July 19, 2010

Over 550,000 small drug retailers in the country are transforming into producers and marketers of pharmaceutical products, readying to compete with companies such as Ranbaxy, Cipla, Sun Pharma and Lupin whose produce they sell.

All Indian Origin Chemists and Distributors Ltd (AIOCD Ltd), a company floated by the 35-year-old All India Organisation of Chemists and Druggists (AIOCD) to face competition from large drug retail chains, has launched 100 private label generic-generic drugs under the brand name AIO. Generics are non-patented drugs, and those without a brand name are referred to as generic-generics.

These common off-patent drugs and over-the-counter products are targeted at a wide variety of common ailments and lifestyle disorders. These address a domestic market worth about Rs 5,000 crore which is shared by the 3,000-plus manufacturers in the country.

The company will soon appoint a sales team to aggressively market its products. AIOCD Ltd, which has a current annual turnover of about Rs 12 crore, plans to earn Rs 60 crore in 2010-11 and Rs 150 crore in 2011-12, said J S Shinde, chairman of AIOCD Ltd and president of AIOCD.

AIOCD's aggressive move comes at a time when drug retail chains such as Apollo Pharmacy, Guardian Lifecare, Medplus and Trust Pharmacy are trying to push their sales with private labels. Through private-label sales, the retailer can avoid middlemen in the supply chain. Manufacturers fear private label drugs may hamper sales of their branded generics as retailers can influence the consumer with cheaper options.

Dominated by branded drugs, the size of India's pharmacy retail market is estimated at around Rs 21,000 crore.

"Such private-label products are common in the West among drug retailer giants like CVC, Cardinal Health or Walmart. There is no harm in competing with your own clients when you are doing a business, as we need steady revenues to grow our company," Shinde said.

Initially, AIOCD Ltd will source these drugs from about a dozen manufacturers located in excise-free zones in North India. AIOCD Ltd has launched the products in a dozen states since Thursday, and will soon extend it to other states in North India.

In the third phase, the company will roll out it into the North-East region to gain a pan-India presence.

AIOCD claims to control 95 per cent of drug trade in India; it very often dictates terms with the manufacturers.

AIOCD Ltd already has seven state-level companies in Maharashtra, Bihar, Assam, Tamil Nadu, Gujarat, Himachal Pradesh and West Bengal. It plans to set up another eight or nine companies in other states. Depending on the demand, the company will increase the number of products, Shinde said.

The pan-India roll out will be supported by AIOCD Pharmasofttech AWACS, a nationwide IT infrastructure backbone created by the traders to streamline and monitor logistics and inventory. A private equity fund, Mumbai Angels, has invested in this IT firm, which also tracks monthly drug sales, stocks and offers online solutions to drug traders.

AIOCD Ltd, which has 13,000 shareholders, was formed three years ago by the retailers to take on competition from organised retail drug chains coming up in the country and to lend the many decade old traditional drug retailing a corporate face with value added services and products. The initiatives in this transformation include rebranding of the chemists outlets under a common brand, patient counseling training, new storage practices, cold chain management and uniform logistics.

July 19, 2010

The government is planning to set up a Rs 10,000-crore venture capital (VC) fund for financing new drug discovery projects in the country.

"We will soon invite bids from consultancy firms for establishing a venture capital fund in public-private- -partnership that would finance research and development (R&D) activities in the pharmaceutical segment," Department of Pharmaceuticals Secretary Ashok Kumar said.

The department will soon invite bids from advisors to prepare a detailed project report on the proposed fund, Kumar said.

The initial target will be to raise up to Rs 3,000 crore by 2011-12, and it would be gradually increased to Rs 10,000 crore by 2015, he added.

National Institute of Public Finance and Policy (NIPFP) is advising the department in the process of selecting an agency to design the fund.

Kumar said that though the government aims to make India a hub for new drug development activities, no institutional funding is currently available for the purpose in the country.

According to information available, the country spends about Rs 2,000 crore every year on R&D. While the government contributes Rs 500 crore to this, the rest comes from the private sector.

The proposed funding of Rs 10,000 crore, which includes substantial contribution from the private pharma industry under the public private partnership (PPP) model, is likely to bring about a favourable environment for drug innovation, Kumar said.

Last year, the department of pharmaceuticals had prepared a white paper on promoting research and development funding in the country, and submitted the proposal to the Prime Minister's Office for approval.

"The present state of infrastructure and research and development of the pharma industry in the country is rather weak," Kumar said.

As per the proposal, the government intends to undertake pro-active steps on four fronts -- building infrastructure for talent and research, encouraging public-private partnerships in infrastructure development, providing financial incentives to encourage innovation, and shaping a favourable regulatory environment.

July 17, 2010

Drug development to treat tuberculosis will depend on some sort of advance commitment from government agencies to procure anti-TB drugs from pharmaceutical companies which otherwise have to go through a bidding process for supplying anti-TB drugs.

Presently, government procures anti-TB drugs from companies through a bidding process which lowers margins.

“There should be some sort of an advance market selling anti-TB vaccine to provide incentives to drug companies for developing drugs in the wake of the rising number of TB patients in the country,” R D Joshi, senior consultant of Interlink Marketing Consultancy, said.

Tuberculosis (TB), caused by Mycobacterium tuberculosis, is one of the most prevalent of diseases in the country.

As per government estimates, every year around 1.8 million persons develop the disease of which 800,000 are infectious. Around 370,000 people die of TB annually which is around 1,000 people a day.

The disease is also a major barrier to social and economic development as an estimated 100 million workdays are lost due to the illness.

Also, the country has to incur a huge cost of nearly $3 billion in indirect costs and around $300 million as direct cost due to this disease burden.

However, with the implementation of the Revised National Tuberculosis Programme (RNTP), the government is trying to reduce the disease burden through ‘directly-observed treatment’, short-course (DOTs) regime.

“There are some fundamental issues in the treatment of TB as usually poor people with less resources discontinue treatment after two-three months without completing the full dosage of 180 days. Also, the treatment of TB should be concurrent with proper nutritional support which is not counselled to the patients,” Joshi told pharmaquest.biz

New drugs should be developed that takes less treatment time, to restrict the spread of the disease, he added.

In the mean time, pharma majors like Astra Zeneca, Eli Lilly, Lupin Laboratories, Novartis India among others are collaborating with TB Alliance — an international alliance — to discover new drugs for the treatment of TB.

“We partner various agencies and organisations in TB eradication programme. While we are pre-qualified as a supplier to the Global Drug Facility (GDF), we also supply to various international institutions like Pan American Health Organisation, Medicines Sans Frontier and the Damien Foundation,” a spokesperson of Lupin said.

Lupin, which commands close to 48 per cent marketshare in a Rs 300 crore Indian anti-TB market, had a growth rate of over 7 per cent last fiscal and remains bullish on the segment, he added.

The company has been expanding its offerings in the multi-drug resistant TB category, the spokesperson said.

As per an estimate of the World Health Organisation, MDR-TB killed 150,000 people in 2008 and infected 440,000 globally.

July 17, 2010

Mid-cap Indian drugmakers are likely to post healthy quarterly earnings on rising sales across geographies but a strong rupee against the dollar through two-third of April-June period might shave off margins for some.

The Indian rupee touched a 19-month high in mid-April before closing at 46.45 on June 30, down 5.13 percent from its mid-April high of 44.18 against the dollar.

Cadila Healthcare, Glenmark Pharmaceuticals, Lupin and Piramal Healthcare, which rely heavily on domestic formulations and contract research and manufacturing services (CRAMS), are seen posting strong profits on rising sales and new drug launches, analysts said.

While rival firms like Aurobindo Pharma, Aventis Pharma and Jubilant Organosys, for which U.S. generics market is a growth driver, might report a slight dip in net profit, they said.

A Reuters' poll of 14 brokerages forecast four of the 10 mid-cap drug firms for which estimates are available, seen posting a dip in net profit in April-June.

Profits for some of the companies would be under pressure due to the rupee appreciation, but otherwise, mid-cap firms are likely to post stable or strong numbers, Sushant Dalmia, analyst, Angel Broking said.

Volume growth from various geographies and a number of U.S. FDA approvals would also help boost profits, he added.

Export-focused players would be impacted due to rupee appreciation -- but only to a certain extent, another analyst with a Mumbai-based brokerage said.

Volumes are growing and they would continue to growth for at least three years from now.

Indian drugmakers are expected to report a top-line growth of 12.8 percent with an EBITDA growth of 20.5 percent, Motilal Oswal Securities said in a research note.

Mid-cap players like Divi's Labs and Lupin would post strong EBITDA margins, primarily due to a low base, it added.

Lupin, Piramal and Glenmark, which together draw about 60 percent of revenue from domestic and non-U.S. markets, are expected to report better margins in the quarter, the note added.

While Aurobindo Pharma and Aventis Pharma, who rely heavily on generics, are expected to see currency fluctuations dent margins by 1-1.5 percent, a pharma analyst with a Mumbai-based brokerage said.

We are likely to see some forex losses in case of most pharmaceutical companies considering the sequential depreciation of rupee, a research note by CLSA said.

Cadila Healthcare, although it has substantial U.S. exposure, would post strong margins due to the low-base effect, the note added.