Baxter’s Wockhardt buy could spur consolidation, feel LVP manufacturers

Baxter International’s reported interest in acquiring the intravenous fluid business of Wockhardt Life for a consideration of Rs.120 crore has sparked a new hope for consolidation among manufacturers of large volume parenterals (LVPs). More specifically, LVP manufacturers hope that somebody, somehow will manage to acquire the ailing Core Parenterals.

Given the nature of LVP business in India, 50 percent of the total sales results primarily from dealer push and the lobby is very powerful. Ironically, there were the same dealers who refused to stock Core products in 1996 owing to differences over margins.

Industry experts hope the Baxger deal will trigger the next round of consolidation, or better still, Baxter will itself play an active role. "We believe

Baxtger’s acquisition of Wockhardt’s IV business will improve fortunes of the IV fluid industry. IV is not a core business of Wockhardt and this industry will benefit it if there are only large players. If Baxter can achieve some consolidation, it will prove good for the market," Bhargava comments.

In fact, consolidation is waiting to happen but there are a dearth of buyers. Frustrated with high demands, Fresenius has altogether given up the strategy of expansion through the inorganic route. Earlier, this year, the company has earmarked USD 60-70 million to fund number of smaller acquisitions after its attempts to buy out Core did not materialise. Instead, the company is now setting up a greenfield project in

Gurgaon with a new form of container manufacturing technology at Gurgaon. Albert David, the other significant player in this segment, has no appetite for acquisition. On the contrary, it had evinced interest to divest its LVP business altogether, say sources.

Large scale consolidation apart, the segment is witnessing low levels of realignment in the form of capacity acquisition. For instance, Fresenius has acquired FFS manufacturing machines from Torrent and Gujarat Inject and Core, say sources, is planning to sell a couple of its machines to an unidentified buyer. For the moment, though, all eyes are fixed on the Baxter-Wockhardt deal, which is still believed to be hinged on the valuations.

Pharmaceutical consulting firm Pharmaplan is planning to develop its Indian arm as an official hub for south east Asian countries. "We have recognised the growth potential here and are discussing the possibility of developing Pharma Plan India as the major centre to cater to South East Asia," said George J Jakobi, MD, Pharmaplan Germany.

The company is already servicing the south east Asian region from India. This will be stepped up in future. Lower operating costs is the other significant reason why Pharmaplan is consolidating its SE Asia operations in India.

Jakobi, who was recently in the country to discuss the strategy for India, said that the company is conducting internal discussions on spreading its operations to other parts of the country as well. "We have already worked out plans to open another office at Bangalore in January 2002," the

company has identified southern region as a potential area.

Despite industrial slowdown, the number of new pharma projects are on the rise, says independent industry consultant Devinder Pal. Also, a number of Indian pharmaceutical houses are upgrading their facilities in wake of Schedule M amendments of the Drugs Act, he says.

Interestingly, the bulk drug sector continues to attract 60 percent of the overall new projects in the country, says the Indian head of Pharma Plan Dr AK Singal. Formulation projects accounts for 30 percent and the remaining 10 percent in split between biotech and specialty chemicals. Currently, Pharma Plan is targeting only 25 to 30 top companies in India.

Pharma Plan has successfully completed projects for formulations in China, Korea, Dubai, Iran and Uzbekistan. Besides,

recently, the company finalised a bulk and formulation facility in Bangladesh. For its Indian clients, Pharma Plan has undertaken construction of a formulation plant for Kopran in Dubai in 1999, a US FDA approved bulk drug project for Morepen Laboratories and specialty bulk drug project for Dabur, to name a few.

Pharma Plan’s activities in India include technical feasibility and conceptual studies, simulation studies to optimise production costs and basic and detailed engineering of complete pharma/biotechnology/ sterile liquids and medical devices, plants and components.

In addition, the company takes up audit of complete facilities in the area of design, engineering, systems, documentation and validation, turnkey project implementation and revamping and modernisation of existing pharma plants.