Multinational drug makers such as Pfizer and GlaxoSmithkline are planning large-scale forays into generic manufacturing or the reverse-engineered cheap drugs business, threatening the growth prospects and survival of Indian generic companies such as Ranbaxy Laboratories, Dr Reddy’s Laboratories and Sun Pharma and global generic leaders like Teva, Sandoz and Mylan.
Pfizer, the world’s largest drug company, which recently tied-up with Hyderabad-based Aurobindo Pharma to market off-patent drugs in the US and Europe, is planning to develop its own new generics, licensing deals and buy-out of generic companies. The company already has a small generic arm, Greenstone, to market its own off-patent drugs.
Glaxo Smithkline, the world’s second largest drug company, is eyeing a stake in South Africa’s largest drug firm, Aspen Pharmacare, and is speculated to acquire Piramal Healthcare. French drug giant Sanofi-Aventis, also in the race for Piramal Healthcare according to reports, has acquired the Czech generic drug maker, Zentiva, for $2 billion. India’s largest drug maker, Ranbaxy, was acquired last year by Japan’s Daiichi Sankyo. Novartis already owns Sandoz, the second largest generic drug company after Israel-based Teva Pharmaceuticals.
“Multinational drug makers realise that future growth prospects are in emerging markets, where generics dominate. While developed markets like the US and Europe are stagnating with 1-2 per cent growth, emerging markets are growing at 12-14 per cent annually,” said D G Shah, secretary-general of the Indian Pharmaceutical Alliance (IPA) and former chairman of the International Generic Pharmaceutical Alliance (IGPA).
Germany-based Merck KGaA, the oldest multinational pharmaceutical company, is targeting to acquire a prominent Indian pharma company and established drug brands, as part of its target to earn over Rs3,200 crore from its Indian operations within the next four years, Marek Dziki, managing director of Merck India, recently told Business Standard.
Dominated by volume sales and thin profit margins, the generics business was not an attractive business proposition for most innovator companies until a few years earlier. Innovator multinational companies, worried over plummeting profits and business due to the dwindling new drug pipeline and existing drugs going off-patent in the near future, are looking at containing costs and additional revenue streams.
The growth in sales of the top 15 multinational pharma companies was just 1.2 per cent, at $369.72 billion, in 2008. And, net profit also grew just by 1.2 per cent to $94 bn, said a study by the industry magazine, Pharmabiz. The study also said seven of 15 top companies cut their research and development expenditure, last year.
The global generics market will grow to $140-150 bn by 2015, thanks to $105 bn worth of drugs going off-patent in the near future, according to a YES Bank estimate.
