Large Indian companies are faced with a dilemma. Given the high expectations they have built up, the key question before them is how to grow from the present levels and keep investors hooked.
While Dr Reddy's says it is working on a comprehensive plan to shore up sales to $3 billion from the present $1.4 billion, Cipla has taken a more conservative approach of a 10% growth as its revenue base quickly doubled in about three years to a whopping Rs 5,000 crore.
Cipla's time-tested approach of partnering for supply of medicines and going all out in penetrating deep into the Indian market cannot be questioned. Flood the products and reduce the price — the policy seems to have worked so well for the company in retaining its leadership position over the past year.
Also, Cipla has attained the position of an invincible player in India's respiratory and inhalation devices market. Many companies have tried to get close to Cipla in the therapy area, but the gap has always been widening. Lupin is trying its best for the last three years to challenge Cipla's domination in the asthma products market, but technologically, Cipla might just take the game to the next level.
In what could be called a much-needed confidence-building exercise recently, Dr Reddy's hosted a analyst conference and laid out its plans including marketing strategies in the US, the future outlook in basic research and the growth plans in emerging markets.
Dr Reddy's has a strong management bandwidth, albeit missing in many other Indian companies. The company made big mistakes in the past but has been able to learn from those experiments. Many analysts keep their hopes alive in the way Dr Reddy's has handled its business programmes and tried to be different in everything that is done from the marketing perspective.
Sun Pharma has been a darling of the markets and so that much higher is the pressure on the company to keep all its cylinders firing. While a large part of the market remains bullish on Sun Pharma, a few analysts have voiced the opinion that the company has to grow its base business in the US to keep the confidence levels intact.
Sun has been silently strengthening its presence, digging deeper in the US and also struggling to get Taro hooked up. Sun has been able to get the numbers right even as large part of its profits came from one-time opportunities of risky launches like pantoprazole or on the back of successful patent challenges. Nothing wrong with that approach, but more consistent revenue streams are expected from India's most highly valued pharmaceutical company.
Lupin is another Indian company making noises about its achievements in the US and other markets. Lupin has perhaps been a slow starter in the quest to widen its geographic reach, but it has been able to amply demonstrate that it can be a strong force.
In the past, Lupin prided itself on its obsession to replicate the Ranbaxy model of spreading out in the emerging generic markets, but then took a big plunge into branded generic drugs market in the US. According to recent analyst reports, Lupin has a decent growth graph for the next three years, riding on its nimble and efficient US operations, good product pipeline and entry into markets such as Philippines, South Africa Australia and Japan, where it acquired small companies all through 2008.
Piramal Healthcare is another company to watch out for. Turning its back on the generic drugs boom in the US, Piramal Healthcare saw enough opportunities in the steadily growing Indian formulations market, but soon realised that there could be a higher growth potential in doing contract research and manufacturing work for multinational companies.
Over the last four years, the company built a pipeline of contracts from foreign companies interested in working alongside Piramal — from the discovery research stage right up to putting the product into the manufacturing process. How much the company gets out of this can only be ascertained in a few years time. Rumours, however, refuse to die down about Piramal selling part or full equity stake to some multinational companies. This defies logic for the buyer or the seller, but the most unbelievable things can and do happen in the world of mergers and acquisitions. Two other companies struggling to retain their identities are Ranbaxy and Wockhardt.
Nobody knows how long the pain will last for these two. While some hopes are kindled for Ranbaxy after Malvinder Singh was eased out by Daiichi Sankyo, the Wockhardt management is trying to get out of the vicious debt trap the company has run into.
Importantly, after many setbacks, Glenmark is still hard-selling its discovery research dreams and continues to be the most exciting discussion topic for financial analysts. It may make the cut someday if it remains relentless about discovery research. These companies are all at the crossroads. If they manage to survive and grow for the next 3-4 years, each of them could figure prominently on the map of the $900 billion global pharmaceutical industry.