Sandoz eyeing Indian acquisition?

Sandoz and arch-rival Teva Pharmaceutical Industries have been playing leapfrog for the title of the world's largest generics company, thanks to a series of company acquisitions. Now, Sandoz is said to be planning to acquire a mid-range Indian pharmaceutical company in a move that will bring it back to the top, and boost its presence in the $8 billion Indian pharmaceutical market.

Cipla, a company Novartis tried to acquire in the late 1990s and which was linked to talks with Teva earlier this year (along with Ranbaxy and Dr Reddy's Laboratories), is the name that seems to be on everyone's lips, according to India's Economic Times newspaper.

That Sandoz should be interested in an acquisition in India comes as no surprise. The generics sector depends on low-cost manufacturing, and India offers this as well as technological sophistication that is arguably unmatched by any other region outside the big three pharma markets of the US, Japan and the European Union.

The US Food and Drug Administration has approved more than 60 manufacturing plants in India, the largest number in any country other than the US - and their costs are estimated at just one tenth of an equivalent plant in the west. Meanwhile, a chemist's salary in India is around an eighth of a US counterpart, while Indian companies can employ four PhD scientists for the cost of one in the US or Europe.

Moreover, Indian companies have started to dominate the entire market in terms of the number of applications for Drug Master Files, dossiers filed with regulatory authorities which allow the ingredients they describe to be used 'off-the-shelf' in generic products.

If they have not done so already, Sandoz and Teva are likely to soon feel margin pressure from Indian companies expanding into their 'home' territories - especially the US and Europe - and smaller Western generics houses such as Watson Pharmaceuticals which have forged alliances with Indian producers.

Teva has bought into this type of alliance via its proposed $7.4 billion acquisition of Ivax, which has co-development agreements in placed with Cipla and two other Indian companies, Wockhardt and Nicholas Piramal.

To date, Sandoz has operated in India mainly on its own behalf, and has made significant investments in its manufacturing there. It recently opened a manufacturing facility in Navi Mumbai, to complement its three existing plants, and is currently building a new unit in Mahad, Maharashtra, that will come on-line in 2007.

Flooding hits Maharashtra pharma sector​

Meanwhile, pharmaceutical producers in Maharashtra, and particularly around the capital Mumbai, have been hit hard by serious flooding which followed record rainfall last month.

The All India Association of Industries has estimated the direct losses to all industries at 40.0 billion rupees. And it is a measure of the importance of the pharmaceutical sector to the region that this industry alone has suffered losses of around 10 billion rupees, according to Ranjit Shahani, president of the Organisation of Pharmaceutical Producers of India.

And Sandoz' rumoured acquisition target, Cipla, is among those companies affected by the flooding. The firm's joint managing director Amar Lulla told The Hindu newspaper that his firm has had to source medicines and essential drugs from other locations, such as Goa and Indore, to serve the region around Mumbai.