Pharma companies to scale up Romania operations

NEW DELHI: Romania could soon become the hunting ground for Indian pharma companies who plan to strengthen their foothold in the European market.

With low-cost of production and regulatory reforms expected soon, big Indian drug makers are shifting their production for European markets to Romania while others are already in the race to acquire companies in the European country.

With Romania recently becoming a member of the European Union, it has become a gateway for Indian drug makers to over 30 markets in the region. Ranbaxy Laboratories which acquired Terapia for $321 million last year is shifting the production of some of the drugs from India to its Terapia facility and plans to make the country a hub for its European markets.

The Gurgaon-based company is also investing $10 million in Terapia. For the quarter ended September, 2007 Romania posted a revenue of $23 million, which is about one-third of the company’s total European sales of $73 million.

Three Indian companies Shreya Lifesciences, Lupin and Dr Reddy’s Laboratories are reportedly in race to acquire LaborMed, a Romania based generic manufacturer.

“The cost of production are comparable with India. There are companies in the region which are on the blocks and Indian companies will be keen for an acquisition,“ an investment banking source said.

There could be an additional incentive for companies to have a subsidiary in the country. In a bid to encourage domestic manufacturing, the local government has proposed to cap prices of drugs imported in the country at the lowest price of the similar brand in key 12 European markets.

Once implemented, Indian companies who export a drug to Romania will have to sell brand in the country at the lowest price of similar brands in these 12 countries, an industry source said.

Says Prabhudas Liladhar, head private client group Ranjit Kapadia, “Having a subsidiary in Romania will help Indian companies to expedite the distribution process rather than importing from India. The country has now assumed significance after it became a part of EU. But the quality of man-power and production could be a problem.”