Pharmabiz
 

BEGINNING OF A DECLINE

P A FrancisWednesday, February 25, 2009, 08:00 Hrs  [IST]

It seems the good days of Indian pharmaceutical sector are over. The promoters of the major Indian companies are losing interest in this industry and are getting out of it. The first clear indication of this dangerous trend was noticed when promoters of Hyderabad based Matrix Labs sold of their entire stake to the US based MNC, Mylan Laboratories, for a sum of Rs 3238 crore in 2006. Then came the big shock of the sell off of India's No 1 pharmaceutical company, Ranbaxy, to the Japanese multinational, Daiichi, last year. Soon after came the reports of possible sales of the controlling stakes in Cipla and Dr. Reddy's Labs to some other MNCs. But there were no confirmations to these reports so far. Of late, there are reports of promoters of Piramal Healthcare selling of their stakes in the company. Piramals, however, have denied any such move. Meanwhile there are repeated media reports of a serious financial crisis faced by Wockhardt, another pharma major. Huge debts the company has and a sharp drop in its share price have made the promoters quite vulnerable and shaky. All these are large and prestigious Indian pharma companies which were boasting of their capabilities in new molecular research and acquisition of companies abroad just a couple of years ago. Financial health of half a dozen remaining Indian pharma companies is also not good since last year due to fierce competition in generic market and with current global economic crisis. A recent Pharmabiz study of 50 top Indian pharma companies confirms this unhealthy trend with their net profits declining by 18 per cent during the first nine months of the current year. Based on their performances so far, the net profit of these companies should be under pressure and can decline by over 15 per cent during the whole of 2008-09. What went wrong with these torch bearers of Indian pharmaceutical sector all of a sudden? Is it the fierce competition in the US generic market the reason for this loss of confidence and interest? Or is it the desperation out of continued failure of these companies in new molecular research. It is a fact that a dozen of India's top ten pharma companies had spent Rs 5000 crore or more for new drug research during last ten years with no prospects of any major breakthrough. Now with tougher regulatory norms for new drug approval worldwide, prospects of getting any new molecules to the major markets are grim. An inevitable outcome of this trend is the re emergence and domination of the multinational drug companies in the Indian pharmaceutical space. That is bound to create an environment of high prices for essential drugs and launching of several therapeutically useless drugs in the Indian market. India's patients community and the government have to seriously ponder about such an eventuality and initiate steps to prevent it from happening.

 
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