industry in general was then experiencing a major overhaul by vertically integrating operations such as production, marketing and research. The protection given to the pharmaceutical industry through patents and brand names saw many top companies switch over to the production of specialty medicines. Indian pharmaceutical fine chemical players have served their apprenticeship and are now embarking on their own voyage of conquest in this globalizing industry. Looking back to the early 1990s, a handful of modest sized Indian companies, including firms such as Ranbaxy, Cheminor and Dr. Reddy’s Laboratories, first appeared on the RADAR scope of industry participants in the United States and Western Europe. These Indian ‘upstarts’ looked to be an emerging threat to Western European fine chemical players, particularly Italian and Spanish firms, and some discovery based drug companies based on manufacturing and skilled labor cost advantages and limited protection for intellectual property. At the time there were questions about consistent quality, lack of FDA certification and even environmental practices that slowed their progress in international markets. But today we can say that the Indian pharmaceutical fine chemicals industry has learned its lessons well. Even a brief survey of the situation, reveals an Indian industry that has: many moderate to large players with a varied range of participation, even some with international operations, • •
management and financial resources to pursue acquisitions in other countries,
become a reputable source of building blocks, advanced intermediates and active ingredients to the growing global generics market • •
an improving track record with the FDA and other regulatory agencies,
skilled technical labor that can now support not only fine chemical process development and production but also clinical development and contract research. •
A key driver for significant growth in the global pharma fine chemicals segment (APIs, advanced intermediates and basic building blocks are normally about 17-18% of the total pharma industry value, or about $85 Billion in 2005) was the expected increase in outsourcing starting in the mid-1990s, based on the anticipation of very productive discovery and generic drug pipelines (today, approximately 40% of the value of this production is outsourced). Industry analysts expected the human genome project to lead to the introduction of new drugs of increasing complexity and these drugs would require competent outsourcing partners with real know-how to effectively bring this growing portfolio of life saving products to market, quickly and at acceptable cost. At the same time, an increasing number of older drugs would go through patent expiry and expand opportunities for generic suppliers. As a result, both technology start-ups and divisions of large chemical companies – jumped in to take advantage of the growing outsourcing opportunity. New cGMP capacity was built by suppliers of all sizes, and in the late 1990s several large chemical companies (e.g., Degussa, Rhodia, Clariant and DSM) made significant acquisitions to establish themselves as leading fine chemical and active ingredient suppliers to the pharmaceutical industry. This active capacity building, coupled with the improving quality of Indian and Chinese manufacturers created strong price competition and Page | 40