As he writes, Indian companies now need to weigh up their options carefully. Should they reach out to partner with Big Pharma in key markets? Or are nimble, cost-conscious Indian companies ready to take on the giants themselves?

Tarun Shah, Asia Head of Mehta Partners, the strategic business advisor to Japan's Daiichi Sankyo in its 2008 acquisition of Ranbaxy, is brutally frank: he does not think that the likes of Sun, Zydus Cadila and Cipla should partner with "big elephants". Generics is a new game for Big Pharma and their decision-making processes can be expected to be "dead-slow", Mr Shah argues.

For its part, Sun's approach has been to grow its businesses on its own. However, the company says there need not be a clear-cut decision between Indian firms remaining completely independent or fully embracing the partnership model. Depending on the markets in question, firms could go for a mixed strategy, Sun Pharma says.

RD Joshi, Director of Business Processes at the Indian pharmaceutical and healthcare consultancy Interlink, points out that companies such as Ranbaxy and Sun have recently been beset with quality issues (mainly concerning cGMP glitches and consequent FDA action), adversely affecting their aggressive marketing of generics. Thus partnerships may be the way forward. "Even in emerging markets, issues of safety and effectiveness will not be compromised and regulatory norms will get harmonised. In view of this, it should be a preferred business model where Indian companies partner with large globally-established companies for better synergy and scale-up. Global companies can expand [into new] markets without additional costs", he said.

Sanjiv Kaul, Managing Director of ChrysCapital, an India-focused investment firm and formerly a member of Ranbaxy's senior management team, adds another dimension to the debate. He believes that Indian players have carved out a "dominant niche" for themselves in the world of generics and expects original research companies (ORCs) to reach out to Indian players that are looking for an exit. Because Indian generics players such as Zydus Cadila, Cipla, Lupin and Sun Pharma are more efficient at running generics businesses, they will remain key potential targets for innovators. "At the end of the day, it is the valuation that the ORC [is willing to] pay that will determine whether the deal will be consummated", Mr Kaul said.

According to Mr Ghangurde, the jury is still out as to the best way forward for Indian firms, but it is clear that the generics space will pose challenges for firms both large and small. “There can be no business pariahs in this game”, he concludes in Scrip News. (see also Big Pharma finally warms to generic pariahs, Big Pharma’s strategic detour into generics, How easily will Big Pharma slip into generics ‘avatar’? and Big Pharma’s generics entry and generic drug prices)

Reference:

Anju Ghangurde. 2010 Scrip 100: Big pharma finally warms to generic pariahs. Scrip News/2010 Scrip 100. 2009 December 9.