India's top drugmakers Cipla and Wockhardt are in advanced stages of talks for a broader business alliance exploring the best synergies between the two to tide over serious market and regulatory challenges globally.
The alliance, which may even lead to a merger or equity collaboration between the two local rivals to strengthen their base significantly in India as well as key foreign markets, is expected to be announced soon, said two people privy to the talks.
The alliance, which is very strategic in nature, would involve synergies between the manufacturing capabilities of Cipla and the brand and marketing bandwidth of Wockhardt on a global scale, mainly concerned with the US and Europe.
"It's a win-win situation for both the companies in the current situation where Wockhardt is facing bigger manufacturing challenges for the regulated markets, and Cipla keenly looking for expanding foreign market presence," said one of the persons, who requested confidentiality.
Cipla, which recently announced top management changes, has been looking for new investment or strategic partnership opportunities to expand its global footprint. While it has very recently acquired two manufacturing units along with a pipeline of product filings in the US, it is keen to follow similar strategies in Europe too.
Although Cipla has already built a much larger manufacturing capacity, approved by foreign regulators, in India as well as several other markets, its product pipeline for the US and European markets is comparatively narrow.
On the contrary, Wockhardt, which has been facing serious manufacturing compliance issues in most of its key export facilities, has already established a broader range of products approved for Europe and US markets.
"Since these markets along with the fast growing India market are key for these companies to sustain growth, this strategic partnership would play a critical role in achieving a much better synergy between them," said the other person, who also didn’t want to be identified due to confidentiality reasons.
"A deal of strategic nature by which Cipla may even digest the struggling Wockhardt, is expected to be announced very shortly," said this person.
"Cipla does not comment on any product or partner discussions," said a Cipla spokesperson responding to an emailed query.
"As a pharmaceutical company we are constantly in discussions with multiple parties on potential collaboration opportunities – in line with our aspiration to drive access and ensure availability of high quality, affordable medicines," added the Cipla spokesperson in her response to BW Businessworld query to confirm its talks with Wockhardt.
An email query sent to Wockhardt did not elicit any response.
Wockhardt, which has been struggling with import ban by US Food and Drug Administration (US FDA) on its key export facilities in Waluj and Chikalthana in Aurangabad for the last three years, had received adverse audit observations from the US regulator with regard to its Shendra factory, a comparatively new facility in Aurangabad, also in January.
Worsening the situation further, the US FDA banned the company's another big plant at Ankleshwar in Gujarat too in the first week of August. Wockhardt, which has established a better market presence in Europe, could expect similar action from the European and UK regulators also hurting their product supply.
While, Cipla, which is still not able to establish a bigger market presence in the Europe had recently tweaked its strategy in those markets from the earlier direct to distributor model to a business-to-business model. This may be a precursor to the expected Wockhardt deal, say industry analysts.
BW Reporters
Unnikrishnan is currently Senior Associate Editor with BW Businessworld at its Mumbai Bureau. During his two decades long journalistic career, he has received several media awards and recognitions. His articles on healthcare, life sciences and intellectual property rights (IPR) have been republished by several international blogs and journals.
