Report from: Europe
by Sean Milmo
A wave of pharmaceutical expansions is expected in Europe this year, surprisingly by Indian companies. Their goal is to use
the region as a production base for supplying the global market—particularly North America—with active pharmaceutical ingredients
(APIs) and intermediates. In the past two years alone, Indian companies such as Dr. Reddy's Laboratories (Mumbai) have used
acquisitions to build a strong presence in the European generics sector. Among the biggest deals have been Dr. Reddy's $690-million
takeover in February 2006, of Betapharm, Germany's fourth largest generics player, and Mumbai-based Wockhardt's $265-million
acquisition of Negma, France's fourth biggest integrated pharmaceutical company, in May 2007. In fact, Wockhardt has taken
the lead as the largest Indian pharmaceutical company in Europe, with 1500 staff.
Now there are signs that Indian companies desire a significant position in contract manufacturing in Europe. They plan to
grow production capacity via outsourcing, partnerships, and acquisitions.
Bangalore-based Avesta Biotherapeutics and Research Pvt. Ltd (ABRPL), a joint venture between Avesthagen (Bangalore) and Meditab
Specialties of the CIPLA Group (Mumbai), acquired the biologics operation of Siegfried GmbH in Switzerland with the aim of
strengthening its biopharmaceutical contract-manufacturing activities. The move fits in with ABRPL's strategy of being able
to meet the manufacturing standards of both the US Food and Drug Administration and the European Union's European Medicines
These deals demonstrate a reversal in a trend of European pharmaceutical companies manufacturing their APIs and intermediates
in India. "Indian companies are now outsourcing APIs from Europe because of the advantages of having products in both the
North American and European market which are made in European plants and have been approved by the EU plant inspection agencies,"
said Roger Laforce, marketing and sales general manager for Fabbrica Italiana Sintetici (FIS), a leading Italian advanced
intermediates producer, at the 2007 ICIS Fine & Specialty Chemicals conference in Hamburg, Germany. "We're now making APIs
for Indian companies."
Manoj Dutt, managing director of Solaris Chemtech (Gurgaon, India), said on the sidelines of the conference that, as Indian
companies become global operators in the production of APIs and intermediates, they will inevitably want to have production
facilities in Europe.
"As they expand internationally, Indian [companies] want to make use of the technological expertise of European fine chemical
companies by, if necessary, taking them over," he added. "They also want to benefit from the close relationships which European
fine chemical producers have with the large Western pharma companies. Some of the European fine chemical companies seem content
to restrict their activities to Europe because of these close ties with Big Pharma."
Indian pharmaceutical companies are targeting Central and Eastern Europe (CEE) for expansion because the area provides a platform
for exporting into Western Europe as well as into the neighboring Commonwealth of Independent States (CIS), including Russia.
A number of Indian companies are already making their move. Ranbaxy (Gurgaon) acquired Terapia S.A., Romania's largest independent
pharmaceuticals company, for $324 million in 2006. Sun Pharma (Mumbai) bought ICN Hungary, a producer of controlled substance
APIs in 2005. And, Strides Arcolab (Bangalore), a leading Indian specialist in the production of finished generic medicines,
has established a regional production base for making dosage-form pharmaceuticals in Warsaw, Poland, which will also be part
of the company's global manufacturing network.
"Production costs in CEE countries are cheaper than in Western Europe where there is a general trend to move production facilities
from western to eastern countries, especially to Hungary and Poland where there is a strong base of qualified employees,"
says Aleksandra Jargot, an analyst at Frost & Sullivan, a market research organization headquartered in London.