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Pharmaceutical firms opt for inlicensing to push sales

May 15, 2008 14:47 IST

Ranbaxy Laboratories, Dr Reddy's Laboratories, Nicholas Piramal and other pharmaceutical companies are betting on inlicensing or strategic marketing tie-ups to help grow local sales after India banned copying of patented drugs.

According to analysts, Indian drug makers are forging alliances with overseas companies such as CD Pharma, Gnosis SpA, Crawford Healthcare and Syrio Pharma to sell drugs for chronic and acute cases.

These companies are doing so because it fetches higher profits vis-a-vis investments and is less risky after the world's second most populous nation adopted drug patents in 2005.

"The margins for exclusively inlicensed patented drugs are higher at about 25-35 per cent and most inlicensed drugs may not face competition. The marketing expenses of these companies will also be less as they already have a large, dedicated network to penetrate different parts of India," noted Ranjit Kapadia, Head of Research (Pharma), Prabhudas Lilladher.

Ranbaxy, which has the highest number of brands featuring among the top 30 launches over the last two years as per the ORG-IMS data, launched 12 new products during the last quarter.

As a result, its domestic market share increased  from 4.82 per cent to 5.05 per cent in the December 2007-February 2008 period, a growth of 23 per cent. In the quarter ended March 2008, the company's domestic business increased by 16 per cent compared to the corresponding quarter last year.

Ranbaxy's new offerings include a novel bio-generic product, Bonista -- a hormone injection to treat osteoporosis. Bonista was launched in collaboration with Virchow Biotech of Hyderabad. The company also licensed a dental drug, Inersan, from CD Pharma to market in Nepal and India.

According to a KPMG report, the domestic pharmaceutical market is expected to grow at a compounded annual growth rate of 16 per cent to touch $11 billion over 2007-2011.

A Crisil Research study also indicates that key therapeutic categories such as cardiovascular drugs (13.5 per cent), anti-diabetic (13 per cent), gastro-intestinal and central nervous system (CNS) drugs (12 per cent each) will grow higher than other categories till 2011.

In February this year, Dr Reddy's Lab entered into collaboration with the London-based SkyePharma to develop a drug based on two of its drug-delivery systems.

A month earlier, Dr Reddy's also inlicensed Supanac, an acute pain management drug from Applied Pharma Research (APR) of Switzerland, to tap the Rs 2,700 crore (Rs 27 billion) domestic pain-management market.

As per ORG IMS' November 2007 data, the company recorded a growth of 13 per cent in domestic drug sales.

Similarly, Wockhardt's domestic market share increased by 24 per cent in Q1' 2008, compared to the corresponding quarter of the previous year. The company had brought in five inlicensed drugs last year, mainly in the dermatology and osteoarthritis segments.

Nicholas Piramal, which had earlier inlicensed drugs for the Indian market from companies such as Eli Lilly, Ethypharm and Genzyme Corporation, recently struck two joint venture marketing alliances to tap the diagnostics market in India.

Its domestic branded formulations business grew by 17.9 per cent in the fourth quarter of 2007-08. The company is now planning to strengthen its domestic marketing set-up with significant investments, according to chairman Ajay Piramal.

Further, inlicensing is an easy option. It's always easier to market drugs than manufacture the same. It also saves time and research expenses. Most of the deals which are renewable, are for about 3-5 years.

"It is a win-win situation for both the parties since the licensing partner gets an opportunity to enter a market where it lacks a marketing set-up," noted Angel Broking sector specialist Sarabjit Kaur Nangra.

P B Jayakumar in Mumbai
Source: source