Indian pharma's struggle to tighten standards paves way for M&A deals

Sun Jun 28, 2015 5:07pm EDT
 
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By Zeba Siddiqui

MUMBAI (Reuters) - India's smaller generic drugmakers, struggling to cope with a bruised reputation and tougher regulation in the United States, are under pressure to consider branching out to new, less-profitable markets or sell out to larger rivals.

Two years after its most high-profile regulatory setback to date in the United States - Ranbaxy's (RANB.NS: Quote) $500 million U.S. fine for drug safety violations - India's $15 billion a year generic drug industry is still rebuilding its image in its biggest market.

Many of its top firms are facing sanctions at some of their factories, as the U.S. Food and Drug Administration (FDA) tightens checks and its approvals process.

Combined with government-mandated price controls on drugs at home, that is piling pressure on smaller players.

"If they want to have a presence globally, they have to make investments. If they can't, then they'll have to focus on other markets or scale back their ambition outside of India, and that's probably what will happen," said Subhanu Saxena, CEO of Cipla (CIPL.NS: Quote), India's fourth-largest drugmaker by revenue.

Ashok Anand, president of Hikal Ltd HIKA.NS, a Mumbai-based drugmaker with a market value of $167 million, said some peers were putting themselves on the block.

"If they cannot deal with the stricter regulations, they might just prefer to sell out," he said.

Pressure on U.S. sales has been felt across the Indian industry, with all drugmakers hit by delays in FDA approvals as the U.S. safety body overhauls its review process. Growth in U.S. revenue for drugmakers slowed to 14 percent in the year to March 2015, less than half what it was in the year to March 2012, according to brokerage Edelweiss.   Continued...

 
People walk past a chemist shop at a market in Mumbai, India, June 25, 2015. REUTERS/Shailesh Andrade