Pharmaceutical companies looking at India like what they see. With its huge base of potential new customers, India, as well as other emerging markets, has the potential to help Big Pharma offset lost revenue from expiring patents on some of its cash-cow drugs.
Abbott Laboratories (NYSE:ABT) is leading the charge into the country, which now boasts the 10th largest economy in the world. In one fell swoop, Abbott recently became India’s biggest drugmaker when it bought local generic manufacturer Piramal for $3.7 billion.
With that purchase, three of the largest pharmaceutical companies in India are now foreign multinationals. Outsiders already have 25% of the market, which grew by 16.5% in 2010 to an estimated $8 billion. The market is expected to double by 2015, when the share of multinationals is expected to approach 50%. Look for at least two acquisitions of local companies in the near future, says one analyst.
Abbott is among those members of Big Pharma that are remodeling operations to suit emerging markets like India. In 2010 the company set up a stand-alone Established Products Division specifically for expanding the market for its well-known pharmaceutical portfolio outside the U.S.
GlaxoSmithKline (NYSE:GSK) also wants a bigger piece of the pie in India. It took an important step when it purchased the pipeline of India’s biggest domestic pharmaceutical company, Dr. Reddy’s Laboratories (NYSE:RDY). Glaxo also has shifted its strategy from a traditional blockbuster model toward driving growth from new products and its consumer business. The company also plans to significantly reduce prices of its medicine in emerging economies.
Merck (NYSE:MRK) also devised country-specific pricing and marketing strategies for India, launching drugs and vaccines at far lower prices than at home.
Pfizer (NYSE:PFE), too, wants a larger presence in the country. Its cough medicine Corex was the top-selling drug in the country in 2010. In second place was Abbott’s insulin drug. Novartis’ (NYSE:NVS) painkiller Voveran was third. In emerging markets like India, Pfizer also has a new business model aimed at giving the company a strong local presence, faster responses, addressing the lower end of the market and developing specific products for local use.
There is one big fly in the ointment plaguing the Indian market: lower profits, in fact, substantially lower than those enjoyed in developed countries. Yet even the prospect of less money in their pockets hasn’t dampened Big Pharma’s enthusiasm for India.
While the future looks promising, investors well know that man’s best plans often go astray. India remains wracked by poverty, corruption and illiteracy. One local consultant revised downward his forecast for the Indian pharmaceutical market, citing faltering urbanization, massive income disparities and insufficient state involvement in healthcare.
