MNCs consolidate

There has been an increased M&A activity in the biosuppliers space. These players are not only consolidating their businesses elsewhere in the world, but also in India setting up subsidiaries or through dealers/distributors.

Dr G Ramakrishnan, director, Asia Business Development for Scientific Instruments Division, Thermo Electron Corporation.

Last year the turnover of life sciences and chemical analytical division of Agilent Technologies India Ltd, a multinational biosupplier company based at New Delhi, touched $23 million. It has increased its revenue from $2.9 million in 1999. The company, having a team of 23 technical and support staff, has achieved this milestone to emerge as the BioSpectrum Top 20 Biosupplier company of the year. There is no involvement of the dealers/distributors. This shows the opportunity for the supplier companies and the potential India has in the life sciences industry.

Even Jerold Martin, senior vice president and global technical director, Pall Life Sciences, USA who was here in India recently, looking at the growth of the life sciences sector in India said the sales figure of Pall Corporation would increase in the near future (from $311.7 million with a growth rate of 19 percent in Asian region). "The market for products in separations is anticipated to increase at an average annual growth rate of 11 percent, reaching $3.6 billion by 2008. Liquid chromatography is a critical separations technology used at both the biopharmaceutical research and production stages," he said.

As life sciences industry requires over 800 equipments/instruments from consumables like test tubes, reagents, and pipettes to high-end equipments like bioreactors, fermentors, HPLC, LCMS it is difficult even to make a guess on the market size from the supplier side. However, considering just the market size of the analytical instruments it would be around $100 million growing at the rate of 25 percent. This is mainly because many companies are coming up in clinical research, proteomics and drug discovery areas do require different types of spectrometers.

Looking at the industry trends world over, the biosuppliers are going for amalgamation and consolidating their market position by acquiring the other suppliers or their divisions to enhance their product range. This will help them to enter the upcoming markets like India and China with a basketful of products. Some of the companies are entering the Indian market by setting up their subsidiaries or by entering into a tie-up with the local companies for distribution in India.

Amalgamation – a new norm
In India about 25-30 multinational suppliers are operating either by establishing their marketing office - Eppendorf India, Koch Membrane Systems, Cambrex India, Accelrys, BioRad, BD Biosciences, PerkinElmer etc. or with a full-fledged manufacturing facilities - Pall India, Thermo Electron, GE Healthcare (Amersham Biosciences), Millipore, Kendro's Labs, Alfa Laval, Sartorius, Waters India etc. Some of these companies have acquired other companies globally to strengthen their product portfolio and to meet the needs of the customers in a better way and to reach out to different customers.

General Electric (GE) has acquired Amersham plc, a key player in diagnostic imaging agents and life sciences industry. Together with GE Medical Systems - a global leader in medical imaging, healthcare services and information technology – the combined $14 billion business, now known as GE Healthcare, is expected to generate $16 billion in revenues in 2005. "These technology and service driven businesses can change the face of healthcare," said Jeffrey R Immelt, chairman of the Board and chief executive officer of GE.

Similarly Bio-Rad Laboratories Inc., a multinational manufacturer and distributor of life science research products and clinical diagnostics, has signed a binding letter agreement to acquire MJ GeneWork Inc., and its subsidiaries. MJ GeneWork is the parent company of MJ Research Inc. of Waltham, Massachusetts, a biotechnology company that specializes in thermal cycling instrumentation and reagents used to amplify DNA.

It gives an idea as to how these companies in supplier sector are looking at the industry. The trend is expected to continue further as more and more companies will look for mergers /acquisitions in future, as big companies will be in better position to provide whole lot of products and better services to the end users.

India a lucrative market
Looking at the huge potential and growth of biotechnology industry that is growing at the rage of 39 percent (according to Biotechnology industry survey 2004 by BioSpectrum and ABLE), these supplier multinationals are establishing their base in India by setting up subsidiaries /marketing offices to take an early mover advantage. In this direction already a few MNC companies in supplier sector have set up their base while others are entering the Indian market. Pall Pharmalab Filtration has now become Pall India, a 100 percent subsidiary of the Pall Corporation, which has majority stake in the joint venture company between Pall Corporation, USA and Pharmalab Filtration Engineering Group India, after the former bought the remaining stakes in the company last year.

Considering the growth potential in India, the Thermo Electron Corporation will be setting up one more division i.e. scientific instruments division headed by Dr G Ramakrishnan in addition to the existing Life and Laboratory Sciences division headed by Virendra Tipnis. The Board of Directors of Alfa Laval (India) Ltd has given its approval to Alfa Laval Holding AB, Sweden to establish a wholly owned subsidiary in India to undertake business activities supporting its global operations. The proposed activities are related to: research and development, global Alfa Laval Group's IT network and global IT systems in co-operation with centers located outside India, general administration particularly related to human resources. Cambrex too has firmed up its position in India by combining its different divisions under one umbrella called Cambrex India.

"The MNC companies are looking at India as a potential market so as to supply high-end technological equipments to the biotechnology industry and also to enhance their relations with the Indian customers. Besides the direct presence of the multinationals, dealers/distributors will also play a major role in India because of their service background, geographical background and close interaction with the customers. They have an edge over the manufacturers as they can offer range of products to the customers," observed Dhiren Wagle, country manager, BioRad Laboratories India Pvt Ltd.

In addition to acquisitions, the big suppliers are taking the route of in licensing agreement, exclusive marketing agreements with the local dealers to market their products. At the same time to overcome the problem of the having a handful of the products in their kit, the local companies and the dealers are now entering into a strategic tie-up with big equipment manufacturers to increase their product portfolio and to offer better and quality products to the companies in life sciences industry. This trend is seen not only in supplier segment but also in other industries like pharmaceuticals, insurance, automobile etc.

Korea-based SPL Labware (SPL), a bioscience labware manufacturer, has launched its operations in India through Hysel India Pvt Ltd. VS Narayanan, managing director, Hysel said, "We have recently signed a MoU with SPL to market their entire range of products in India. We expect a good market for SPL's products here as the initial few customers are satisfied with the performance of these products."

The Swedish Biotech major Mabtesh will supply its high quality ELISpot reagents in India through Jain Biologicals Pvt Ltd, which is at Panchkula near Chandigarh. Corning Life Sciences has joined hands with Delhi-based Axygen Scientific Pvt Ltd to sell its entire range of life science products in the Indian market. Corning Life Sciences specializes in polymer science, biochemistry and molecular biology, glass melting and forming, surface modification and characterization science. Wealtec Corp of US entered into a distribution agreement with Medispec Instruments India to market its Dolphin series of gel documentations systems in the country. Phase Technology, Canada and Accustandard Inc. USA have appointed Skytech Systems India Pvt Ltd as their authorized distributor for India. Phase Technology offers cloud, pour and freezing point analyzers for lab and online applications. Accustandard Inc is an analytical standards manufacturing company.

"India also has many big suppliers who manufacture quality equipments locally. They are also well placed in certain segments. There is growth for them too as the quality of the local products has gone up in the recent past. This is mainly because the requirement of instruments will differ from company - company and organization – organization and will be at different levels. Local companies are in a better position to provide good quality instruments at a reasonable price. And the dependency on imported products has come down. So there is a good market for everyone who is making good and quality products," said Dr G Ramakrishnan, director, Asia Business Development for Scientific Instruments Division, Thermo Electron Corporation.

"However the volume will become the key when it comes to high-end technology products. Making them in volumes will not be feasible for the local companies. So it is preferred choice to import such equipments. It is feasible for the MNCs that have worldwide market to invest so much on developing one equipment/instrument and it takes a minimum of five – six years to launch in the market like discovery process, after passing through rigorous regulatory requirements/ specifications like FDA, ICH guidelines etc. So every company in the sector has a potential to grow provided it supplies quality products and good services to satisfy the customers," noted Dr Ramakrishnan.

At the end it is the customer who is the king and not the manufacturer. With this in mind the supplier companies will look at different models to satisfy and meet the needs of the customer. The marriages between two multinational suppliers in the form of mergers and acquisitions and strategic tie-ups with the local companies do help the companies to increase the product portfolio and to enter newer upcoming markets like India. It will be a win-win for both the companies.

Narayan Kulkarni