Compared to recent years, 2010 may well usher in a much larger dose of zeal throughout the Indian manufacturing sector, particularly among CMOs.

The first week of the year itself broke with some great cheer for the industry. On January 6th, the world’s top drug maker, Pfizer, announced a deal with Strides Arcolab on sourcing some 40 generic products for the U.S. market. The Bangalore-based Strides, which claims to have the largest portfolio of specialty injectables in India, has agreed to license and supply several of its oncology injectables as well as oral drugs to Pfizer. Pfizer, in return, will pay Strides upfront and certain milestone payments, beside the licensing money.

Another unconfirmed report that dawned with the year is that India’s leading drug maker Cipla has been talking to GlaxoSmithKline and Israeli drug major Teva on supply of generic drugs. Cipla, which is one of the biggest suppliers of anti-retrovirals, is also reportedly in discussions with German drug maker Boehringer Ingelheim for a possible supply deal.

Many more such deals are also said to be in the offing as global drug giants are on the prowl scanning through India’s generic landscape.

To put it in a different way, the year 2010 may rather be a continuation (in a much larger scale, of course) of the trends in a year that has just gone by.

Year of Game-Changing Deals

It was in 2008 that some of the path-breaking models like the so-called ‘hybrid’ deals between the innovators and generic makers started charting out new courses in India. These deals, which have re-written the rules of the game, would have been virtually impossible for brand-dependent big pharma, until a couple of years ago.

Daiichi-Sankyo, the #2 firm in Japan, the world’s second largest pharma market, bought out the then-top Indian drug company Ranbaxy lock, stock and barrel in a $4.6 billion deal.

Sanofi-Pasteur, the vaccine division of the French drug maker sanofi-aventis, picked up a majority stake in emerging vaccine firm Shantha Biotechnics, paying $780 million.

And most recently, the generic injectables leader Hospira acquired the entire injectables business of mid-tier generic player Orchid Pharma for $400 million.

While Daiichi, Sanofi or even Hospira went to the extent of buying out either companies or businesses, often ending up paying huge premiums, Pfizer (and perhaps GSK) resorted to more ‘cautious’ ways of sourcing generics.

In May, Pfizer forged an alliance with an upcoming injectables manufacturer Claris Lifesciences for supplying nearly a dozen injectables even as the world’s top drug maker added 40 more products from Aurobindo Pharma, expanding an earlier deal.

UK-based GSK entered into a purchasing agreement with Dr Reddy’s to source more than 100 branded generics in June. GSK signed a similar supply arrangement with Strides Arcolab as well, in 2008.

Dr Reddy’s, which is currently India’s second largest drug maker, has a long-time strategy to grab the first-to-file status in U.S. generic market; in the process, the company has been implicated in patent breaches by several innovators, including GSK (Imitrex (sumatriptan) pills litigation is a recent instance.) The rumor mill has it that GSK has been in talks with Dr Reddy’s for a minority stake buy.

More Gains for Indian Firms

Evidently, the deals are a ‘win-win’ for partnering companies. “The alliance combines Dr Reddy’s portfolio of high quality branded pharmaceuticals together with GSK’s extensive sales and marketing capabilities,” said a senior official at Dr Reddy’s. Dr Reddy’s alliance, like Pfizer’s, is meant exclusively for emerging markets except India.

While generics form a silver lining for emerging economies, the generic orientation turns out to be a great enabler for those lawmakers in developed countries who confront the twin challenge of widening health cover and cost containment, experts said.

“Increasingly we will see a phenomenon of ORCs [Original Research Companies] staking a claim in the fast growing branded generics and pure generics segment that collectively accounts for more than one-fifth of the global pharma market presently and is expected to touch one-third of the global market by the end of this new decade,” said Sanjiv Kaul, managing director, CrysCapital, an investment firm focused on India.

With generics emerging, Indian manufacturers may be the ultimate beneficiaries, either directly or indirectly. They can either be global generic marketers or global generic suppliers.

Despite India’s historical low prices, quality is going to be determinant in the coming days. India has a large base of world-class manufacturing facilities, including 100-plus factories approved by FDA. However, a few of them – including the factories of well-heeled firms – also bear the brunt of figuring in the FDA’s cGMP deviators’ list. Indian companies can strive for even better returns by addressing these gaps, rather than getting complacent.

S. Harachand is a pharmaceutical journalist based in Mumbai.