After more than 5 years of FDA regulatory issues kept Ranbaxy Laboratories from generating the kind of cash it once had, owner Daiichi Sankyo threw in the towel. It recently sold the Indian generics maker at a loss to Sun Pharmaceutical and moved on down the road. Analysts say a tougher regulatory world is, in fact, remaking India's vast drugmaking industry.
The fact that Ranbaxy, Sun and Wockhardt have had plants banned by the FDA has prompted some of India's biggest drugmakers to boost investments in new equipment and training in hopes they can avoid a similar fate. Consultants tell Reuters those investments now are reaching between 6% and 7% of sales. But that is a hefty lug for small to medium-sized Indian companies without deep pockets. Insiders say those companies are calculating whether to just focus on smaller, less profitable markets than the U.S. and Europe, or selling out all together.
|Cipla CEO Subhanu Saxena|
Markets like Latin America offer growing demand and perhaps less oversight, but also thinner margins. "If they want to have a presence globally, they have to make investments," Subhanu Saxena, CEO of Cipla, India's fourth largest drugmaker, tells the news service. "If they can't, then they'll have to focus on other markets or scale back their ambition outside of India, and that's probably what will happen."
Statistics indicate that the investments in quality that some drugmakers have made may be paying off. Last year, bans were issued by the FDA against 8 Indian drugmakers, down significantly from the 21 that were issued the year before, when Ranbaxy and Wockhardt each had two plants added to the list, moves that whacked their revenues.
But that is not to say the FDA isn't still finding significant problems with some Indian plants. It issued a ban against an Aarti Drugs plant earlier this year and inspectors reportedly found problems in May at a Claris Lifesciences plant. That came just weeks after reports that Claris was close to a deal to sell its generic sterile injectables business to India's Zydus Cadila.
Ashok Anand, president of Mumbai-based Hikal, tells Reuters some of his peers have indicated they are looking for buyers rather than having to make large investments. "If they cannot deal with the stricter regulations, they might just prefer to sell out," he said.
- read the Reuters story