Bangalore: In keeping with the trend of Indian pharmaceutical companies making acquisitions internationally, Micro Labs Ltd, a producer of branded generics and formulations, is looking to acquire a formulations company in eastern Europe for $5-30 million (Rs19.7-118.2 crore). It is also tying up with a New Jersey, US-based research and development company, InnoPharma Inc., in an attempt to gain a foothold in the USmarket.
“Today, the global valuations are crazy, so we have to keep a wide price band,” said Dilip Surana, managing director of Micro Labs in Bangalore, referring to the proposed European acquisition.
Expansion plans: Dilip Surana, managing director, Micro Labs.
Ranked No. 22 in the Indian market by the ORG-IMS market report in August, Micro Labs is a privately held company that grossed Rs842 crore in sales and Rs103 crore in profit in 2006-07 and expects to net Rs1,000 crore in sales this fiscal. It was one of the first companies to start the concept of branded generics in India in the 1980s, and intends to continue promoting branded generics, which it believes have higher margins than “generic generics”.
The company has a presence in 64 countries and intends to enter the US market as well. “In regulated markets, even generic drug prices are at least four times of Indian (generics) prices,” said Surana.
InnoPharma will provide technical, regulatory and project management consultancy for Micro Labs’ entry into the US formulations market.
“We will facilitate commercial discussions and agreements of Micro Labs with US marketing companies,” said Navneet Puri, president and CEO of InnoPharma, which also consults for New Delhi-based Panacea Biotec.
In a sort of backward integration, the company, which sourced its raw materials called active pharmaceutical ingredients (APIs) from outside until recently, has set up an API plant in Bangalore at a cost of Rs75 crore. “For the US market, we want to have our own API with our own formulations,” said Surana.
Its Goa manufacturing facility almost entirely caters to the formulations needs of Israel’s Teva Pharmaceutical Industries Ltd, the world’s largest generic drug maker.
The global formulations market is worth $643 billion and growing at 7%, according to global health care consulting and data services company IMS Health.
The Indian formulations market accounts for about 1% of the global share. But drug companies believe the domestic market is highly underpenetrated and offers high-growth opportunities.
At a 19 January investors meeting, Mumbai-based pharmaceuticals company Nicholas Piramal India Ltd (NPIL) said the modern medicine penetration is just about 30% and insurance coverage even lower at less than 10%. NPIL projected that the Indian formulations market would grow threefold in the next 10 years.
Micro Labs, like many other players, is preparing for this opportunity. It has set up a new formulations facility in Baddi in Himachal Pradesh and will start a similar plant in Sikkim soon. It has also set up a new US Food and Drug Administration-compliant ophthalmic products manufacturing facility in Bangalore.
While it is already manufacturing some eye-care products for a large Swiss drug company, it is in talks with New Jersey-based pharmaceuticals, diagnostics and other health-care products maker Johnson and Johnson for similar manufacturing deals, particularly with respect to the latter’s new chemical entity for eye care.