There is a new growth prescription for the Indian pharmaceuticals sector: tap the generics market in non-English speaking parts of Europe.
For, analysts say, there's money to be made there. "Indian firms have started moving in too, though not at the speed required," laments an industry observer.
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Pep pill
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The Rs 1,000 crore (Rs 10 billion) Zydus Cadila Healthcare Ltd this week acquired Alpharma France, a French formulations and generics firm.
Zydus aims to target France, where the generics market is estimated to grow to euro 1.20 billion by 2005 from euro 520 million currently.
The French pharmaceutical market is the second largest in Europe, and is valued at over euro178 billion, including patented drugs.
For Zydus, the acquisition opens up the way to the European generics markets, which is the second largest for generics after the US.
D G Shah, CEO of Vision Consulting Group, a Mumbai-based pharmaceutical sector consultant, says these are the markets that Indian pharmaceutical firms have not traditionally looked at.
"Of course, it can't be as big as the US market where there are many generic players, but over time, it will be substantial both in terms of quantity and value."
He regrets that very few Indian pharmaceutical firms are looking at the European market currently.
"Most of them have gone to the US, while others have touched base in the UK -- another English-speaking market."
Shah says non-English speaking European nations such as Spain, Portugal and Italy have their own generic companies. "But still, there's business to be had -- even in these countries," he says.
The acquisition brings in a large product basket for Zydus, which is crucial in the generics business.
Alpharma has 110 product registrations in France and is among the top six companies with the most number of product registrations in that country.
Zydus itself has 20 generics under registration. The generics will be manufactured at Zydus's manufacturing facility at Moraiya near Ahmedabad.
"The acquisition unlocks great value for the group as we are now better placed to enter the European generics market. Our goal is to tap opportunities for growth in the generics market by establishing ourselves in the European market over the next decade," said Zydus chairman and managing director Pankaj Patel.
To contain their health-related expenditure, European governments are increasingly banking on generics.
"And the French government took some steps recently to promote generics due to which the market is expected to grow by 33 per cent in the year 2003-04," a Zydus official said.
Says Shah of Vision Consulting: "In France today, only 8 per cent of the drugs market is generic, whereas in the US, it is, by way of prescription, 50 per cent. This presents a huge potential."
Zydus Cadila signed an agreement to buyout Alpharma SAS France. The acquisition valued at euro 5.50 million, has been made through Zydus International Pvt Ltd, a wholly owned subsidiary of Zydus Cadila abroad.
Zydus officials declined to comment on the increase in revenue and profit that the company expects to earn after the acquisition.