Alembic plans formulations unit in Sikkim

After Zydus Cadila and Torrent Pharma, Gujarat-based Alembic is planning to set up a formulations unit in Sikkim.

Confirming the development, Chirayu Amin, chairman and managing director, Alembic, said work on the project is on. "The project is likely to cost Rs 40 crore," he added.

The 100-year-old company is also planning to set up a pharma special economic zone (SEZ) near Vadodara. Amin, however, refused to divulge details about the project.

The project will come up on a 200-acre land near Vadodara, sources close to the development said. The company will set up bulk and formulations units in the SEZ.

Alembic plans to set up its own SEZ

Alembic, the oldest pharmaceutical company in the country, has decided to set up its own Special Economic Zone (SEZ) dedicated to the pharma sector, its Chairman and Managing Director Chirayu Amin said today.

The land for the proposed SEZ is located at Kavi and Nahar village on the Mahisagar Tidal sanctuary, about 60 kms from here, Amin told PTI.

This will be a single sector SEZ focussing on meeting the requirments of the pharmaceutical industry for the entire spectrum of naturally Derived/Biologically-developed/ Semi-Synthetically-developed/Synthetically-developed drugs and their succeeding formulations and dosage forms and preceding intermediates.

The manufacturing of Penicilin using indigenously developed technology was considered as incredulous until Alembic took up the challenge and proved that it could be done, Amin said.

Manufacturing of high quality glass containers and tableware on automatic lines for the first time in the country was a highly successful venture and subsequent foray into premium quality crystal and cut glass products was so far ahead of its time that the market was not quite ready for it.

The growth of the Indian economy with significantly improved GDP and comsumption levels is good for the domestic pharmaceuticals industry as more customers are entering organised health care as they can afford more medicines, Amin said.

"This is very important and advantageous for a company like Alembic which has its domain strength in acute therapy segment since this would be the first line of defence," he said.

Alembic to foray into US, European markets

The 100-year-old Alembic, one of the oldest pharmaceutical companies in India, plans to enter the regulated US and European markets in a big way, with a target of an annual turnover of Rs 1,000 crore within three to five years.

The company has already filed six abbreviated new drug applications (ANDA) with the US Food and Drug Administration (FDA).

The US regulator has already inspected its formulation and active pharmaceutical ingredient (API) or bulk drug manufacturing facilities in Baroda, said Pranav Amin, director, Alembic.

“Though our entry into the US and Europe market was a bit late, we plan to aggressively tap these markets in the coming years. We will file an average 10 drug master files (DMF) and 10 ANDAs with the regulatory agency in the US, every year,” he said.

Pranav is the eldest son of Chirayu C Amin, chairman and managing director of the Rs 750 crore plus Alembic (for the nine months ended December 2007). It was started in 1907 in Baroda as Alembic Chemical Works and manufactured cough syrups, tinctures and alcohol.

The strategy for the US and Europe will be to rope in marketing alliances with leading multinational pharmaceutical companies. Alembic has already signed two to three strategic partnerships for the US market, he said.

Alembic, which acquired the oncology business of Dabur Pharma, last year, is also looking at acquiring brands or marketing facilities in the domestic market, Amin said.

The acquisition helped Alembic, a predominant chronic therapy drug manufacturer, to foray into lifestyle diseases with a portfolio of 24 brands and a marketing force of 400 people.

Currently, Alembic is re-organising the business of the acquired assets, including plans of own manufacturing at Alembic sites in future, he said.

Pranav said the company will set up two new units, a greenfield manufacturing facility at Sikkim with an investment of Rs 20-25 crore for the domestic formulation business and another API facility at Baroda with an investment of Rs 15 crore.

Alembic, which has about seven products in the top drug brands in India with a turnover of more than Rs 10 crore per year, plans to tap the potential in the rural markets. The company will launch at least 20-30 new brands every year in the domestic market, he said.

Its lead brands such as an erythromycin pain killer Althrocin with sales worth Rs 66.70 crore, Roxid (Roxithromycin) with Rs 60.13 crore and anti-infection drug Azithral with Rs 47.21 crore in 2006-07 are among the top-selling drugs in the domestic market.

Indian Pharma giants change strategy

Indian pharmaceutical majors, such as Ranbaxy Lab and Dr Reddy's, are changing their tactics to concentrate on brand acquisitions and strategic investments rather than risky big ticket cross-border acquisitions to boost their global business. Year 2007 witnessed only 25 M&As with 15 cross border transactions with an estimated value of about $ 600-700 million in the Indian pharmaceutical sector. (This figure excludes Sun Pharma's unsuccessful attempts so far since March this year to take over Israel's Taro for $ 454 million).

The domestic pharmaceutical companies had executed more than 40 deals with 32 cross-border transactions worth about $2,000 million in 2006, including big ticket deals like Dr Reddy's acquisition of Betapharm of Germany for ¤480 million (Rs 2,550 crore) and Ranbaxy's Terapia buy in Romania for $ 324 million (over Rs 1,250 crore), according to industry observers.

The major pharmaceutical M&A deals in 2007 were Wockhardt's acquisition of the French company Negma Laboratories for $ 265 million (Rs 1,045 crore) and the US-based Morton Grove Pharmaceuticals for $ 38 million (Rs 150 crore), Jubilant Organosys's acquisition of Hollister-Stier Laboratories of the US for $122.5 million (about Rs 500 crore) and Alembic's buyout of the entire domestic non-oncology formulation business of Dabur Pharma for Rs 159 crore.

Industry experts cite relatively small deals like Lupin's acquisition of Rubamin Laboratories, Baroda to enter into the contract research and manufacturing services (CRAMS) business and Zydus Cadila's buyout of Liva Healthcare of Mumbai to strengthen its dermatology product portfolio as glaring examples of an emerging trend of brand and strategic buyouts.

"Focus on brands will be an emerging trend in future, both for domestic companies and overseas firms looking at India. Almost all companies are strategising innovative opportunities that suit them to build brands in India as big deals become more expensive," said Shailesh Gadre, managing director, ORG-IMS, a leading market research based consulting company.

Experts also said that most of the domestic deal activity so far is focused on small asset or brand purchases with the exception of the Liva and Dabur deals and are yet to see domestic consolidation in the mid-cap or large-cap space.

"This can only be driven by farsighted boards that put senior managements through a systematic internal and competitive review, scenario planning and regular review of progress against corporate goals. Rationale for domestic consolidation requires more analysis than cross-border transactions but can have a significant impact if the right parties come together," said Rajiv Shukla, executive director of Avendus Capital and a seasoned pharmaceutical M&A expert in Mumbai.

Ranbaxy, which executed five cross-border acquisitions in 2006 (Ethimed of Belgium, GSK's facilities in Spain and Italy, Terapia and Be-Tabs of South Africa) refrained from any acquisitions in 2007. Instead, it made a strategic investment in the Hyderabad-based upcoming company Zenotech Laboratories to hike its equity stake to 45 per cent for Rs 214 crore. The investment was to access Zenotech's pipeline of specialty injectibles, cancer and off-patent biotechnology drugs. Though Ranbaxy was in fray to acquire the generics business of Merck KGaA, it withdrew from the bid mid-way due to the high valuations. Dr Reddy's and Ahmedabad based Torrent were also reported to be in fray for Merck Generics assets, which was eventually taken over by Mylan Laboratories of US for $ 6.6 billion.

Similarly Dr Reddy's Laboratories, which is yet to recover from the Betapharm acquisition due to various reasons and Aurobindo, which acquired a manufacturing unit in the US and Milpharm of the UK in 2006, did not buy any new facilities in 2007.