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Mylan's India Gameplan

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People in the corner offices in most leading Indian pharmaceutical companies may have reason to worry: Mylan is coming to India. On 27 May, Mylan said it would rebrand Matrix Laboratories (the active pharmaceutical ingredient, or API, manufacturing company it acquired in 2006 for over Rs 3,000 crore) as Mylan and launch its own prescription products in the Indian market in the next 12 months. "We are exploring various options — either to go for a soft launch in a phased manner with select products or a big-bang launch with several products," says Robert J. Coury, chairman and chief executive of Mylan.

Mylan is the third-largest generic drug maker in the world with $5.5 billion in revenues in 2010, after Teva Pharmaceuticals of Israel ($16.1 billion) and Novartis-controlled Sandoz Generics ($8.51 billion). But Both Teva and Sandoz are yet to seriously tap the Indian drug market, with its estimated sales of Rs 65,000 crore, and growing at above 15 per cent annually. Compared to the global majors, the Indian drug companies are minnows: the largest, Ranbaxy Laboratories, is only $1.87 billion in revenues (in 2010), Dr. Reddy's Laboratories makes $1.7 billion, and Cipla, $1.37 billion in 2010-11.

Industry insiders say Mylan has started recruitment of experienced medical representatives targeting 800-1,000 people — a number that suggests a big-bang entry. "Yes, we are in the process of recruitment," says Coury. Mylan is also looking at acquisitions and marketing collaborations for specific products; the objective is to become one of India's largest drug companies within 2-3 years, Coury adds.

But Mylan has competition. Analysts point out that Abbott emerged as the largest drug company with the acquisition of Piramal Healthcare's formulation business a year ago, followed by Cipla and Ranbaxy (see table); other leading players include drug majors such as GlaxoSmithKline Pharmaceuticals, Sun Pharma, Zydus Cadila, Mankind Pharma and Lupin. The Indian market is an overcrowded one, with about 30,000 brands made by over 2,500 companies, many of them me-too product makers selling common formulations. The top 75-100 firms control more than 70 per cent of the market.

Mylan has a portfolio of over 900 products. "We are evaluating scope for each of our products and will launch suitable products in this market," says Heather Bresch, president of Mylan. But sales in the domestic market are price-driven, by relationships with doctors and by geographical factors. Mylan could get into a price war with the competition, besides having to put together a sizeable marketing force of over 3,000 people to cover India, says an analyst. "Poaching from other leading companies will be expensive, training fresh hands will delay the launch by over 1-2 years," he adds. "Mylan could acquire an Indian company with marketing strength, if valuations are right."

People apart, the company is also looking at contract manufacturing options. "About 70 per cent of the products of Merck KGaA (which Mylan acquired for $6.7 billion in 2007) are outsourced and we can follow that strategy here," says Bresch, suggesting that Mylan's entry could also benefit local manufacturers. The other big worry for local players: if Mylan is here, can Teva be far behind?

(This story was published in Businessworld Issue Dated 13-06-2011)