 26 million vials per annum in partnership with Ahmedabad-based TorrentPharmaceuticals Ltd.

The Rs 1,600-crore Torrent Pharma is the flagship company of the Rs 6,400-crore Torrent Group andhas been manufacturing insulin for Novo Nordisk since the early nineties.

Novo Nordisk's Senior Vice-President (International Operations) Jesper Hoiland said that thecompany already had a manufacturing facility in China and was also looking for opportunities incountries like Bangladesh. When asked whether India could be developed as a hub for

manufacturing insulin for neighbouring countries in the sub-continent, Hoiland said: "That is indeed apossibility. We are looking into it." With over 50 million cases, India is one of the world's biggestmarkets for diabetes, and the numbers are expected to reach 80 million by 2025. While the adultprevalence rate in the country is at around 6.2 per cent, only a small percentage is actually treated.

Novo Nordisk enjoys a 70 per cent market share in the country, reaching out to almost 1.2 millionpeople of the total two million patients who are currently getting treated with insulin. "India's share inNovo Nordisk's global turnover is negligible around 1-1.5 per cent.

But it is steadily growing at a rate of 20-30 per cent," Hoiland said.

Novo Nordisk enjoys a 50 per cent share in the world insulin market.

Hoiland added, with the growing market in the country, India is fast becoming a strategic market forthe company. Novo Nordisk has brought in 150 people from its Denmark operations and is currentlyholding 8-10 per cent of its clinical trials in India on over 10,000 people. Torrent PharmaceuticalsChief Operating Officer Sanjay Dalal said his company had invested around $11 million on thededicated insulin manufacturing facility for Novo Nordisk and this could be expanded. The Kadifacility could also be used to export insulin from India later on.

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indian pharma news update nov 1 - 15 2009

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