The Telegraph
Monday , July 28 , 2014
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High valuations put on older generics

Mumbai, July 27: GlaxoSmithKline Plc (GSK) is likely to receive a good response if it indeed puts up its older but off-patented drugs for sale, given the massive gain Bafna Pharma made from Raricap.

According to reports, Lupin is eyeing some of the drugs, which are branded generics. However, industry circles said Sun Pharmaceuticals and Dr Reddy’s Laboratories might also throw their hats into the ring.

In 2011, Bafna Pharmaceuticals had acquired Raricap, the haemoglobin drug from Johnson & Johnson, for Rs 21 crore and made it the eighth-largest brand in the oral haematinic segment. Attracted by the potential of the brand, Strides Arcolab recently announced the acquisition of the branded generic business of Bafna for Rs 48.1 crore.

It shows how a successful brand, even if it is 40-years-old, can alter the fortunes of a company despite competition from other generic players.

“Indian companies already figure among the top 10 generic players and they have been acquiring companies to boost market share in geographies such as the US,” Sarabjit Kour Nangra, vice-president (research) at Angel Broking, said. This implies that some of the domestic companies will be keen to bid for the GSK brands to not only boost their presence but also differentiate themselves from unbranded generic drugs. Moreover, many of them (barring Lupin) are not present in the branded segment.

A senior official from a domestic pharmaceutical company, which exports to the US, said mature or tail-end brands might have to compete with generic drugs, but they present an opportunity for growth. He pointed out that some of the brands that were reportedly up for sale were very lucrative.

“Further, the companies can bring more improvements into the brand after its acquisition. They can utilise their brand equity to come up with line extensions or improve the drug delivery mechanism and thus beat the generic competition in that particular market,” he said.

The delivery mechanism for a drug can be improved by making it available in chewable pills, tablets and oral drops. This not only results in higher prescriptions, but better margins as well. The official, however, added that care must also be taken to see that the particular brand did not have too much competition from generic drugs.

At present, Lupin markets four brands in the US. These include Suprax (a paediatric antibiotic), Antara (a cholesterol-lowering drug), Locoid (used in the treatment of skin disease) and Alinia (used to fight diarrhoea).