India: 2015’s M&A-savvy pharma sector eyes policy changes, robust US market

For the Indian healthcare and pharmaceuticals sector, 2015 was a year of healthy growth driven by mergers and acquisitions, and the bouncing back of domestic market growth. On the other hand, 2016 is seen as a year of hope for further growth boosted by a better US and domestic market, with many policy decisions lined up.

TRENDS TO WATCH

Bulk drug policy
To reduce India’s dependence on China, the government has promised to come out with a bulk drug policy by March. Bulk drugs, or active pharmaceutical ingredients, are the active raw materials used in a drug. India gets more than 75% of its bulk drugs from China. A boost for public sector enterprises, tax-free status for manufacturers and cluster development are likely to be the highlights of the policy.

A new ministry
The Narendra Modi government has promised to create a new ministry for pharmaceuticals and medical devices. The Central Drugs Standard Control Organization and the Drug Controller General of India—which exercise regulatory control over the import of drugs, approval of new drugs and clinical trials—are governed by the health ministry. The National Pharmaceutical Pricing Authority, which sets the price limit on essential medicines, comes under the ministry of chemicals and fertilizers. All these will be brought under the new ministry.

Marketing code
A mandatory code is set to replace the voluntary Uniform Code of Pharmaceutical Marketing Practices by June. This will prohibit the practice of drug makers offering gifts to doctors in return for prescribing their products. In 2011, the ministry of chemicals and fertilizers had backed away from such a mandatory code after protests from the industry. It needs to be seen whether this time around the government will not succumb to the pressure.

Online pharmacies
Regulation of the booming business of online pharmacies is also expected. The DCGI has constituted a subcommittee under the chairmanship of Maharashtra Food and Drug Administration commissioner Harshdeep Kamble to frame regulations for online pharmacies. The issue came into the limelight after 800,000 chemists across the country went on a nationwide strike in October against the move by the government to regularize the online sale of medicines.

Cap on trade margins
A cap on the margins that drug makers make on generic medicines sold through distributors is expected this year. The total business in these drugs, known as trade generics, is pegged at Rs.5,000-6,000 crore, or 5-6% of India’s total pharma market. In trade generics, the distributors appoint medical representatives to market products to doctors in rural areas, in addition to supplying to retailers. The Prime Minister’s Office has intervened on the issue as in some cases trade margins go up to 4,000%.

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(Infographic: livemint.com)

COMPANIES AND PEOPLE TO WATCH

Sun Pharma
For India’s largest drug maker, 2016 may be crucial as the impact of the $4 billion Ranbaxy acquisition is likely to be evident this year. Ranbaxy’s manufacturing units are under the US Food and Drug Administrations lens and Sun Pharma has to resolve these issues first as they are likely to impact its sales. It also has a warning letter from the US regulator over violation of manufacturing norms at its Halol facility in Gujarat.

Ipca Laboratories
The firm has lined up a strategy to shift focus from lower-margin businesses to the high-margin cardiovascular segment and central nervous system businesses. Ipca produces finished dosage forms and active pharmaceutical ingredients. Its formulation sales have shown improvement in the US and India. This is significant as around 76% of its revenue comes from the formulation business.

Dr Reddy’s Laboratories
Dr Reddy’s was in the news recently over a warning letter from the US regulator. India’s second largest drug maker got the warning relating to two active pharmaceutical ingredient manufacturing plants and a formulation plant in Andhra Pradesh and Telangana. With the company submitting a response to the letter, it remains to be seen how the future of these plants pans out in 2016.

Cipla Ltd
For Cipla, 2016 will be more about how it strengthens domestic sales and exports. Moreover, the recent acquisitions of two US-based generic-drug makers—InvaGen Pharmaceuticals and Exelan Pharmaceuticals—are likely to strengthen its presence in the world’s largest pharma market, and improve margins. The firm is also a bidder for a portfolio of US generic-products maker Teva Pharmaceutical Industries.

Lupin Ltd
The company is likely to see better growth in fiscal 2017 on the back of improved business in the US and the acquisition of New Jersey-based generics firm Gavis for $880 million. It expects Gavis’s sales to triple in three years to about $300 million. The company has also made some smaller acquisitions recently, such as Netherlands-based Nanomi, Mexican firm Grin, Brazilian company Medquimica Industria Farmaceutica and ZAO Bio Biocom in Russia, which may all turn out to be beneficial in the long run.

Also Read:

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India 2016: Fintech is booming & here to stay

This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.