Pills and spills

India?s pharmaceutical giants would probably love to pop a pill to forget the Dog Year that 2005 was: attempts to storm the US through patent challenges were badly stymied by courts, sales growth remained sluggish, competition intensified on the home turf and their boffins in research labs were still struggling to come up with some new molecule that could be developed into a blockbuster drug.

But the biggest blow in the year was the fact that at the end of expensive litigation, drug makers like Ranbaxy and Dr Reddy?s were left nursing bruises that no salve could relieve.

Dr Reddy?s (DRL) lost a patent challenge against Eli Lilly over the its schizoprenia drug Zyprexa while Ranbaxy was blocked by a US court from launching a generic version of Pfizer Inc?s $11-billion drug, Lipitor.

The setbacks could force a rethink over the strategy to force open the door to lucrative markets like the US through patent challenges that are made through Para IV ANDA applications. In a Para IV application, the applicant who intends to make the generic version of a drug believes that the patent (of the innovator) is not infringed or it is invalid.

The truth is that generic drug manufacturing companies have had a poor run since 2004 in major litigation challenging patents in international courts.

Nevertheless, Indian pharmaceutical makers are still looking for other ways to make their presence felt on the world markets.

Analysts tracking the developments in the industry said that out-of-court settlements and market exclusivity agreements ? similar to the one inked by Ranbaxy and Cephalon Inc on narcolepsy drug Provigil ? could well turn out to be the favoured road as generic drug manufacturers seek to get a foothold in global markets.

Pharma makers have also been buying boutique drug outfits in the US and other countries. Nicholas Piramal for instance acquired British pharma major Avecia for ?9.5 billion.

Ranbaxy Laboratories has sought to establish firm foothold in Asia, particularly in Japan. Around the same time, Dr Reddy's Laboratories Ltd inked a deal to acquire Swiss pharma company Roche's facility manufacturing active pharmaceutical ingredients (API) in Cuernavaca, Mexico involving an amount of $ 59 million.

There are some uncertainties that could dog performance in 2006 as well. The US generic market itself witnessed severe price erosion baldy crimping margins. The Indian market faced its own problems as VAT-related uncertainties hit sales of domestic formulations. During the January-March quarter for instance, nearly all the pharmaceutical companies posted lower sales growth. Though the environment has turned better since then, it still cannot be termed as rosy.

Another crucial development in India was the ushering in of the patent regime.

However, here too, there was disappointment as subsequent developments did not live up to the hype that was originally generated.

Avers Shahina Mukadam, head of research at IDBI Capital, ?2005 has been quite a damp year for the sector. While couple of negative developments hit Ranbaxy, valuation in the stock markets also suffered as they had run on optimistic expectations''.

Despite the disappointments suffered during 2005, observers are looking at 2006 with a sense of optimism.