Pharma club seeks protection from foreign predators

The Indian Pharmaceutical Alliance (IPA), the association of the country's leading domestic drug producers, 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 for domestic entrepreneurs.

There have been six such instances in a little over a year. It all started when Daiichi Sankyo of Japan acquired Ranbaxy Laboratories, India’s largest pharmaceutical company, from the Singh family.

In a letter to the department of pharmaceuticals, IPA has said the paucity of funds and the enormous challenges 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 buying into Dr Reddy’s, Piramal Healthcare and Aurobindo.

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

The association has pointed out that the financial trouble at Wockhardt was triggered by the need for more funds. “In a bid to develop a global infrastructure and accelerate entry of its value-added products in the regulated markets, it relied on funds from elsewhere and had to suffer as there is no funding 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 the challenges faced by big and successful Indian companies and have exposed the limitations of the current policy framework providing weighted deduction for R&D and meagre amounts under the Market Development Assistance programme, the association said.
 

FAMILY SILVER LOST
Year	Acquirer company	Target company
Jun’08	Daiichi Sankyo Co Ltd	Ranbaxy Laboratories
Aug’08	Fresenius Kabi AG	Dabur Pharma
Jun’09	Pfizer (Animal Health Business)	Vetnex Animal Health Ltd (earlier ICICI Venture acquired from Ranbaxy)
Jun’09	Vetoquinol SA	Wockhardt (Animal Care Subsidiary)
Jun’09	Abbott Laboratories	Wockhardt (Nutrition Business)
Jun’09	Sanofi Aventis	Through Merieux Alliance Shantha Biotech (hiked stake from 60% to 80%)

“It is easy to classify these stake sales as the greed of promoters, but unless the basic issues of the domestic industry are addressed with foresight and understanding of the market dynamics, more promoters may sell-out on account of frustration in keeping the business growing,” IPA Secretary General DG Shah said. “This would ultimately hit not only exports of pharmaceuticals from India but also the availability of quality medicines at affordable prices in the domestic market.”

IPA members (Cadila Healthcare, Cadila Pharmaceuticals, Dr Reddys, Glenmark, Intas, Lupin, Sun, Micro Labs, Torrent, Unichem, USV and Wockhardt) are known to collectively account for Rs 2,100 crore of annual R&D expenditure. This is 90 per cent of the total private sector investment in pharmaceutical research. The member companies also account for one-third of the country’s drug exports and a third of the sale in the domestic market.