Asian Producers Raise Their Profiles In the Global Pharmaceutical Value Chain

Indian and Chinese manufacturers are becoming a force in the global pharmaceutical supply chain by further penetrating Western generic drug markets, upping investments in manufacturing active pharmaceutical ingredients (APIs) and in formulations, and strengthening internal research and development.

"Indian companies are becoming leaders in capital investments in generics and are leading in drug master files (DMFs)," says Cynthia Dowd Greene, vice-president for industry research at Newport Strategies (Portland, ME, www.newportstrategies.com), who recently spoke at the Generic Pharmaceutical Association's (GPhA, Arlington, VA, www.gphaonline.org) API 2006 Meeting. In 2005, Indian companies filed 265 DMFs, up from 227 in 2004 and 139 in 2003, notes Greene.

"This trend is apparent in the success of first-tier companies such as Dr. Reddy's Laboratories and Ranbaxy in the US market," says Greene. "They are strong competitors in the US generics market by supplying finished-dosage products. They also have a strong API presence and will supply APIs to other US generics companies. And, they have strong R&D organizations for supporting patent challenges, generic product development, and now are focusing on their own drug discovery efforts."

Also, "Indian companies are expanding as well to target the pharmaceutical custom synthesis business," says Nailesh Bhatt, managing director at the consulting firm Proximare Inc. (Princeton, NJ, www.proximare.com). "We see this with companies such as Shasun, Nicholas Piramal, and Hikal."

Ranbaxy's R&D center in Gurgaon, India.

Dr. Reddy's and Ranbaxy expand

Dr. Reddy's Laboratories (Hyderabad, India, www.drreddys.com) is building its core generics business, developing a footprint in pharmaceutical custom synthesis, and strengthening R&D. In March 2006, it completed the acquisition of Betapharm Group, the fourth-largest generic pharmaceutical company in Germany.

Dr. Reddy's is building its custom pharmaceutical service business, marked by the 2005 acquisition of Roche's API manufacturing site in Cuernavaca, Mexico. The deal included all employees and business supply contracts for the manufacture and sale of APIs, including intermediates to Roche and other innovator companies. The portfolio consists of about 18 products, including mature APIs, intermediates and steroids. With the acquisition, Dr. Reddy's hopes to build its custom pharmaceutical business to $100 million over the next year.

Dr. Reddy's is advancing its internal R&D, with pacts with Argenta Discovery Ltd., Rheoscience A/S, and Perlecan Pharma Private Ltd. Perlecan was formed in 2005 with $52.5 million in initial funding from Citigroup Venture, the Indian private equity group ICICI Venture, and Dr. Reddy's for advancing four of its new chemical entities. ICICI also invested as much as $56 million in partnership for commercializing abbreviated new drug applications (ANDAs).

Ranbaxy Laboratories Ltd. (Gurgaon, India, www.ranbaxy.com) has a goal of reaching $5 billion in sales by 2012. In 2006, it agreed to buy a 97% stake in the Romanian generics company Terapia for $324 million and made bolt-on acquisitions of the Belgium generics company Ethimed NV and the unbranded generics business of Allen SpA, a division of GlaxoSmithKline in Italy. Ranbaxy filed 26 ANDAs in 2005 and had 16 ANDAs approved, bringing its totals to 170 ANDA filings and 111 approvals. In 2006–2007, Ranbaxy hopes to launch between 15 and 20 products, conditional on regulatory approvals.

Like Dr. Reddy's, Ranbaxy is looking to build its proprietary drug business with a goal of launching its first new chemical entity by 2009. Last August, it opened a new 400,000-sq ft² R&D center in India.

Foreign inspections: A perspective on India and China

Ranbaxy spent more than $250 million over the past three years for its manufacturing network. It operates 19 facilities, three dedicated to API manufacturing and 16 for dosage forms. These facilities support its generics business and contract manufacturing services.

Next generation of Indian suppliers

"We then see what we may call the next-generation of Indian API manufacturers to the generics market," explains Greene. "These companies are seeking to expand geographically outside of India, increasing their dose-product filings from less regulated markets to more regulated markets, and are looking to grow through partnering by forming marketing and distribution deals in the United States and the European Union and also are employing their own sales and marketing organizations, for example, as with Aurobindo and Zydus."

Zydus Pharmaceutical (USA) Inc., a subsidiary of Zydus Cadila (Ahmedabad, India, www.zyduscadila.com) and Mallinckrodt Pharmaceuticals Generics, part of Tyco Healthcare (Mansfield, MA, www.tyco.com) formed a strategic alliance last year to market generic drugs in the United States, with Zydus manufacturing the products at its plant in Ahmedabad, India.

Other next-generation API suppliers include Cipla, Glenmark, Jubilant, Lupin, Matrix Laboratories, Orchid Chemicals & Pharmaceuticals, Sun Pharmaceuticals, and Wockhardt, notes Green.

Chinese companies build their global footprint

Aurobindo Pharma Ltd. (Hyderabad, India, www.aurobindo.com), a manufacturer of generics and APIs, is in an acquisition mode. In April 2006, Aurobindo's board of directors approved raising as much as $200 million in foreign currency convertible bonds to fund overseas acquisitions. Aurobindo made its first acquisition in Europe by acquiring the UK generics company Milpharm Ltd. Between financial years 2002 and 2006, it invested $350 million in its manufacturing infrastructure for APIs and formulations.

Wockhardt Ltd. (Mumbai, India, www.wockhardt.com) received shareholder approval in March 2006 to raise as much as $800 million to fund overseas acquisitions. Europe has overtaken India as Wockhardt's largest market, and the United States has become its fastest growing market. Its US formulations business posted 50% growth in 2005. It launched six new products in 2005, giving it 11 generic products in the United States. It has 22 ANDAs awaiting approval and plans to file 18 ANDAs in 2006.

In 2005, Wockhardt opened a new pharmaceutical formulations plant in Baddi, India, with the capacity to manufacture 2 billion tablets per year.

Jubilant Organosys Ltd. (Noida, India, www.jubilantorganosys.com), a supplier of APIs, dosage-product formulations, and custom research and manufacturing, is expanding. A new facility for finished solid dosages in Uttaranchal, India with a capacity of 1.8 billion tablets and 160 million capsules (on a two-shift basis) is on schedule to come on stream at the end of 2006, says Carlos Gonzalez, Jubilant's vice-president and general manager.

Over the last year, Jubilant invested roughly $34 million to enhance its capabilities in R&D and manufacturing of advanced intermediates and fine chemicals. It set up two new multipurpose plants at Gajraula, Uttar Pradesh, India and expanded its kilo laboratories in Gajraula. After sales of $270 million in 2005, it expects 50% of its revenues from international sales over the next three years.

Glenmark Pharmaceuticals (Mumbai, India, www.glenmarkpharma.com) received US approval for its solid-dosage plant in Goa, India, last year and has filed six ANDAs from there. It is targeting development of 12–14 ANDAs in 2006.

Glenmark has licensing and partnership pacts with US-based companies Interpharm Inc., Andapharm LLC, Konec Inc., and InvaGen Pharmaceuticals Inc. for marketing rights to specific products in the US market. It bought two ANDAs from Clonmel Healthcare Ltd and has a pact with Shasun Chemicals & Drugs Ltd. (Chennai, India, www.shasun.com) for the joint development and marketing of 13 generic products. In January 2006, it received US approval for two ANDAs: fluconazole and zonisamide. It will manufacture the formulations for these products at Goa and the APIs at its facility at Ankleshwar, Gujarat, India.

Sun Pharmaceutical Industries Ltd. (Mumbai, India, www.sunpharma.com) also is positioning in the United States. In December 2005, it acquired the dosage-form manufacturing operations of Able Laboratories Inc. as part of Able's bankruptcy proceedings. It gained two formulation facilities in Cranbury and South Plainfield, New Jersey. The Cranbury plant, designed and built for controlled substances, is yet to be commissioned.

Earlier in 2005, Sun acquired a 30,000-sq ft² liquid oral, ointment, and creams manufacturing plant in Byran, Ohio, and a dosage-form and bulk active manufacturing facility (built to handle alkaloids such as those in controlled substances) in Tiszavasvari, Hungary from Valeant Pharmaceuticals. The Hungary plant has 500 kL of bulk reactor capacity. Overall, Sun has bulk active reactor capacity of 1200 kL per year with FDA-approved plants in Panoli and Ahmednagar, India. A dosage-form plant in Halol, India recently received approval for injectables and nasal sprays.

To reposition its proprietary drug business, Sun's board approved a proposal for a demerger of its research-based innovative programs into a separate company in February. It is working on gaining regulatory, legal, and shareholder approval.

Matrix Laboratories Ltd. (Hyderabad, India, www.matrixlabsindia.com) is expanding. It recently acquired a 55% stake in Concord Biotech Ltd. (Ahmedabad, India, www.concordbiotech.com), which specializes in fermentation and biocatalytic technology. As a strategic step to backward integrate in intermediates from China, Matrix acquired a 58% stake in Mchem Group in December 2005. Matrix also acquired a 43% stake in the Swiss API technology firm Explora Laboratories SA and formed two manufacturing ventures with South Africa's Aspen Pharmacare. It also bought a controlling stake in the Belgium generics company Docpharma NV for $260 million.

Positioning in custom synthesis

Other important recent moves include Shasun's acquisition of Rhodia SA's pharmaceutical custom synthesis business, a deal that closed in late March. The deal gained Shasun developmental, pilot-plant, and manufacturing facilities in Dudley, England, and Annan, Scotland.

"The successful execution of this acquisition is an important milestone for Shasun to realize its strategy of developing a global presence in APIs, custom synthesis, and contract manufacturing," says Shasun CEO N. Govindarajan.

Kemwell Pvt. Ltd. (Bangalore, India, www.kemwellindia.com), a formulation contract manufacturer, gained its first plant outside of India: Pfizer's API and finished-drug manufacturing plant at Uppsala, Sweden in a deal to close in May 2006. Kemwell says it will continue to manufacture the anti-inflammatory drug salazopyrin for Pfizer at the facility.

"Kemwell's goal is to be a leading global partner to the pharmaceutical and biotechnology industries, offering services ranging from formulation development to CGMP-compliant commercial manufacturing," says Subhash Bagaria, Kemwell chairman and managing director.

Kemwell operates four pharmaceutical formulation-manufacturing plants in Bangalore. It plans to bring on-line a new tablet manufacturing facility in Bangalore in mid-2006. The manufacturing capacity of the new plant initially will be 2 billion tablets per year, with the potential to increase capacity to 5 billion tablets. It also will include coating capacity of 540 million tablets, scalable to 3.6 billion tablets, for film and sugar coatings. The new tablet facility will provide exports to the United States and Europe.

NPIL Pharma, the custom manufacturing operations of Nicholas Piramal India Ltd. (Mumbia, India, www.nicholaspiramal.com), is strengthening its position in pharmaceutical custom synthesis following its acquisition of Avecia's Pharmaceuticals, a custom chemical synthesis and pharmaceutical manufacturing services business in late 2005.

"We aim to be one of the top three players in pharma custom services," says Michael J. Fernandes, executive director of the custom manufacturing group at Nicholas Piramal.

With the acquisition, NPIL Pharma gained three business units: the early-phase delivery team, based in Huddersfield, UK; the pharmaceutical products division that manufactures advanced intermediates and APIs in Huddersfield and Billingham, the UK; and the high-potency substances division in Grangemouth, Scotland. It also gained the former Avecia subsidiary Torcan Chemical Ltd. (Aurora, Ontario, Canada), which specializes in preclinical and early-phase clinical trial products, and a 25% stake in the catalyst technology company Reaxa Ltd. These Avecia assets are being integrated within NPIL Pharm, which has four production facilities in India. These include R&D and kilo laboratories at Mumbai and Chennai; a GMP site at Chennai; and a commercial-scale plant at Hyderabad.