INTERNATIONAL EXPANSION DRIVE DIVIDES INDIAN FIRMS

Amid signs that the drive to expand R&D activity and tap foreign markets is proving a severe drain on the financial performance of many large Indian drug firms, some drugmakers are opting to drive expansion from a solid base in the core domestic market.

Despite a string of poor first-quarter results, Indian firms' R&D investment has continued unabated, rising 25% year-on-year in the period. This reflects the move into developing ethical pharmaceuticals amid the country's tighter patent regime, but some are wondering whether the spending - and its outcome - will ever match that of foreign rivals. Further, the cost of overseas drug launches is also impacting results.

Nicholas Piramal (NPIL), India's second-largest healthcare company, has gone against the roadmap set by its peers. The company's CEO says its strategy is to cooperate rather than compete with multinationals, offering a range of services from custom manufacturing to contract research.

However, even this apparently less risky strategy is not certain to yield better results. Companies such as NPIL could benefit from gaps in the market left by the ongoing contraction in the small-scale manufacturing sector, but it remains to be seen whether multinationals will prefer to manage their own production in India. It appears that - as is the case with other firms - building an efficient export capacity will be of critical importance.