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 Agency.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.set up facilities.
"CIS markets have huge potential and the eyes of multinational pharmaceutical companies are already being directed toward them," she adds. "Currently, India is the third largest exporter of drugs and pharmaceuticals to Russia.
"The CEE is also a fast-growing generics market itself with consumption of pharmaceuticals still being much lower than in Western Europe," she explains. "Thus Indian companies, like other foreign companies, are interested in supplying that market as well."
Indian companies could establish a large manufacturing presence in Europe, perhaps ultimately similar in size to that set up by US pharmaceutical producers in Europe in the 1960s and 1970s. Unlike their US counterparts a few decades ago, however, multinational Indian companies will not have to restrict themselves to Western Europe but will be able to spread across the entire continent.
Sean Milmo is a freelance writer based in Essex, United Kingdom.