Fill it, shut it and forget it is the advertising slogan for Hero Honda, the world's largest motorcycle manufacturers. Investors would prefer to modify that line to: "Buy it, sleep on it (but don't forget about it)." After all, the stock has emerged as the most consistent wealth creator over the past 10 years, according to the wealth creation study by Motilal Oswal Securities. Rs 6 invested in April 1991 would be worth nearly Rs 900 today, an appreciation of 15,000 per cent. Due to its consistent performance, Hero Honda has emerged 10 out of 11 times in Motilal's list of wealth creators. It's followed by Ranbaxy Laboratories, Wipro, Dr Reddy's Laboratories and Cipla. According to the study, out of the top 10 most consistent performers between 1991 and 2006, four are pharma companies and six are consumer firms.

However, 2006 belonged to Matrix Labs for being the fastest wealth creator, which posted an average cumulative growth in M-cap of 183 per cent in the past five years. If investors would have invested Rs 1.5 as on March 30, 2001 in Matrix, they would have made Rs 281.60 as on March 31, 2006. Matrix is followed by Kirloskar Brothers and Pantaloon Retail, both of which have generated a M-cap growth of 170 per cent each over the past five years.

Large-caps-ONGC, RIL, Indian Oil, Infosys and ITC-continued to be the biggest wealth creators. Says Raamdeo Agrawal, MD, Motilal Oswal Securities: "Bet on leaders. Others will create wealth for you only if you buy them low."

-Mahesh Nayak

Old Drugs In New Bottles
Should pharma MNCs be allowed to patent innovations?

Novartis' Shahani: Patent problem

Some call it incremental innovation, others evergreening of patents. The issue of drug patentability in India is a source of conflict between global MNCs and Indian generic players. The issue is about India restricting patentability to new chemical entities (NCEs) and not extending it to 'incremental innovations' such as novel drug delivery systems (NDDS), polymorphs and isomers. Global major Novartis has already tasted the impact of this last year when it was denied a patent for its anti-cancer drug Glivec (imatinib mesylate), used in the treatment of chronic myeloid leukemia (CML), a slow growing cancer in which the bone marrow makes too many white blood cells.

Last January, the Indian Patent office upheld Hyderabad-based Natco Pharma's contention and refused Novartis a patent on Glivec. Natco said that the application claimed only a polymorphic form of imatinib mesylate and that Section 3(d) of the Patents Act did not permit such polymorphic forms to be patented. The patent specification, it argued, did not bring out any improvement in the efficacy of the product over the known substances. Today, as a result, Indian generic players can freely produce its generic versions. Natco, for instance, markets imatinib mesylate under the brand name "Veenat." Novartis moved the Chennai High Court where the case comes up for hearing on January 30.

Novartis' position is that "the India law creates new and unjustified hurdles in the way of pharmaceutical innovators." The company has maintained that India, being a signatory to the WTO trips (Trade Related Aspects of Intellectual Property Rights) agreements, should be interested in promoting the development of innovative therapies. In fact, members of the Organisation of Pharmaceutical Producers of India (OPPI), which is viewed as a platform of multinational drug companies (and has Novartis India as a member and its VC & MD, Ranjit Shahani, as its President), have maintained that patent protection needs to be extended to incremental innovations.

Others, mostly Indian generic players, do not seem to buy this argument. Their contention is that India is only trying to ensure that MNCs do not resort to evergreening of patents. Members of the Indian Pharmaceutical Alliance, which mostly has Indian domestic players as members and claims to represent generic Indian companies, argue that the Doha declaration on trips agreement and public health confirmed the flexibilities allowed to WTO members to define patentability in the national laws and India is only using this flexibility to protect public health and its generics industry with the aid of Section 3 (d). This section "aims to curb the abuse of patents that prevent the entry of generics on expiry of 20 years period of patent protection. Therefore, what the Act essentially does is only to filter patents for trivial changes, which keep alive monopoly of the originator."

So, does this all boil down to a case of the big bad pharma trying to make money? After all, the drug in question is quite expensive and could cost patients over Rs 1 lakh per month as against Rs 10,000 per month that the local makes could cost. Novartis maintains that it gives away this drug at no cost to the really needy patients. In fact, it has a programme for this (Glivec International Patient Assistance Program) that is administered for Novartis by The Max Foundation.

The Novartis Glivec case could set a precedent. "It is estimated that there are around 8,000-9,000 applications filed with the Indian patent office, most of which are filed by foreign pharma companies during the last 10 years. It is also known that only about 274 NCEs were approved by the US FDA and this implies we should expect huge number of patents which involve improvements or modifications," says Komal Shah Bhukhanwala, founder and CEO, Innovarip Consulting Group, which describes itself as an entity founded to provide specialised patent services to companies. Her contention is that section 3(d) raises the question on how one defines and measures efficacy.

January 30 should provide some answers.

-E. Kumar Sharma

Taking On Nokia
Sony Ericsson wants to be a strong #2 in mobile handsets.

Sony Ericsson's Dutta: New gameplan

With nearly seven million subscribers being added every month, India is the fastest growing cellular telephony market in the world, even ahead of China, which has been adding at the rate of 6.5 million subscribers per month, though admittedly on a larger base. India, as of November 2006, has an installed base of around 141.3 million subscribers, according to Association of Unified Telecom Service Providers of India. And most of these millions are also constantly trading up their handsets. With new purchases and trading up combined, the total mobile handset market in India has been estimated at $3 billion (Rs 13,500 crore).

India thus far has been largely Nokia territory, with the Finnish company having a dominant market share in excess of 70 per cent, according to a TNS CellTrack study. A reinvigorated Motorola as well as Korean chaebols Samsung and LG trail considerably. Also way behind the leader is the Indian operation of Sony Ericsson, the five-year-old joint venture between Japanese consumer electronics giant Sony and Swedish telecom equipment major Ericsson. Sony Ericsson India is estimated to have just around 6 per cent of the Indian market, considerably lower than its global market share of an estimated 8.5 per cent.

There are a couple of reasons for the company's diminutive India presence. For one, it is completely absent from the entry level segment, which comprise monochrome, black and white handsets, constituting nearly a third of the Indian market. For another, unlike say an LG or a Samsung, it has no presence in the CDMA market and all its offerings are in the GSM space only. Sony Ericsson also has an image issue with the company being seen as a player, which addresses only the top-end of the market.

However, Dee Dutta, Corporate Vice President and Head of Marketing for Sony Ericsson worldwide, while acknowledging some of the shortcomings, says the company is pulling out all stops to increase its market share. "The Sony name has tremendous brand equity in India. We want to leverage that. Our aim is to address as many price points in the market as possible. India and China are very important markets for us."

As a part of its efforts to leverage the Sony legacy, the company's music-enabled and camera phones are riding on the brand positioning of the Walkman and Cybershot range of products, respectively. Dutta says the company is also increasing its visibility and footprint by expanding its dealer and distribution network across the country. "Our aim is to become a strong #2 in the Indian market." Refusing to confirm whether the company was looking at setting up a manufacturing base in India, Dutta says: "We are examining all options. Depending on market requirements we will respond appropriately." The problem for Dutta and Sony Ericsson could well be that competitors like Nokia, Motorola and LG have already read the market requirements-more affordable handsets is just one of them-and have responded by producing out of India.

-Venkatesha Babu