Mid-cap pharma firms focus on LatAm market

Lupin and Glenmark Pharmaceuticals are leading Indian mid-cap drug makers in exploiting rising demand for medicines in South American nations, such as Brazil and Argentina, even as competition and rules intensify in the developed markets of the US and Europe.

Lupin, which already sells tuberculosis drugs Ethambutol, Pyrazinamide and Rifampacin in South America, aims to treble its sales from the region to more than Rs 230 crore in 2-3 years. “We would be investing close to $100 million in that region,” said Vinod Dhawan, president (business development) at Lupin. “The economic and political environment has stabilised with governments focusing on improving healthcare.”

Indian companies, faced with increased competition in developed markets and stiff standards set by the US Food and Drug Administration, are looking to markets where rules are less stringent, as governments focus on affordability of healthcare rather than defending patents on billions of dollars of drugs. Companies, such as Ranbaxy Laboratories, which led a foray into developed markets in the past, have landed with disputes in the US over the quality of drugs.

Eight pharma markets in Latin America — Argentina, Brazil, Chile, Colombia, Cuba, Mexico, Peru and Venezuela — are poised to grow by an annual average rate of 9.9% to reach $80 billion in 2014, according to Espicom, a UK-based market research firm. “Indian generic companies are perfectly suited to enter the Latin America market,” said Ajit Mahadevan, partner (business advisory services) at Ernst & Young. “Larger companies have been present there, most through distributors, but now we can expect to see more companies setting up units there or acquiring existing units.”

Boosted by the prospects of higher demand, companies are raising their expectations. Lifeline Industries, which is planning some JVs in the region, expects to earn 10% of its sales from the Latin American markets next year from 2% last year, said its CMD Nikunj Kanakia. It had sales of Rs 415 crore last fiscal. Glenmark, whose trials for Oglemilast, a drug to treat Chronic Obstructive Pulmonary Disease (COPD), with Forest Labs of the US failed last month, plans to increase its presence to 12 markets in South America from nine, and the company said in an e-mail. It sells over 250 products in South America with revenue of Rs 198 crore.

Arch Pharmalabs targets to double the contribution of Latin America revenues to around 14% in two years, said Arch Pharmalabs CMD Ajit Kamath.

However, it is not going to be a smooth sail for Indian companies.

In the Latin American markets, a drug-maker has to wait for 150-180 days to get payments for the products from the retailer, against India’s average of 100 days, said Mr Kamath. Also, these companies have to factor in currency fluctuations, which have hurt many companies such as Wockhardt.