The announcement lived up to the hype. It was of Ranbaxy's deal with Bayer AG. Under the deal, Ranbaxy licensed out its once-a-day dosage form of anti-infective drug, Ciprofloxacin, to the German company for $65 million and royalty payments linked to milestones in the drug's clinical trials.

It was a breakthrough for not only Ranbaxy but also the Indian pharmaceutical industry. Bayer, which holds the patent on the twice a day dosage form of Ciprofloxacin, is said to have given up on developing a once a day form after years of effort. And an Indian company, with limited resources in comparison to the MNC giant, had done it. Suitably, it made headlines and Ranbaxy's perception improved several notches in the eyes of one and all.

That was then. Now, things have taken a drastic turn, a none too pleasant one for Ranbaxy. Bayer announced in the middle of this month its decision to try out a similar drug developed by an unidentified company for development and subsequent commercial launch. It is reported to be undecided on which drug it would finally develop for commercial launch.

To be fair to Bayer, it has a right to hedge its position. Ranbaxy's molecule is undergoing clinical trials and there is no guarantee that it will come out successful. The trials will be over by the end of 2002. Registration will take up another six-eight months. Which is cutting it fine, since Bayer's original patent expires in December 2003. Therefore, it has a right to look at other options, just in case Ranbaxy's molecule fails.

At the same time, the development has given rise to widespread concern over the future of drug discovery---new molecule as well as new delivery systems---in India. For, Indian companies do not have the resources required to take a new molecule through the expensive clinical trials and world wide markets, braving numerous regulatory hurdles along the way. Which is why they have been taking the licensing-out route for their discoveries.

However, while this results in huge savings, it also puts matters in the hands of the licensee.

Ranbaxy executives admit to being concerned over the development, but not overly so. "Bayer has a contractual obligation to take our drug to the market if it comes through the clinical trials successfully. And the payments have to come as scheduled," says the a spokesperson for the company.

Which means there will be no impact on Ranbaxy so long as its drug is successful in trials. It gets its money and its drug reaches the market regardless of what happens to the other one.

But what if both the drugs are successful? Wouldn't Bayer be free to choose the option that is cheaper. And the fact that the name of the other company has not been disclosed, leaves plenty of room for the prophets of doom to see sinister motives.