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Indian cos capture bigger slice of US, European pie
Sanjay Pingle | Thursday, January 14, 2010, 08:00 Hrs  [IST]

Overcoming several odds, Indian pharma companies could capture a bigger slice in the highly regulated markets like the United States and Europe during fiscal year 2008-09. However, in the fast -changing global landscape, it will be difficult to maintain the same tempo of growth in the year 2009-10 in these markets. The recessionary conditions, volatile exchange rates, stringent regulatory norms, stiff competition from international giants, cost - cutting measures in several countries, patent litigations and the US healthcare reforms may put pressure on operations in highly regulated markets.

Despite these problems, the leading 15 Indian companies could increase their exports to the US and Europe by 35.7 per cent to Rs 20,151 crore during 2008-09 as against Rs 14,852 crore in the previous year. This worked out to 43 per cent of their revenues as compared to 38.9 per cent in the preceding year. Though the exports to the US and Europe of major Indian companies improved smartly during 2008-09, the same trend is not likely to continue in the current year as exports by Ranbaxy, Sun Pharmaceutical, Glenmark Pharmaceutical in the US and Dr Reddy's in Europe declined during the first few months of the current year. However, Lupin, Aurobindo, Cadila Healthcare, Wockhardt, etc have reported better performance on forex front.

The Indian companies are poised to tap the upcoming opportunities in these markets with higher approvals for research -based generic products. Several blockbuster drugs are going off-patent in near future and creating huge market for generic products. Indian companies are enhancing investments in Research and Development (R&D) to make use of the new opportunities and also updating their facilities to meet the regulatory norms. The Indian government is also offering its helping hand to increase export earnings by introducing the Special Economic Zone (SEZ) Act 2005 and Rules 2006.

Several Indian companies have set up their own subsidiaries in highly regulated markets and a few have also adopted mergers and acquisition root to enhance there presence in this region. Further, these companies entered into alliances with US and Europe based companies. The generic partnership arrangements and global cost advantage will help to boost revenues in the years to come.

The Pharmaceutical Exports Promotion Council (Pharmexcil) is now working on a project to promote exports of medicines to the top 10 export destinations viz., US, Russia, Germany, Austria, United Kingdom, South Africa, Canada, Brazil, Nigeria and Ukraine. The US is India's largest export destination and nearly one -fifth of the total exports from the country goes to the US market. The Indian companies have built up strong product pipeline and received several approvals for ANDAs and DMFs in the US during last few years. This will give significant mileage to face stiff competition.

The export earnings as per the Pharmabiz sample of 15 leading pharmaceutical companies in India have recorded smart gains of over 46 per cent in the US during 2008-09 and their exports scaled to Rs 12,212 crore from Rs 8,345 crore in the previous year. Similarly, exports to European market went up by 22 per cent to Rs 7,939 crore from Rs 6,507 crore. Thus, the aggregate exports to the US and Europe showed a noticeable growth of 35.7 per cent during 2008-09.

There were seven companies with aggregate exports of over Rs 1,000 crore in the US and Europe during 2008-09. DRL has captured the top position from Ranbaxy during 2008-09. Its exports to the US went up sharply to Rs 2,430 crore from Rs 1,150 crore in the previous year, a significant growth of over 111 per cent. Similarly, its exports to Europe moved up by 12.8 per cent to Rs 1,805 crore from Rs 1,600 crore. DRL acquired three companies viz. Dow Pharma's facility in UK, BASF's manufacturing facility in the US and Jet Generici SRL in Italy. These acquisitions are paying dividends and will act as building blocks for future growth. DRL launched sumatriptan, the authorized generic version of Imitrex in the US and this has contributed to Rs 719 crore sales during 2008-09. The company launched 16 new products in the US generic market.

During the second quarter ended September 2009, Dr Reddy's revenues from the US increased to Rs 430 crore from Rs 310 crore, showing a growth of 36 per cent. However, its revenues from Europe declined by 13 per cent to Rs 280 crore from Rs 330 crore on account of lower sales in Germany. Its revenues from Germany decreased by 21 per cent to Rs 220 crore from Rs 280 crore due to the AOK tender and the pricing pressure in the market. Its revenues from rest of Europe grew by 29 per cent to Rs 65.4 crore, largely contributed by UK with sales of Rs 43.6 crore.

Ranbaxy's exports to the US during the third quarter ended September 2009 declined sharply by 53 per cent to $ 44 million (Rs 213.8 crore) mainly on account of ongoing US FDA issues and the discontinuation of Omeprazole authorized generic. Its exports in Europe including Romania declined by 10 per cent to $ 67 million (Rs 326.5 crore). However, compared with the trailing quarter ended June 2009, sales grew by five per cent despite an intensely competitive business environment in Western Europe. Its sales in Romania declined by 25 per cent to $17 million due to new pricing regulations and liquidity crunch in the trade channels. Its aggregate exports to the US and Europe moved up by 54 per cent to Rs 4235 crore in 2008-09.

The sales of Sun Pharma's US subsidiary - Caraco Pharmaceutical declined to $ 126 million during the first half ended September 2009 from $ 230 million in the corresponding period of last year and it suffered a net loss of $2.8 million as against a net profit of $ 18 million. For the year 2008-09, Sun's exports to the US increased marginally by 8.7 per cent to Rs 1,495 crore. Similarly, Glenmark's generic business in the US declined by five per cent to Rs 349.17 crore from Rs 367.01 crore in the first half of 2009-10. However, its Europe sales went up by 328 per cent to Rs 13.53 crore from Rs 3.16 crore. The company recorded exports of Rs 848 crore to the US and Europe during 2008-09, showing a strong growth of 40.9 per cent.

Lupin maintained its upward growth momentum in the US and European markets with it contributing 32 per cent to net sales. Formulation sales to the US and Europe grew by 28 per cent to Rs 353 crore from Rs 277 crore. It expanded it brands business substantially with the acquisition of the US rights for Antara from Oscient Pharmaceuticals. The US generic business continued to register strong growth during the second quarter of 2009-10. Cadila Healthcare also improved its revenues in US and Europe by 91 per cent and 27 per cent to Rs 308 crore and Rs 117 crore respectively in the first half. As far as generic US market is concerned ,Cadila and its 21 partners are working on 118 products. So far it has commercialized about 23 products. For the European markets, it has 60 partners and registered about 400 plus products. Wockhardt's UK business grew by 17 per cent during the third quarter of 2009-10.

Though the Indian companies have set up a strong foothold in the US and Europe and competing successfully with international giants, the export performance in the year 2009-10 will be a challenging one for them. Considering the latest export performance of major companies, the margins will be under pressure and these companies will have to look out for newer marketing strategies in the coming years

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