India Pharmaceuticals & Healthcare Report Q1 2008

During this quarter, BMI has completely overhauled its Business Environment Rankings. India represents a moderately attractive proposition to multinational pharmaceutical companies operating in Asia Pacific, significantly behind mature leaders such as Japan and South Korea, but far ahead of the some of the more emerging markets of Pakistan and Vietnam. Positives include a fairly large market in regional terms and above average growth. However, India is let down by very low per capita consumption and a large rural population. By 2012, the value of the pharmaceutical market will have reached US$17.8bn, up from the current figure of US$12.2bn.

In a startling recent development, a remedy from the ancient Ayurveda system has become the top selling drug in India. The Himalaya Drug Company's Liv 52, which is a mixture of botanicals, posted sales of over INR107 crore (US$20mn) in the year ended August 2007, according to market research firm ORGIMS Health. Demonstrating the magnitude of this achievement, the product has overtaken well-known medicines such as Pfizer's Corex (chlorpheniramine + codeine), Nicholas Piramal's Phensedyl (promethazine + codeine + ephedrine) and Novartis' Voveran (diclofenac) in terms of revenue generation.

During Q307, a group of international medical associations met in India and called for a regulatory pathway specifically for generic versions of biological drugs. The request followed a study that found that existing rules for these types of products are insufficient, sometimes resulting in ineffective and intolerable biologicals that put patient safety at risk. Given the lucrative nature of this sector, BMI strenuously urges India to define this roadmap, following in the footsteps of the European Medicines Agency (EMEA) and Japan, but ahead of the US FDA and, perhaps more importantly, China.

Ranbaxy Laboratories revealed in October 2007 that it would spin-off its new chemical entity (NCE) division, following the footsteps of compatriot firms Sun Pharma and Nicholas Piramal. While BMI endorses the approach in principle - separation of generic and innovative drug businesses allows investors to more accurately gauge a company's value - this trend raises big questions concerning the future of original R&D in India, especially when rival China is investing hundreds of millions of dollars over the next five years to develop new drugs.

South Africa-India bilateral trade is set for strong growth according to the Federation of Indian Chambers of Commerce and Industry (FICCI). Overall trade is expected to reach US$12bn by 2010 - triple the current level. Demand for drugs and a growing number of clinical trial collaborations should be major drivers of the growth, according the FICCI. BMI expects pharmaceutical trade to be largely one-way: from India to South Africa, adding to South Africa's already negative trade balance.