While gold dealers have worried over the sharp spurt in the price of the commodity, followed by a sudden crash, many punters on the commodity exchanges have reaped a ‘golden’ harvest.
With gold prices having topped $540 an ounce in mid-December (in India, it translated to a high of Rs8,100 per 10 gm), traders have been splurging on gold futures. The Multi Commodity Exchange (MCX) here recorded trading volumes in excess of Rs250 billion in gold futures in November, the highest ever.
Both the MCX and the National Commodity and Derivatives Exchange (NCDEX) offer gold contracts, ranging from 100 gms to a kilo. This has attracted a host of retail investors in recent weeks, and many have seen their profits soar.
The action on both these exchanges is likely to hot up further, once Sebi (the Securities and Exchange Board of India), the country’s capital markets regulator, amends the rules to allow mutual funds and foreign institutional investors (FIIs) to participate in bullion and crude oil futures at the exchanges.
The Forward Markets Commission has recommended that both mutual funds and FIIs should be allowed to trade in gold, silver and crude futures. S. Sundareshan, chairman of the commission, believes that small investors (who will invest in the futures through the mutual funds) will stand to gain substantially, and the markets will also deepen, with the entry of FIIs.
While punters made money on gold futures in the commodity exchanges, retail buyers of jewellery have kept away from the yellow metal over the past few weeks, especially after the price went up to a 25-year high. This, despite the onset of the festive and marriage season in India.
India is the world’s largest market for gold, with a demand in excess of 800 tonnes annually. The country imports 75 per cent of the gold, and the bulk of the metal is used for jewellery. However, with prices scaling $500 an ounce, retail investors – who have been buying gold in huge quantities for much of the year – decided it was time to back off.
While usually about a thousand kilos of gold are sold in Mumbai daily, the figure fell drastically to around 50 kg, about a fortnight ago, as the price broke new records. Gold prices had touched a high of $873 an ounce way back in 1980. About 20 years later, it fell to $250 an ounce. But the recovery began this year, and the price touched $540 earlier this month, before reacting and falling to $500.
Inflationary fears, coupled with a sharp decline in global production (South Africa, Australia and the US, the three major producers, have seen significant falls in production in the last few years), have led to a spurt in prices. Speculators and investors around the world have also been pouring funds into gold futures leading to the price rally.
Analysts expect gold prices to remain high both in 2006 and 2007, with the price expected to soar to $550 and $600 respectively. But consumers in India are unlikely to be deterred by the high prices for long. Gold traders expect consumers to begin buying the yellow stuff in the New Year, preparing for the marriage season beginning April-May.
US drug-maker Pfizer has finally launched Viagra, its high-profile remedy for erectile dysfunction, in the Indian market, seven years after its global launch. But the international pharma major will find the market for sildenafil citrate to be a crowded one in India. !
There are nearly a dozen other me-too brands in India, and almost all of them sell at prices a fraction of what Pfizer is charging for its Viagra. While Pfizer is selling the tablets at prices ranging from a little over Rs450 – for 50 mg – to Rs600, local substitutes are being hawked at between Rs10 and Rs20 a pill.
Not all of the sildenafil citrate tablets sold in pharmaceutical shops in Mumbai are from unknown entities. Many of the leading Indian drugs firms also have their versions of Viagra. Indian companies like Ranbaxy Laboratories (with its Caverta), Cipla (Silagra), Zydus Cadila (Penegra), Torrent Pharma (Androz) and Sun Pharma (Edegra) have captured a bulk of the nearly Rs1.25 billion market for sildenafil citrate tablets.
Besides these leading firms, there are dozens of other remedies for impotency being marketed by aggressive Ayurvedic firms, especially in small cities and towns across India. But Pfizer – which has notched up sales of $1.7 billion for Viagra globally – is looking at the upper-end of the Indian market.
K.G. Ananthakrishnan, senior director of Pfizer India, expects Viagra to capture 10 to 15 per cent of the market over the next two years. Considering the growing incidence of cases of erectile dysfunction in urban India – caused mainly by stress and bad habits like smoking and excessive drinking – it wouldn’t be surprising if the company manages to carve out a significant share in the already over-crowded market for such drugs.
WHILE thousands of Indian males are expected to benefit following the launch of Viagra, Pfizer itself got a boost last week when a US district judge ruled in its favour in a patent fight with India’s largest pharma firm Ranbaxy Laboratories.
Ranbaxy, which aims to emerge as a $2 billion company by 2007 with half of its revenues expected from the US, suffered a setback following the ruling involving Pfizer’s cholesterol reducing drug Lipitor, the world’s largest selling prescription drug, which fetches the US company almost $12 billion in revenues.
The Indian pharma major has vowed to appeal against the US court ruling, but this is the third time it has lost a case against infringement of Pfizer’s patent on Lipitor. In October, courts in the UK and Norway had ruled against Ranbaxy in similar cases. The US court order blocks generic competition for the top-selling drug till 2011.
While Pfizer’s stocks have shot up on stock exchanges, punters have hammered Ranbaxy scrips on bourses. Ranbaxy’s fortunes have been on a downslide, as there has been a sharp slowdown in new products, and its litigation costs have soared.
Indian pharma companies, wanting to launch generic versions of drugs in the US, have over the years filed an Abbreviated New Drug Application (ANDA) with the US Food and Drug Administration. Ranbaxy had opted for a para-IV filing, which is the most popular route, but also the most expensive as it involves litigation.
If the application is approved the company offering the generic version in the US market gets an exclusive marketing right to sell the drug for 180 days. Ranbaxy itself has over 30 para-IV filings under ANDA, but it has failed in its battles, resulting in expensive legal costs.
Had Ranbaxy won the right to sell the generic version of Lipitor in the US for six months, it would have earned revenues of about $800 million.
The Ranbaxy defeat has boosted the fortunes of other western pharmaceutical companies, facing similar challenges from Indian firms. Bristol-Myers, for instance, is facing a patent challenge from another leading Indian company, Dr Reddy’s Laboratory, for its blood-thinner drug, Plavix. Other companies facing similar patent challenges include AstraZeneca Plc and Sanofi-Aventis.
Share prices of Indian drug companies declined sharply as a result of the US court order. The BSE Healthcare index also dipped sharply, as all pharma counters reported heavy selling last week.
Indian companies are hoping to grab exclusive marketing rights on a big chunk of the estimated $25 billion worth of drugs that are expected to go off-patent next year.
According to the Associated Chambers of Commerce and Industry of India (Assocham), India’s drugs exports will nearly double to Rs300 billion by 2007-08, if the expected $65 billion worth of drugs get off-patent by then in the US and Europe. According to Anil Agarwal, President, Assocham, Indian companies are expected to capture a 30 per cent share of the off-patent drugs. They are also expected to aggressively market their products in Africa and other parts of the developing world. However, the Lipitor ruling could dim the prospects for the industry in India.