Lately Indian drug makers have become the ideal prescription for pharma majors, as one news report points out. This is very much evident in the present circumstances of licensing and merger & acquisition deals gaining ground between them. The research deal between Zydus Cadilla and Eli Lilly, according to a business daily, for the discovery and development of potential molecules against a novel target primarily in the area of cardiovascular research with potential milestone payment of up to $300 million and royalties on sales upon the successful launch of any compounds derived from the research programme is just one example.

The news report further tells that more such deals are a possibility for other research molecules. Another recent example is the global drug giant Pfizer’s licensing and supply agreement with Aurobindo Pharma to source a substantial number of generic drugs for sale in the U.S. and Europe.

India in the present circumstances seems to be a fertile playground for global pharma sector with an increased spotlight shifting to this geography over the recent past. With consolidation becoming the buzzword of big pharma, global players are increasingly looking at cashing in on the Indian option with interest being evinced in Indian pharma majors like Piramal, Wockhardt and Shantha Biotech. Sourcing strategies, mergers and acquisitions, collaborations etc. between Indian companies and multinationals are happening benefitting both the parties.

The pricing pressure seemingly has led the big pharma players to forego the manufacturing units and increasingly focus on manufacturing as a non-core option thus lending to outsourcing. This space is only going to get significant as the pressure is on big pharma to deal with drying pipelines and millions of dollars worth of drugs going off patent in the coming few years making generics dominated India a potential goldmine. In addition an expert view is that there is realisation among foreign pharma firms that future growth will come from emerging markets and as there is a lack of basket of products for emerging markets (generics), multinational pharma are desperately looking for opportunities to acquire or form strategic alliances with Indian companies to source generic products.

Dominated by volume sales and thin profit margins, the generics business was not an attractive business proposition for most innovator companies until a few years earlier. Innovator multinational companies worried over plummeting profits and business due to the dwindling new drug pipeline and existing drugs going off-patent in the near future, are looking at containing costs and additional revenue streams.

The growth in sales of the top 15 multinational pharma companies was just 1.2 per cent, at $369.72 billion, in 2008. And, net profit also grew just by 1.2 per cent to $94 billion, according to a study by an industry magazine. The study also said seven of 15 top companies cut their research and development expenditure, last year. The global generics market will grow to $140-150 billion by 2015, due to $105 billion worth of drugs going off-patent in the near future, according to an estimate.