Top Japanese drug makers are planning big presence and investments in India, within two years of India’s largest manufacturer, Ranbaxy Laboratories, being taken over by Daiichi Sankyo, the third largest Japanese one.
Last week, the $40-billion Mitsui & Co Ltd announced it would acquire a five per cent stake in pharmaceuticals ingredient manufacturer Arch Pharmalabs for Rs 65 crore. The move is to strengthen its contract manufacturing business in the pharmaceutical sector.
Mitsui has had a business relationship with Arch for the past four years. The strategic stake sale will help the Rs 1,200-crore Arch to foray into supply of active ingredients and intermediates in the tough Japanese market, as Mitsui will exclusively market Arch’s products in Japan, said Ajit Kamat, chairman and managing director.
“Mitsui has formulation manufacturing units in Japan and contract and clinical research facilities in Singapore. It is natural for them to enter into a strategic alliance in India to access the active ingredient link, which was missing in their pharma supply chain,” he said.
This is the first acquisition by a Japanese company in the Indian drug market since the June 2008 acquisition of Ranbaxy by Daiichi Sankyo. The recent deal is likely to trigger more Indo-Japanese drug sector deals, said Kamat.
Japanese companies such as Takeda, Astellas, Eisai, Taiho Pharmaceutical, Mitsubishi Pharma, Dainippon Sumitomo, Kyowa Hakko and Shionogi are among the top 50 drug companies in the world. The first three are among the world’s top 25 drug companies. Most of these majors were so far concentrating only on the Japanese market, with their patented drugs.
India’s attraction
According to a report by consultancy company PricewaterhouseCoopers (PwC), India is estimated to become one of the top 10 drug markets and will be worth $50 billion in the next 10 years. The country is currently at 14th position in the list of the world’s largest markets, with annual sales of $19 billion.
Takeda, Japan’s largest drug maker, with a history of 230 years and a turnover of ¥1,466 billion (Rs 78,700 crore), is likely to be the next major Japanese drug company to tap the Indian market. “We are considering expanding our business to India,” Oguri Mitso, spokesperson, told Business Standard in an e-mail.
He declined to reveal details. A week earlier, market sources speculated Takeda was in discussions to acquire the formulation business of Dr Reddy’s Laboratories. “Our plans are not related to Dr Reddy’s Labs,” clarified Mitso. A Dr Reddy’s spokesperson also ruled out sale of the domestic formulation business.
Astellas Pharma, the second largest Japanese drug maker, has started testing the Indian waters by launching a liver-kidney-heart transplantation drug in India. Astellas, which is not looking at generics business globally, will launch more products from its parent stable in the coming years, said Himanshu Dave, director, sales and marketing, of Astella’s Indian unit.
“We cannot give a time frame as of now, but we are evaluating the big opportunities in India,” he said.
Similarly, Dainippon Sumitomo Pharma, another Japanese drug maker has started an Indian office and will soon launch its operations, said industry executives.
Eisai and Co, another leading Japanese drug leader, is making India a major manufacturing hub for its global operations and is setting up a huge facility at Visakhapatnam, Andhra Pradesh, with an investment of close to Rs 1,900 crore. The facility is ready and is awaiting some regulatory approvals to start production, said industry sources.
These companies will first be confined to small operations to get a feel of the local market. Then, in a year or two, will go for large-scale investments including big-ticket acquisitions, said an industry observer.
