Alliances and Emerging Markets: Way forward for Domestic Pharma Companies
July 14, 2013: Alliances: There have been an increasing number of alliances for domestic pharma companies to expand their global presence. It has been a ‘win-win’ situation for Indian companies and Multinational companies as the former can take advantage of the network of the multinational companies without incurring additional costs for setting up their own front end in new geographies while the multinational companies would get more products to sell in emerging markets. Presence of low-cost, Food and Drug Administration approved India facilities and marketing networks of multinationals are the key factors behind this trend.
Alliances are seen as the first step in entering the emerging markets, with companies gradually setting up their own front ends. Front end presence would be important as it lowers the risk to growth in case of a break up with the partner. Companies with front end would be able to reap the benefit of higher revenues and have direct control.
Emerging Markets: Indian companies have been focussing on alliances in the generics route in the markets of Brazil, Commonwealth of Independent States, South Africa and Mexico. Dr Reddy’s-GSK Pharma, Sun-Merck and Cadilla Abbot are examples of such tie ups. The strategies involved in these tie ups are to develop and market branded generics for emerging markets. Dr Reddy’s in its alliance with GSK Pharma markets 100 drugs in the fast growing therapeutic segments in Africa, West Asia, Latin America and the Asia Pacific regions.
The market in the emerging countries is expected to increase from US$ 150 billion to US$ 285-US$315 billion in three years as per an ICRA report. Indian companies have been targeting these markets to expand their geographical footprint. Opportunities similar to the domestic formulations segment, high proportion of branded generics, high margins are some of the key factors existent in the emerging markets. Options available for companies in these markets include alliances, acquisitions and organic expansion.