Indian Drugmakers Move to Focus on Core Competencies

March 17, 2005

Rising competition in the local drug sector, largely prompted by price pressures and the onset of tighter regulation, is increasingly obliging Indian firms to consolidate their operations. A recent study by the Federation of Indian Chambers of Commerce and Industry indicates that more and more Indian firms are focusing on the industry's core competencies, which include low-cost manufacturing, world-class quality products and low-cost drug discovery.

Further, the local industry stands to gain from the fact that manufacturing costs are almost 50% below those of multinationals in the US and Europe, and that India's drug discovery costs are almost one-tenth that of the Western world.

Testimony to the trend is the merger plan announced by two Indian drugmakers, Glenmark Laboratories and TASC Pharmaceuticals. The latter company makes bulk active pharmaceutical ingredients and offers R&D services, while Glenmark is focused on biopharmaceuticals and niche products. According to company sources, the merger is intended to create an integrated discovery and biopharmaceuticals firm, primarily focused on the export market. Glenmark also has a formulation plant in Goa awaiting US FDA approval, potentially allowing economies of scale with TASC's bulk drugs business. The merged entity is expected to have annual revenues of some INR 5.9bn (US$135.48mn).

Nevertheless, it remains to be seen whether the trend toward greater consolidation in India's drug industry will create innovative companies capable of matching multinational rivals, especially in the more sophisticated areas of R&D.