Gujarat sees a surge in small drug firms eyeing regulated export venues

The country’s pharma hub Gujarat has, of late, witnessed a surge in small-sized drug firms eyeing regulated markets like the US and Europe for exports. Traditionally, small and medium players had focused on the semi-regulated markets such as Latin America and Africa, among others. 

However, with big pharma firms focusing on specialty drugs in the US market, owing to pricing pressure in plain vanilla generics, the smaller players have seen an opportunity in this space, partially vacated by the large ones.

The pharma industry in Gujarat is buzzing again with new entrants that are eyeing aggressively the regulated markets of the United States (US) and Europe even as they build their presence in semi-regulated markets like Latin America and Africa, among others.

Recently, Ahmedabad-based Espee Group saw its recent buy of Aavis Pharmaceuticals’ plant in Georgia (the US) bag regulator US Food and Drugs Administration’s (USFDA) nod. 

With this, the Espee Group, which had acquired Aavis in October 2016, joined the ranks of other Gujarat-based firms like Cadila Healthcare (Zydus Cadila) that have plants in the US, thereby opening up the regulated market for the firm.

A $125 million or roughly Rs 886 crore group in calendar year 2018, Espee Group’s formulation facility in the US through Aavis Pharma will lead to an immediate 12 per cent growth in revenues to close at $140 million (Rs 992 crore approximately) by the end of 2019. Aavis Pharma is engaged in contract development and manufacturing of generic pharmaceuticals, including controlled substances. 

Swapnil Shah, executive director of Espee believes his group could tap areas suited for the regulated markets. According to Shah, therapy areas like central nervous system (CNS) and pain management drugs, apart from muscle relaxants, anti-rheumatic and anti-fungal drugs have gained prominence in the US markets.

Similarly, on the back of rising exports, Ahmedabad-based Lincoln Pharmaceuticals Ltd has now applied for inspection and approval which could provide access to regulated markets for the company for the first time. So much so that the company expects exports to double in the next two years, depending on approvals in the regulated markets. 

Compared to last year, exports of the company have already doubled to stand at Rs 300 crore so far, said Mahendra Patel, managing director of Lincoln Pharmaceuticals Ltd. The company makes cardiovascular, general anti-infectives and respiratory system drugs, among others. 

“We have applied for inspection in regulated markets. Already, our exports to African, South East Asian, Latin and Central American and other regions are growing rapidly. We are also expecting inroads into some Commonwealth Independent States (CIS) countries,” said Patel. He, however, did not share further details. 

Another such player eyeing the regulated markets is Yash Medicare. “There are limited players in regulated markets due to stringent measures but this provides space for new players. We have already forayed into non-regulated and semi-regulated markets. We now see business prospects in regulated markets where we intend to foray into in the next couple of years on the basis of specialised products like creams and ointments,” says Chirag Doshi, managing director of Yash Medicare.

According to the Indian Drug Manufacturers’ Association (IDMA), around 33 per cent of pharmaceuticals is produced in Gujarat with the state also forming 27-28 per cent of pharma exports. With more number of forays into regulated and semi-regulated markets, this is set to grow. 

Meanwhile, experts reiterate the trend of new plants in Gujarat coming up with facilities of international standards for making off-patent drugs for regulated and semi-regulated markets. 

“Increasingly, new small and medium enterprises in pharma are focusing on off-patent products which do better in regulated markets. This is because big pharma companies are exiting off-patents making way for the new players. While the margins may not be lucrative in off-patent drugs for big pharma firms, for the new players it is still decent enough to grow,” said Doshi, also a senior official in the Gujarat chapter of the Indian Drug Manufacturers’ Association (IDMA).

Seeking a step-up

  • Off-patent generics offer scope for smaller players after big pharma firms’ exit
  • Smaller firms graduate from non-  and semi-regulated markets to regulated ones
  • Eyeing regulated markets, more facilities in Gujarat aim for USFDA standards 
  • Gujarat accounts for 33 per cent of pharma products 
  • About 28 per cent of pharma exports come from Gujarat