Injectables are slowly coming up to center-stage as the top-listed category in Indian CMOs’ dealmaking space. The trend emerged in several deals forged in quick succession towards the end of 2012.
   
On the 5th of December, Strides Arcolabs came out to formally announce a supply pact with Eli Lilly, shutting down rumor and speculation about a possible sell-off. Indian press and global wire agencies had been competing with stories of an imminent acquisition of Agila, the Bangalore-based company’s injectables division. Pfizer, Novartis, Roche and U.S.-based private equity fund agency Kohlberg Kravis Roberts & Co. (KKR) were jostling for Strides’ Agila unit, reports said, quoting anonymous sources.

A fast-growing business, Agila Specialties currently commands nearly 50% of Strides total revenues. Clearly, everybody was looking for a big ticket buy-out similar to the $400 million Hospira-Orchid deal in 2009.The world’s leading injectables maker paid in excess of four times the market valuation of the Orchid Pharma’s finished injectables formulations business. Hospira went on further to acquire Orchid’s beta-lactam API facility and the associated R&D centre as well, paying another $200 million in August last year.

All the speculation of a sell-off, however, came to a naught when Strides made it public that the company had only made an arrangement with Eli Lilly for supplying injectables. The portfolio of 10 drugs to be manufactured by Agila Specialties includes orals as well. Eli Lilly will make a foray into the Indian generics market space by distributing these medicines.

Bringing Back Action
In the second instance, Ahmedabad-based injectables firm Claris Lifesciences Ltd. entered a joint venture agreement with two Japanese drugmakers, Otsuka Pharmaceutical and Mitsui & Co Ltd. Otsuka is an expert in infusions and speciality products while Mitsui is a trading and financials specialist. In the newly-formed Claris-Otsuka Company, the majority stake-holder Otsuka will hold 60% while Claris and Mitsui 20% each. 

Making use of the JV platform, Claris expects to sharpen focus on its anti-infectives, plasma volume expanders and parenteral nutrition therapies business in India and expand it to other emerging markets with the help of Otsuka’s marketing network. For Otsuka, it paves way for introducing speciality products in India. Plus, the Japanese infusion maker can leverage its manufacturing infrastructure with the addition of two factories transferred by Claris.

If they are any indication, the deals suggest a clear bias from buyers towards steriles. This is in contrast with the familiar, largely oral solids-centric outsourcing alliances. In a way, injectables brought the action back into the CMO scene, by infusing a fresh bout of zeal.

Pfizer, as per reports, figured foremost on the list of the potential bidders for the Strides unit. The U.S. pharma giant was speculated as the most likely buyer as the company already had a running generics supply arrangement with Strides.

The key reason cited for Pfizer’s interest is the short-supply of generic injectable drugs in the U.S. market. Quite a few injectables units have been closed recently and many others are faced with the threat of closure, thanks to the enhanced vigilance and frequent inspections by the U.S. FDA. A dearth of cancer drugs and other medicines used in hospital emergencies has created an urgency that left the drug firms with generic interest with no option but to outsource.

Why Indian Injection?
Also, the increasing demand of generic cancer drugs has placed the generic injectables marketplace on the fast growth track. Expanding by 42%, the global market for generic injectable medicines is forecast to reach $17 billion by 2020 as more and more drugs lose patent and fall to the generics domain, according to a Citigroup study released last year.

No wonder that specialized entities like Agila, with a lineup of market-ready products, have become more attractive. Strides already has several injectables approved by the FDA and has seven facilities certified by the agency to make injectables.

It may take years to build factories capable of producing specialized injectable drugs. Therefore, buying out an established firm — even paying a premium — wouldn’t be a bad idea. With quality assured, price-points are not a matter of concern, since the Indian firms flaunt competitive pricing as their all-time USP.

Very few companies from the developed world have achieved mastery in producing specialized sterile products. In India, CMOs capable of producing injectables are not, of course, very large in number, compared to the abundant oral solids makers. Injectables makers count only a handful. Among those few are firms like Agila, which has proven the quality of its product by withstanding even a stricter regulator’s crackdown. At a time when every other producer is getting ensnared, Strides keeps on successfully adding more injectables in the U.S. market, say deal-mongers.