Over the last couple of weeks we’ve blogged about the Ranbaxy-Daiichi deal a couple of times. Here’s another news item by Jyothi Datta. Of particular interest to us was the concluding section of the report where she very rightly point outs that the Ranbaxy-Daiichi deal represents a new hybrid model in the pharmaceutical industry where innovator companies such as Novartis are diversifying into generic drug market through subsidiaries companies such as Sanofis. In this respect she quotes Shamnad who ever so eloquently describes this new duality of interest as an ‘Ardhanarishwar’ sort of duality. (Ardhanarishwar is the Hindu God Shiva’s form where he is half-man, half woman!)
This duality of interest can be traced to several factors: 1.) Huge opportunities running into billions of dollars in the generic drug market – a market which innovator companies can ignore only at their own peril. 2.) The absolutely inefficient business model being followed by big pharma as of now i.e. for all the money that is pouring into the pharma industry there have been very few breakthrough innovator drugs entering the market in the last decades 3.) As a direct result of point no:2 investor confidence in the pharmaceutical industry has plummeted over the last few years with several pharma stocks taking a beating over the last couple of years.
All these above factors point to the need of pharmaceutical companies to remodel themselves to stay afloat and what better way to do this than to acquire companies like Ranbaxy which have a strong base in the generic industry, a promising R&D set-up & a robust marketing network over several countries around the world.
In this regards it is apt to refer to the Economist which in an article titled ‘The Next Big Thing’, dated
Emerging firms in countries like India and China are more of an opportunity than a threat for established drugmakers. “The most efficient way of making a computer is in cross-border transactions, making the design in one place, the chip in another, the keyboard somewhere else and then assembling the whole thing. The same will happen in drugs as well,” says Swati Piramal, of Nicholas Piramal. With the right support from western industry, that could be good for drugmakers—and their customers—everywhere.
Hopefully these predictions will bear out and the will have newer, cheaper drugs in the not so distant future.