After years of steady growth, Ranbaxy Laboratories Ltd saw a sharp drop in net profit for the first two quarters of 2005 due to competition in the US generic drugs industry, among others.
But China expected to seek US Food and Drug Administration (USFAD), approval for its first generic drug by 2006, the market could become flooded with even cheaper clones in the next five years, said Brian Tempest, chief executive of Ranbaxy.
"I do believe that the Chinese pharmaceutical companies will come to USA," Mr Tempest said. "Theres not one thats filed yet, but I think it will happen shortly. That will add to the pricing pressure," he said in Malaysia ahead of the opening of a new Ranbaxy plant. Mr Tempest said Ranbaxy had 102 product approvals from the FDA and was awaiting approval for 50 more.
The recent acquisition of Israels Ivax Corp by Teva Pharmaceuticals Industries also means Ranbaxy will have the second-largest pipeline of filings with the FDA.
Product filings basically determine the worth of a generic drug company. Ranbaxy had sales of approximately $420 million in the US in 2004 and is eyeing a bigger share of a market worth more than $30 billion as more drugs patent protections expire.
Already, the emergence of more competitors in the US market in 2005 has caused prices of generic drugs to fall, hurting Ranbaxy.
Mr Tempest said, even greater competition for his company and Indian drug makers such as Dr Reddys Laboratories Ltd, another early entrant in the US market, would be Chinese firms with similar or possibly lower priced drugs than their Indian rivals.
"It took Ranbaxy five-six years to get to its place of significance in the US market. I think it will probably take the Chinese a similar sort of period," he said. "The world will then see Chinese pharmaceutical companies doing filings in the USA and Europe at a level which you dont see today."
He said the Chinese drug business, although fledgling, was already established for its source of raw materials, known in the industry as Active Pharmaceutical Ingredients or API.
"Ranbaxy itself buys a certain amount of its API from China. You buy the cheapest API you can for the specifications, quality and the regulatory approval you need."
"Chinas already got US approval for the raw materials and the plants to make them. But in terms of turning that API into capsules, thats the step they are not at yet."