Tapping new markets
As CIS nations and Latin American countries attempt to take
a step forward to address their healthcare systems, Indian pharmacos are using
the proposition to grab the opportunities available in these emerging markets.
Sushmi Dey perceives the new business dynamics
pharma companies are entering new markets and spreading their business operations
all over the world. Some Indian companies are finding promising markets in Latin
American countries and CIS nations. Apart from the four major Latin American
markets of Argentina, Brazil, Mexico and Chile; Indian companies are also making
a mark in smaller countries like Peru, Venezuela and Columbia. Among CIS nations,
most of the Indian pharma companies are targeting Russia, Ukraine, Kazakhstan,
Belorussia, Uzbekistan and Azerbaijan. "These six CIS nations constitute
almost 90 percent of the total pharma market for CIS," asserts D B Mody,
Chairman, Pharmaceutical Export Promotion Council.
countries are large markets for
pharmaceutical products where Indian products and their value for money
proportion is well accepted. Price realisation is also much better in these
markets, as these markets are free of price control"
- D B Mody
Pharmaceutical Export Promotion Council
Indian pharma companies are facing challenges in maintaining
a strong sales growth in the established markets. In such a business scenario,
Latin America and CIS nations pose as emerging markets of the world. These markets
are rich due to the growing populations in these countries. "These countries
have a large population base and with high per capita income, they are representing
a bigger slice of the international market," explains Rajesh Jain, Joint
Managing Director, Panacea Biotec. The purchase power parity list produced by
the World Bank based on the data for 2005 supports this argument. According
to the list, Brazil and Mexico rank ninth and fourteenth respectively, whereas
Russia is positioned tenth. Analysts point out that anti-bacterial medicines,
medicines for cold and cough, anti-rheumatic medicines, multi-mineral or poly-vitamin
medicines are the leading segments having attractive retail sales in Russia.
"CIS countries are large markets for pharmaceutical products where Indian
products and their value for money proportion is well accepted. Price realisation
is also much better in these markets, as these markets are free of price control,"
opines Mody. The CIS countries also have a good growth rate which adds to the
preference. The CIS market is estimated at Rs 700 crore and is expected to be
growing at an annual rate of eight percent. "The Indian pharma companies
control more than 25 percent of the $600 million (Rs 2,760 crore) pharma market
in the CIS countries except Russia," informs Vinod Dhawan, President, Business
Development, Lupin Pharmaceuticals.
Indian pharma companies control more than 25 percent of the $600 million
pharma market in the CIS countries except Russia"
- Vinod Dhawan
President, Business Development
The Latin American countries too pose a huge market opportunity
for enthusiastic Indian companies. "Pharmaceutical market size
of Latin American countries is around $40-50 billion," informs
Mody. According to sources, Brazil is amongst the largest pharma
markets in the world. Similarly, other countries of Latin America
are also quite big and are very attractive in terms of realisation.
According to Mody, considering the current business volume of Indian
companies in Latin American countries and their market size, there
is an opportunity for significant increase in business volume, provided
Indian pharmacos adapt for local business requirements there.
The growth of Indian pharma in these countries is driven by exports of bulk
drugs, formulations and generics. Exports to Latin America and CIS nations constitute
a considerable portion of the total production of the pharma industry. According
to Dhawan, pharma exports to CIS countries in 2003-2004, were about Rs 945 crore
which constituted 20 percent of Indian exports to that region. "Total value
of Indian exports to CIS countries would be in the range of $150-200 million,"
informs Mody. The exports to Latin America are estimated to be around $500 million.
Its not just the money that attracts companies. "The
Latin American markets provide a viable business model for Indian pharma companies
who want to expand and who have already established themselves in India,"
suggests Jain. Though Latin America has been under financial crisis in the last
few years, the national government of Latin American countries has shown commitment
to expand the healthcare coverage. With growing health awareness, these regions
also require more of healthcare facilities. According to industry sources, this
is the big reason why the international pharma industry got attracted towards
Latin America. "These are untapped markets and have relatively easy FDA
rules," explains Dhawan.
With the reform in the healthcare systems in Latin America
and CIS nations, the generics will find themselves in favour but
along with it comes the challenge. The shift to generics has opened
the gates for variety of international companies and the market
has become fiercely competitive. The CIS countries too pose a similar
problem. Due to the geographical proximity of CIS and Europe, there
is a competition from global companies in this region. But Indian
companies have proved their manufacturing and R&D capabilities
and these countries can benefit enormously by establishing tie-ups
with Indian pharmacos. However, analysts say that today, the markets
have evolved with time. In countries like Russia, consumers are
ready to pay a higher cost for quality and there are international
competitors who are fighting for a share of these growing markets.
Yet, sources from the industry say that the situation in these markets is still
better in comparison to those in developed markets. "The competition and
the entry barriers in Latin America and CIS nations are relatively low as compared
to the US market," asserts Dhawan. The mantra of course is the "demand
and supply" game. Markets like Brazil and Mexico in Latin America are raising
hope for the Indian pharma manufacturers for their export strategies. Industry
sources say that Brazil is increasingly becoming an appealing place where Indian
pharmacos can consider conducting R&D as well as production.
||Market Size (in US $)
|Market size of rest of the CIS nations
is below $100 million.
Action and acquisition
Latin America has seen ongoing investments by the Indian companies. "Ranbaxy
looks at Latin American and CIS operations as an important segment of its international
business," informs Ramesh Adige, Executive Director, Ranbaxy. In Latin
America, Ranbaxy has achieved sales of $40 million in 2005, whereas CIS markets
during 2005 recorded sales of $65 million with a growth of 42 percent. Increasing
its foothold in these nations, Ranbaxy has recently acquired Terapia in Romania.
Lupin is in the process of formulating marketing strategies
for the Mexican market. Officials from Lupin assert that the company has laid
strong foundation to enter the markets of Peru and Columbia. Ajanta Pharma and
Panacea Biotec are focusing on registering and marketing products from India.
Panacea Biotec announced that talks are on with three companies in Brazil for
marketing and distribution tie-up for cyclosporine. The Brazilian market for
cyclosporine is estimated at about $80 million and the company expects to have
a significant presence there. "The focus in most of these markets is to
offer world class products with key differentiation, niche value added generics
and products from therapeutic segments of anti-TB, anti-infectives and cardiovascular,"
said Dhawan. For Panacea Biotec, transplant is the major growth area for business
in Latin America.
the Indian market is showing maturity, it is beneficial to get into the
- Purushottam Agrawal
Indian pharma companies have increased their momentum in these
markets through a spate of mergers and acquisitions, new tie-ups, setting up
of joint ventures and subsidiaries. Some companies are making investments in
terms of JVs and manufacturing facilities in Russia, Ukraine and Uzbekistan.
Companies like Core Healthcare, Ajanta Pharma, Dr Reddy's Laboratories and Gufic
of Mumbai are present in Uzbekistan in the form of JVs. "Some individual
companies are also looking at collaboration with local institutions or companies
in R&D," informs Mody.
However, the major acquisitions are in the area of marketing.
A few Indian pharmacos have already installed plants in parts of Latin America
and CIS nations, but medium scale Indian companies are looking at strengthening
their marketing activities before setting up manufacturing units. According
to Purushottam Agrawal, MD, Ajanta Pharma, though a few companies are going
in for manufacturing acquisitions in these countries to get an early entry,
focus on product marketing is the trend with most of the companies. Companies
believe that marketing is the best strategy to learn about new markets.
"Marketing is the best way to start. For any forward integration, it is
important to understand the markets of these countries well. When you start
marketing a product, you start learning a lot about the markets," reasons
Jain. At present, Panacea is focusing on marketing but Jain says that they are
open to forward integration in areas of R&D and manufacturing in the future.
While some pharmacos choose to enter into alliances and synergistic partnerships
with some of the leading players in the respective markets, there are others
who want to establish the brand in the market.
Ajanta Pharma has appointed distributors in each country and has people to carry
on the promotion activity, informs Agrawal. Some Indian pharmacos have also
adopted the route of ethical promotion to the medical professionals and direct
marketing to hospitals and institutions. "Some Indian companies like Unique
(re-named J B Chemicals) have invested substantial amounts in brand building
by leveraging mass media promotions opportunities for their OTC brands,"
|Latin American average
(Source: Industry Statistics)
Indian companies stand to benefit from higher revenue in their trade with Latin
American and CIS countries. "As the Indian market is showing maturity,
it is beneficial to get into the markets overseas," opines Agrawal. According
to him, the export earning and the growth due to this business will be the main
advantage for Indian pharmacos which can harness these funds to invest in R&D
which is the main thrust of Indian pharma companies.
But on the other side of the coin, these countries too benefit in trade and
alliances with Indian companies. The biggest strength of the Indian industry
is its cost competitiveness, which when leveraged will give these countries
benefits in terms of low cost, high quality products. Since it is a win-win
situation for both, association with Latin American and CIS countries seems
to be here to stay!