ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Ranbaxy Sell-out: Reversal of Fortunes

The Ranbaxy sale to Daiichi Sankyo could herald a new phase in the evolution of the Indain pharmaceutical industry. In order to cope in a world after the agreement on Trade-related Aspects of Intellectual Property Rights came into force, some of the larger Indian firms pursued the two strategies of a greater internationalisation of sales of generic drugs and a focus on research and development as junior partners of global giants. Ranbaxy had mixed success with the two strategies. In recent years Ranbaxy found itself increasingly squeezed in both areas and was therefore left with little choice but to sell out. The issue once again then is to stretch the flexibilities in TRIPS and renegotiate the agreement - essential if the Indian industry is to remain healthy and prices kept under check.

Sudip Chaudhuri ( is at the

Indian companies, in fact, compete a lot among themselves. The success of one Indian company in a field often induces the entry of other Indian companies in the same field.

Traditionally, the Indian pharmaceutical industry spent very little on . Since the mid-1990s and particularly since the initial years of the 21st century, there has been a substantial increase in research spending in a segment of the industry. It is quite remarkable that unlike in countries such as Italy

Dr Reddy’s developed three anti-diabetic compounds and out-licensed to Novo Nordisk and Novartis. The deal with Novartis involved upfront and milestone payments up to $ 55 million depending on progress, and the company received $ 5 million to start with in 2002-03. These deals were major news and generated tremendous optimism, luring other smaller companies into new drug However, both Ranbaxy and Dr Reddy’s subsequently suffered several setbacks. Novo Nordisk and Novartis discontinued further development of the three compounds licensed from Dr Reddy’s. Similarly, Schwartz Pharma discontinued the clinical trials of a compound licensed from Ranbaxy.

Nothing much came out of the highly publicised GlaxoSmithKline-Ranbaxy partnership. At present Ranbaxy has a few molecules in the pipeline but none even at the phase III clinical trials. Given that drug development did not progress as anticipated, the prospect of huge licensing revenue through milestone and other payments failed to materialise. In the last three years (2005 to 2007), Ranbaxy has spent Rs 1,584 million on . But its licensing revenue has been nil. The experience of some other companies, Glenmark for example, has been better. But the overall situation is far less encouraging than what it was thought to be a few years back. Indian companies are trying to “de-risk”

investments by setting up separate drug development companies and demerging them from the main activity of manufacturing drugs. It seems Ranbaxy has been looking for a buyer for its unit and that is how negotiations started with Daiichi Sankyo.

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