India - Partnerships are a better alternative to acquisitions

Engelbert C. Tjeenk Willink, member of the board of managing directors at the German drug maker Boehringer Ingelheim GmbH, was in India last week to chalk out the company’s new India strategy, Asia’s fastest growing pharma market.

In an interview, Willink said Boehringer now wants to be an important part of the country’s pharmaceutical industry and will invest heavily to boost growth. Edited excerpts:

Boehringer, despite being present here for almost a decade, has not become quite visible in the local market as yet. And, the fresh move happens at a time when almost all top drug makers of the world as well as the local industry have already established strong bases.

Won’t this make your new growth efforts more challenging?

We were late to make this move. Not having strong patent regime in the country was a barrier in entering India earlier. But now, we clearly want to invest and expand our presence in India. As a company that is built on innovation and heavy investments in research and development (R&D), we don’t consider ourselves a generics company and don’t want to get into generics in a big way. So, as long as that kind of framework doesn’t exist, it’s not an interesting opportunity for us. When you invest more than €2 billion in research (annual research budget), IP (intellectual property) becomes important.

At the same time, we understand the challenge of being in a market that is competitive. As a family-owned business, we have always followed a different strategy compared with the competition, and we do believe in a sustainable model and not in growing overnight through inorganic way and be under pressure to cut size to sustain later.

Are there IP-related concerns now?

We still believe that the IP-related situation in India is not optimal but it clearly has improved strongly. There are many challenges, be it around IP or be it around pricing for an innovative company like ourselves to go into the Indian market.

We established a company here in 2003. At that point in time, most of our products were still running here through an earlier licensing deal with German Remedies Ltd, which was later acquired by Zydus Cadila (Cadila Healthcare Ltd). And now, particularly for our prescription area, we’re building up our own presence. There are two new products from our own research pipeline under patent protection that we’re launching this year—one in diabetes and one in stroke prevention, in addition to five speciality products already in the market. We hope to launch our oncology portfolio in 2013-14. So, we’re in a relatively luxury situation of having a well-filled late-stage research pipeline to feed the market requirements for a sustainable operation.

What are your expansion plans in India?

Our expansion plans are always built on the innovation that we bring from our pipeline. The strategy of this company is not to acquire like some of our competitors. We build our products and our portfolio. We expect to launch all the products that come out of our pipeline, be it in OTC (over the counter) or animal health vaccines. But this does not exclude smaller acquisitions or licensing opportunities.

At this point in time, there are no plans to build up production capacity here. We either source from other countries into India or we work with local firms. We have 400 people in the field now for seven products (including the two sold by Zydus). It will expand significantly both in terms of people and products. But if you ask me whether we will make acquisitions of big generic companies here, I can clearly say that it doesn’t fit into our scheme of things. But we may have partnerships, collaborations for marketing production and even research, which are better alternative to acquisitions.

Will there be differential pricing for India?

For some of these products which are biological, there is not much of a price difference. We’re always concerned about the competition and also whether our products are more expensive than generics in other areas. So, we will try to find an optimum way to bring our drugs to as many people as possible, but it has to be in a way where we can a continue to have a business. But of course, we will expect that the investment in the innovation that we have done will be rewarded. But the issue here is not the cost alone. Even with cheaper generics, not everybody in India can afford medicines today. So there are limits to what we can achieve in this regard.

C.H. Unnikrishnan & Namrata Nandakumar

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