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Pharma cos yet to patent success in US

Aparna Krishnan

MUMBAI, July 3

MAJOR domestic pharmaceutical companies vying for the US generic market have met with disappointment, with returns on investments not matching expectations, according to analysts.

The US generic market is estimated at about $16-20 billions, accounting for 20 per cent of the world market.

Companies such as Sun Pharmaceuticals, Cipla, Ranbaxy, Dr. Reddy's, Lupin and Wockhardt have made entry into the US markets.

Indian companies are also gearing up to tap the vast product market which is likely to go off-patent in the next five years.

The main hitch in the process seems to be the registration procedure. Most Indian companies have US FDA (United States Food and Drug Administration) approved bulk drug facilities, but few have their formulation plants approved by the USFDA.

Hence, the bulk drug exports to the US market is considerably smoother as compared to the formulations segment. Also the cost of exporting bulk drugs is lot less than formulations.

Industry sources say that the approval from USFDA takes anywhere between one and five years, and in some cases, it is known to take even longer. This makes the process even costlier.

Sun Pharmaceuticals joint venture in the US - Caraco Pharmaceutical Laboratories Ltd - has incurred a net loss of $1,643,578 in the first quarter of the current year and a reduction in research and development outlay of $7,39,054 in the current year agai nst $1,169,649 in the first quarter of 1999.

Sun Pharma has invested $7.5 millions towards acquiring its 48 per cent stake in the company and has loaned $5.3 millions to Caraco.

Sun is expecting approval of six ANDAs (abbreviated new drug application) and 12 products in total in the coming year. But sources in the company agree that it has been behind schedule for a year now.

Cipla, on the other hand, has a series of supply-cum-marketing arrangement with US generics manufacturer Geneva Pharmaceuticals and an alliance with Zenith Goldmine. Zenith Goldmine, an affiliate of Ivax Corporation, will market its first formulation, a flutamide-based formulation for advanced prostatic cancer in the US market an and ANDA for flutamide will belong to the US partner.

Cipla's strategy of entering into alliances in markets of interest by leveraging its superior technological ability and taking advantage of the partner's understanding of the local market seems to have paid off. ``This is a low-cost strategy to address n ew markets and allows exports to be more profitable than domestic sales,'' says an industry analyst.

But the fact remains that Cipla's exports have been stagnant for the financial year 2000 with a growth rate of 10 per cent with exports to the US constituting 26 per cent. The stagnation, according to industry analysts, is being attributed to falling mar gins.

Ranbaxy has a strong presence in the US market with Ranbaxy Pharmaceutical Inc. Ranbaxy has a 100 per cent subsidiary company in US - Ohm Laboratories. Besides, the company has a marketing partner in Barr Laboratories and a co-marketing arrangement with Purepac Pharmaceuticals for the antibiotic, amoxicillin.

Ranbaxy Pharmaceutical Inc has six ANDAs filed with the USFDA in 1999.

Wockhardt has a marketing arrangement with New Jersey-based Sidmak Laboratories Inc. The joint venture covers 15 of Wockhardt's products. According to the company, in 1998-99, the sales of these products in US were about $10.5 billions. Under the agreeme nt, both companies share costs and profits.

It is also known that the company is in talks with major generic pharmaceutical players in the US for a similar arrangement.

Indian companies agree that they do not expect any returns for the next two years when making a foray into the US market.

It remains to be seen how Indian companies would wrestle their way into the US markets and come to make profits in the coming years.