In order to cut down the growing capital costs, global pharma companies are now increasingly investing in advanced pharma production plants in Latin America. As this region, which includes countries like Brazil, Mexico, Argentina, Chile, Colombia, Cuba, Peru and Venezuela, offer more bang for the buck, they are on the radar of a growing list of Indian pharma companies.
According to Jatish N Seth, president, Karnataka Drugs and Pharmaceuticals Manufacturers Association (KDPMA) and director, Srushti Pharmaceuticals Pvt. Ltd, Brazil is the most promising market, but steady growth in other countries make Latin America a viable proposition for investors.
With the region playing host to the annual CPhI event, the markets of Brazil, Mexico, Argentina, Chile, Colombia, Cuba, Peru and Venezuela are again in the limelight for industries interested in setting up pharma plants, suppliers of drug manufacturing and packaging machinery research equipment like analytical instruments, lab reagents, testing instruments, microscopes, weighing machines, active pharma ingredients, tableting & capsulation unit and packaging materials.
“CPhI is one of the great platforms to reach out to the customer for any manufacturer from pharmaceuticals to machineries. In fact, this event has made the world shrink in-terms of marketing, information sharing and dissemination of know-how. Participating in an event like this brings down the distances between customers and suppliers. We were present at the CPHI event in Mumbai in 2013 and we could find new market opportunities and generate new customers, Shreepad Hegde, managing director, Schematic Engineering Industries told Pharmabiz in an email.
“Stringent regulation coupled with high manufacturing cost and high labour charges are making the US and EU countries unviable for manufacturing for pharmaceutical products. BRICS nations particularly China are now the investment targets for all multinational companies for manufacturing. Already many of the pharma majors have moved their manufacturing base to these countries. Brazil, just like India having English speaking population, has been identified by global pharma majors for its low labour costs, which is one of the major advantages in production of pharmaceuticals. The governments in the Latin American region have taken up on priority modernization of legal frame work and put in place labour reforms. Going by all these efforts, there is no doubt, Sao Paulo is right choice for CPhI and most of the pharma manufacturers are eagerly looking forward to the event", added Hegde.
The Hyderabad-based manufacturer of rigid containment system equipment for pharmaceutical, chemicals, Schematic Engineering Industries also views the Latin America as a market with considerable opportunities for its business development.
“We are in the field of manufacturing of barrier isolators to handle cytotoxic and anti -cancer drugs. These products are classified as High Potency Drugs. Manufacturing these products in the US and Europe are now becoming more complicated and highly expensive due to the safety regulations and increasing cost of labour. Hence, for global pharma manufacturers, Brazil, India and China are the target nations while planning business strategies for expansion. These countries and particularly Latin America region is considered to be a manufacturing base for a wide range of products that are exported from here to global markets. These regions provide quality equipment at reasonable cost for manufacturers to set up a plant. We have a couple of orders already coming from Brazil and intent to be present at the CPhI event to meet more customers", pointed out Hegde.
In an earlier interaction with Pharmabiz, Ajay Bharadwaj, CEO, Anthem Biosciences, said that specifically Brazil and Argentina are very important markets. Indian pharmaceutical and biotechnology companies can make a big difference in Brazil in particular and South American markets in general. This is despite the mammoth presence of the multinational companies. India’s cost arbitrage and with the right partnering or acquisition, can help companies make a promising headway in the region.
Brazil, Russia, China and South Africa are very important as they are the emerging economies of the world. However the registration rules and requirements are different for each country. Brazil in particular is among the most important, because it has transparent rules and a higher health spends per person than most of the other BRICS nations. Brazil, like all other emerging countries, is keen to lower its cost of therapy and bring these treatments within the reach of its larger population, without compromising safety or quality. Indian biosimilars which have been extensively tested clinically and have gone through due process of registration are likely to win big in BRCS nations, said the Anthem chief.
At the BRICS summit at Fortaleza, Brazil, Indian Prime Minister Narendra Modi along with heads of Brazil Russia, China and South Africa agreed to establish a BRICS New Development Bank at Shanghai on the lines of the Washington-based World Bank. The bank will have initial capital of $100 billion that could increase to $100 billion, funded equally by each of the five countries. The move according to the pharma industry in Karnataka would ensure markets of BRICS to gain salience and pave way for further growth and development.
Sao Paulo is the largest city in Brazil. While Brazil is positioned as Latin America’s largest and fastest growing pharmaceutical emerging markets, the event at Sao Paulo would see increased networking with local drug companies to either collaborate or acquire. The pharma and biotech industry is now looking to spur new business opportunities after reeling under a restrained growth environment following the global economic crisis, said Archana Dubey Mitra, vice president, Exports Bal Pharma.
Bal Pharma is exporting generics to Chile and is working to enter Brazil with active pharma ingredients. In Columbia, it is generating sales with its IV fluids. However, we are now slow on the Latin American markets primarily because we are gearing up for a global regulatory audit for our Uttaranchal facility in north India. Once we get the EMA or MHRA certification, then our entry into new markets in Latin America will be on the cards. Currently, we intend to stay put in Chile and Columbia, said Mitra.
For Biocon , Brazil is an important market primarily because of the growing incidence of lifestyle disorders apart from cancer and kidney. There is a growing demand for leading to rise in organ transplants which require immunosuppressant drugs and biosimilars. Our affordable innovation through commercialization of immunosuppressant drugs not just for organ transplant but cancer and psoriasis are seen to be products for an emerging market, said Kiran Mazumdar-Shaw, chairman and managing director, Biocon Ltd.
Growth potential in Latam
The robust development in the region has been attributed to the favourable environment to invest, easy external financing conditions and growing domestic demand. The access to workforce has also increased the momentum of growth, according to a report by the International Monetary Fund on the Growth Momentum in Latin America.
Indian pharma industry attributes the easy communication in English as the biggest advantage of this region. The regulations and ease of approvals are challenging but nevertheless the ability to communicate with the officials is seen to major relief in international trade.
A stable economy with reduced risks, are seen to be a better environment to do business for Indian pharma which has seen Glenmark, Torrent, Aurbindo, Dr. Reddy’s Labs, Strides Arcolab, Claris Lifesciences, along with Ranbaxy, Cipla and others setting base in this region, said Sriram V Iyer, CEO, ValuGen Pharma .
Research and Information System for Developing Countries (RIS), a New Delhi based autonomous think-tank under the Ministry of External Affairs, report by Sachin Chathurvedi, states “ Brazil is among the India’s top five export destinations for pharmaceutical products. Indian exports of pharmaceuticals to Brazil have constantly expanded in the last decade. Indian pharmaceutical industry has been one of the top performers in Brazil and this dynamism was reflected in increasing presence of their products in export markets, particularly in countries like Brazil.
Key challenges
The market of Latin America is small but even with value-addition for pharma companies, these are seen to incur huge expenses to pay up dossier fees. It is also mandatory to submit reports of bio-equivalence studies which further escalate costs for trading in the Latin American region especially for the small and medium sized pharma companies, said the Bal Pharma associate vice president.
Moreover market size does not increase like the market opportunities.
Yet it is viable only for the large pharma who already have presence in the region to continue exports to the region. But for the new entrants, the trade barriers are the drug registrations costs ensuing from the dossier reports. Therefore, it would make a lot more business sense to pick and choose in this market, Mitra added.
The future of Latam markets
There is ample scope for the growth of generics in Latin America and it is preferred over Africa and Europe. Only the earnest can survive and succeed in the market .Brazil is a wonderful place to do business. If a pharma companies gets an entry into this country, it could make a fortune, said Mitra.
According to the RIS report, “the companies in the region are also expected to look at future collaborations in oncology, particularly blood cancer. Intas Biopharmaceuticals is an example of a firm eying the opportunities of India-Brazil collaboration in oncology through its Brazilian subsidiary.”
The access to trade, ageing population, growing infectious diseases especially HIV/AIDS calls for generic supplies from countries like India. Therefore, these markets are brimming with opportunities which Indian pharma cannot ignore, noted a section of pharma companies in Karnataka like Micro Labs, Bal Pharma and Biocon.