The Indian company that acquires Merck Generics, the multinational drug maker's generics (non-patented) business, up for sale, will be able to compete against the top global players -- Teva, Ivax and Sandoz -- by leveraging the synergy across the plants in different parts of the world, especially the low-cost manufacturing in India.
All the big names of the Indian pharmaceutical industry are in the fray.
Merck Generics' US affiliate, Dey, which had sales of euro 436 million in 2005, has a strong respiratory products portfolio that includes DuoNeb, EpiPen and AccuNeb.
This bunch, accounting for the majority of its sales, can complement the respiratory and allergy product portfolio of Indian companies like Ranbaxy and Dr Reddy's, which are aggressively pursuing the US generics market.
Similarly, Generics [UK] Ltd, an arm of Merck Generics, which is the leading generic company in the UK, sources its products from group companies Alphapharm of Australia, Genpharm and Gerard.
Naturally, Ranbaxy, is interested in Merck's generic business as it has only two manufacturing plants in Europe, in Ireland and Romania, and is thinking of hiving off the first.
Merck Generics' leading subsidiaries are Alphapharm, the leading generic manufacturer in Australia, and Merck Generiques, based in France.
Alphapharm had generated sales of euro 386 million in 2005. Other important subsidiaries include Genpharm in Canada and Generics.
Last year, the group also added Prasfarma, a former subsidiary of Almirall Prodesfarma based in Barcelona, Spain.
Genpharm is one of the top 20 pharma companies in Canada and its products basket includes generics like budesonide, buspirone, diltiazem, famotidine, paroxetine, clarithromycin and citalopram. Most of the Indian companies are yet to market these the Europe or the.
Similarly, Merck Generiques is the largest supplier of generic drugs to hospital pharmcies in France. It had a turnover of euro 270 million in 2005. Merck Generics German arm Merck Dura has a large product portfolio of branded generics with a turnover of euro 70 million.
By realigning these products with their own portfolios in various geographies and offshoring production to facilities in India, Indian companies can achieve a distinct edge over their overseas rivals.
"The cost benefits and manufacturing advantage make Indian companies a more suitable fit for Merck's generic business than other generic majors," says R B Smarta, founder and managing director of Interlink Marketing Consulting.
"The generics industry is more fragmented than other sectors. Building scale is critical for mass market companies. Therefore, most generics leaders are reviewing the Merck Generics opportunity," says Rajiv Shukla, head of lifescience practice at Avendus Advisors.
At present, Sandoz controls more than 10 per cent of the global generic business, Teva and Ivax together have about 12 per cent and Merck Generics 6-7 per cent.
On the other hand, Ranbaxy, Cipla, Dr Reddy's, Aurobindo and Wockhardt together account for only 7.3 per cent of the global generics sales valued at about $57 billion.
Ranbaxy is ranked 10th, Cipla at 17th, Dr Reddy's 19th, Aurobindo 26th and Wockardt 28th in the list of leading generics companies in the world.
