Generics business

Further, with growing competition from Asian peers, the Indian players are learning how tough the generics business can be, the hard way. Generics is one space that has seen killing price wars (particularly in the US). This is despite the fact that China, the undisputed master of the pricing game, doesn’t account for much in the global pharma sweepstakes. “In generics space, the competition from Chinese counterparts is currently limited to the API space. Hence currently the pricing pressure is limited only to the API space, while the formulation space is still dominated by the Indian companies. However, Chinese players can increase the level of competition in the formulation space anytime soon,” prophesies Sarabjit. And even though they are enjoying their day in the sun, these firms still lack the financial and R&D muscle of the global Big Pharma – indeed their final destination. Thus, in this scenario, consolidation happens to be real churner for them. “ R&D is a high risk activity requiring large scale funding & a strong talent pool to bring a drug to market. All these factors are likely to prompt a consolidation in the industry. And as the industry matures, it is bound to happen,” Sujay Shetty, Associate Director, Financial Advisory Services Pharma & LifeSciences, PwC shares with 4Ps B&M.


However, this is not the only reason. “Mid size companies with small promoter’s stake are anytime vulnerable to predators. No doubt, the domestic consolidation is long due in the Indian pharmaceuticals industry and it just needs a trigger to shoot up,” Shetty adds on. Further, with concerns related to economic slowdown and a history of failed overseas acquisitions, Indian companies now seem to have realised that though it’s exciting to buy big companies abroad, the real synergies are hard to achieve and in this scenario the next best option is to look for something in your own courtyard.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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