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Pharma set for small buys in ’08

Indian pharmaceutical firms are set for sunnier days ahead with the possibility of new drug discoveries and outsourced research from multinational drug companies in 2008, reports Suprotip Ghosh

business Updated: Dec 26, 2007 22:04 IST
Suprotip Ghosh

Indian pharmaceutical companies are set for sunnier days ahead with the possibility of new drug discoveries and outsourced research from multinational drug companies in 2008.

Nicholas Piramal, Glenmark, Dabur, IPCA Labs, Cipla and even Sun Pharmaceuticals could provide enough reasons for a brighter year ahead for the sector.

“This is the first time that India’s capability to discover new drugs and successfully carry out contract research is being recognised,” Ajay Piramal, chairman, Nicholas Piramal India, told Hindustan Times.

The Indian pharma industry has been a bit of a no-show in 2007 and stock prices of most companies showed signs of a recovery only by the end of November. Mergers and acquisitions activity has been low, other than the ongoing tussle of Sun Pharma with Taro Pharma’s minority shareholders.

Sun Pharma is fighting a court battle with Franklin Advisors and Templeton, who have alleged a lack of clarity in the $454 million (Rs 1,781 crore) deal to buy the Israeli maker of cheaper medicines.

However, some good news from the Bombay Stock Exchange's came from the fact that the BSE Healthcare Index (an index of 25 of India’s largest and best drug companies) indicated that companies gained 13.9 per cent since November 29. The benchmark for pharmaceutical companies closed at 4,315.91 at close of trade on Wednesday. A Chennai-based analyst said the performance is likely to continue through January 2008.

On the sales front, the domestic market grew at 12 per cent in 2007. While the rate is healthy, growth was mired in controversy. Concerns over the regulations in the new drug policy have kept most Indian companies on the edge.

Prices of medicines sold by major Indian companies have been in focus for most of the second half of 2007. The Drug Prices Control Order (DPCO), which lays out prices for most medicines widely available in the country, has proposed to increase the number of drugs under the DPCO-1995 to 354 from the current 74.

There was also debate over the ministry of health and family welfare decision to arm the Drugs and Cosmetics Act to deal with combination drugs known as Fixed Dosage Combination (FDC). As of today, the ministry wants combination drugs to be treated as new drugs and dealt with accordingly. Many life saving drugs are combinations like Cipla’s Combivir, a medicine for the treatment of AIDS.

Mergers and acquisitions too have turned mostly strategic, feels Piramal. “M&A would be mostly small and highly focussed for more companies in 2007. We do not expect big ticket M&A to come back in 2008,” he added.

According to research by BioSpectrum Asia, the value of deals in the pharma sector in Asia Pacific in 2007 was $8.4 billion, almost twice the value of $4.7 billion a year ago, with the number of transactions totalling around 37 deals in the first 7 months in 2007 as against 57 deals in 2006. In spite of the fact that the deal size of at least 12 transactions has been unavailable, Asian pharma M&As saw a jump in its total share of the global pharma M&A pie from 23 per cent in 2006 to 30 per cent in 2007.