It all began as early as January 1998 when SmithKline Beecham and American Home Products (AHP) (represented by Wyeth Lederle and Cyanamid Agro in India) announced merger plans. But marriages are made in heaven, and talks between the two broke down as unexpectedly as they had begun.

However, a month later SmithKline was back in the limelight, and caught wooing neighbour Glaxo Wellcome, albiet unsuccessfully. The break-down of merger talks between Glaxo Wellcome and SmithKline Beecham saw stock prices plummet, but analysts believe that both companies may get back to the negotiating table sooner or later. AGlaxo-SmithKline merger would have created the world's second largest company in terms of market capitalisation at about $22.4 billion.

The AHP group also was second time unlucky when plans to combine forces with another US company, Monsanto, fell through later in the year.

The year 1998 saw frenzied activity on the mergers and acquisitions front and this reached a crescendo in December with two major cross-border deals. December 1 saw German multinational Hoechst Marion Roussel and French giant Rhone Poulenc announce a two-step merger plan even as the latest wave of consolidation engulfed Swedish giant Astra and Britian's Zeneca.

The proposed Hoechst-Rhone Poulenc merger will create a Rs 700-crore pharmaceuticals powerhouse (market share of 4.4 per cent) and the second largest agrochemicals player in the Indian market, though the formation of Astra-Zeneca is unlikely to have major ramifications in India. AstraZeneca boasts of proforma 1997 pharmaceutical sales of $11.5 billion.

Consolidation effortsin the industry have essentially been prompted with an eye on the escalating costs of drug discovery research. Back home, the Indian industry took the world by storm when a clutch of domestic companies led by Orchid Pharma and Cipla sought the Drug Controller's permission to manufacture and export sildenafil citrate, the active ingredient in Pfizer's anti-impotence wonder drug, Viagra. Orchid stunned analysts with its claims of having received export orders of 39 MT globally. Viagra itself scaled new heights in terms of prescriptions generated (279,000 during the week ended May 8) and discoverer Simon Campbell, in Mumbai earlier this month, indicated that the blue diamond shaped pill had more surprises in store. The drug is now being being tested on women and results are expected in the first half of 1999.

Indian firms Ranbaxy Labs and Dr Reddy's Labs also demonstrated to the world that basic research is no longer the multinational's stranglehold. While Dr Reddy's anti-diabetes molecules moved ahead in theclinical development cycle, Ranbaxy made its debut with the filing of an investigational new drug (IND) application for a new molecule for benign prostatic hyperplasia. Mumbai-based Cipla has also been working quietly on its chiral synthesis-backed R&D strategy.

The year also saw German multinational, Bayer, take a decision to discontinue all future investments in pharma sales and marketing in India, as part of a major revamp. The restructuring exercise, the company said, was aimed at "assuring a non-loss situation" for its Indian shareholders. Bayer's pharmaceutical business, currently ranked 60th in India (market share of 0.5 per cent), had not been able to achieve the critical mass required to make it a self-sustaining, profitable activity.

Another Indian healthcare entity in revamp mode was the fast growing Nicholas Piramal, part of the Ajay Piramal group. The company unveiled plans to spin off its flaconnage (pharmaceutical glass containers) division (Gujarat Glass) and its bulk drugs unit intoseparate entities as subsidiaries. The company also acquired Hoechst's Mumbai-based basic R&D centre for Rs 20 crore.

Hoechst itself, in India, would probably like to wipe off any memories of 1998, given that it faced prolonged labour opposition to the proposed merger of subsidiary, Roussel India, with itself. The company also saw an erosion in sales and profitability due to the turmoil in the Russian economy.

The year also saw the fast-growing Sun Pharmaceutical Industries sew up another deal when it announced its intent to consider a merger with eye care firm Milmet Laboratories in Baroda. The proposed merger marks Sun's sixth major effort towards inorganic growth and comes close on the heels of its buy-out of a clutch of brands from Natco Pharma during the year. Wockhardt also acquired Tata group company, Merind, ending prolonged speculation about the future of the firm. This was followed by a buyout of the $18-million Wallis Labs of UK.

Lupin Laboratories also added flavour to the M&A mela when itmoved swiftly to buy out US multinational Eli Lilly's cephalosporins facility, in alliance with the Puerto Rico-based Mova Pharmaceutical Corporation.

Industry pundits say that 1999 could see another round of consolidation and, this time round, the impending product patents regime may see centrestage occupied by domestic bigwigs.