Indian drug firms eyeing large China market

Many Indian pharmaceutical companies are making a beeline not only to export drugs to China but also to invest in Chinese companies or to establish joint ventures with them and export their products to third countries.

Analysts said China's efficient labor and Indian investments would make an ideal partnership. And with BRIC becoming stronger, Indian drug companies find China a lucrative market.

BRIC is a new trade alliance composed of four of the world's fastest growing economies: Brazil, Russia, India and China.

Indian drug maker Cipla Ltd has recently withdrawn a significant part of its investments in its Chinese partner Desano Holdings but ploughed back part of the money into the group's units manufacturing biosimilars and active pharmaceutical ingredients (APIs).

"We have partially exited Desano Group, where we held 49 per cent. However, Cipla would hold stake in three specific companies of Desano Group," a Cipla executive, who did not want to be named, said.

In 2011-12, Cipla's fully-owned subsidiary Meditab Group entered into an agreement to dispose of its investment in Desano Holdings for 3.97 billion rupees (72 million U.S. dollars). The payment for the deal was completed in April 2012, it was learned.

According to the company executive, Cipla has redeployed part of its funds from the transaction to grow Biomab Holdings for developing biosimilars with two other Chinese companies -- Jiangsu Cdymax and Shanghai Desano Pharmaceutical Investment.

Jiangsu Cdymax makes APIs, mostly anti-cancer and hormone drugs, while Shanghai Desano makes anti-viral and anti-malarial APIs as well as finished antibiotics, anti-retrovirals and cardiovascular drugs.

Cipla currently holds 25 per cent in Biomab, 48.2 per cent in Jiangsu Cdymax Pharmaceuticals and 16.6 per cent in Shanghai Desano Pharmaceuticals, the official said.

After the liquidation of investment in Desano Holdings, each of these units will see investment of around 20 to 25 million U.S. dollars. The rest of the funds will be used to repay debts.

The move is aimed at streamlining investments in Cipla's core business. "Investments in specific verticals make more sense for Cipla. Biomab Holdings is a company focused on biosimilar drugs, and increased investment in the company would help Cipla's goal to develop low-priced biotech drugs," the official said.

The company plans to launch a number of new products in the next two to three years.Only last year, Cipla, known for its low- cost antiretroviral medicines, made significant investments to build facilities in India and China to produce biosimilar products.

"There is certainly a lot of focus in Cipla to launch biosimilar products. However, it has to start from India and other emerging markets. Doing so in the regulated markets may still take some time," Praful Bohra, senior research analyst at Nirmal Bang, said.

Bohra said Cipla should invest more in the biotech segment to make a mark.

Besides biotherapeutics, investment into the other two companies -- Jiangsu Cdymax and Shanghai Desanoare expected to help Cipla's formulations and API business.

"Jiangsu Cdymax has factories to manufacture API and intermediates, whereas Shanghai Desano is working on certain new formulation products. So, with investments in these companies, we will get to use their manufacturing capacities and also get participation when they launch these products," the Cipla official said.