For Indian pharmaceutical companies, there are very few options to explore in the product patent era. Being unable to invest the kind of funds needed for ''discovery research'' they are finding in contract manufacturing the means to maintain high growth rates.

Their expertise in process research and development (mainly reverse engineering) will prove handy. They want to leverage this strength to grow bigger by transforming their relationship from one of vendors to global producers to that of strategic partners in the next millennium.

Ranbaxy Laboratories and Lupin Laboratories were among the first Indian companies to bag manufacturing contracts from multinational companies -- Ranbaxy from Eli Lilly and Lupin from Cynamid.

When Ranbaxy developed an alternative process for manufacturing Eli Lilly''s patented drug Cefaclor, the American company sensed that it would lose its markets to Ranbaxy''s low-cost substitute in countries that did not recognise product patents. To make the best of a bad situation, Eli Lilly offered a manufacturing contract to Ranbaxy for producing 7 ACCA (intermediate for cefaclor).

In case of Lupin, Cynamid offered contract to the Indian company for manufacturing D2 amino butanol.

With liberalisation relaxing licensing rules, in the last few years, Indian companies have found it easy to seek manufacturing partnerships. But, again, only companies that have modern manufacturing facilities, with sizeable capacities and financial muscle have been successful in roping in international clients.

The most aggressive Indian company in this direction is Nicholas Piramal. It made a small beginning through the acquisition of Hoffman La Roche''s Indian business. Along with the Thane unit of Roche, the Indian company also acquired the technology for manufacturing vitamin A from the basic stage, with a proviso that it would not export the product to any other country. With Glaxo''s exit from the vitamin A business, Nicholas enjoys the monopoly in vitamin A.

In 1997, Nicholas Piramal entered a 49:51 joint venture with Allergan Inc, USA. Along with marketing rights for Allergan''s products, it also secured manufacturing rights.

In the same year, it signed a three-way agreement with La Porte of the UK and another global player from the US  for manufacturing inorganic chemicals. Nicholas Piramal provided the land adjoining Sumitra Pharmaceuticals for setting up a new plant for the joint venture. To focus on manufacturing, the company spun off its bulk drugs business into a separate company -- Global Bulk Drugs & Fine Chemicals -- with effect from 1 April 1998.

In early 1999, Nicholas Piramal signed an agreement with Siegfried of Switzerland for development and manufacturing of four products that go off-patent by 2001. Negotiations with the UK-based Baker Norton are at the final stage for a local joint venture. Here, again, Nicholas Piramal will offer the local manufacturing option for the entire range of Norton''s products.

On the bulk drug front, the company is holding talks with several international companies to lease unutilised capacities at its Hyderabad unit, one among them being Apotex of Canada.

For Wockhardt India Ltd too, contract manufacturing is a serious consideration. This Rs 600-crore pharmaceutical company has recently built a Rs 40-crore manufacturing facility in Chandigarh to make nutritional products. This unit will be the main plant for contract manufacturing.

Wockhardt recently signed an agreement with Ferring BV of the Netherlands for manufacturing certain formulations for export to the Scandinavian countries. The products will be made at Wallis Laboratories, a UK-based company acquired by Wockhardt for $5 million. The bulk drug for the formulations will be sourced from India.

Recently Wockhardt signed a memorandum of understanding with US-based Sidmak Laboratories for marketing generic formulations in America. Sidmak will formulate the products, and Wockhardt will supply the bulk drug inputs for them.

Similarly, for the Mumbai-based Kopran group, originally a producer of bulk drugs, which later ventured into formulations, contract manufacturing is a decisive strategy in the tough new era of product patents that India is moving into.

To add focus to its multi-pronged approach, the group has formally de-merged into three separate companies. The formulation and bulk drug business, other than penicillin-G, has been retained by Kopran Ltd, the flagship company. The penicillin-G business was spun off into Kopran Drugs Ltd and research into Kopran Research Laboratories Ltd. The company recently signed an MOU with Synpac Laboratories for the supply of penicillin-G bulk.

Cadila Healthcare, of the Ahmedabad-based Zydus Group, is yet another Indian-controlled pharma group that has entered contract manufacturing. It has tied up with Byk Gulden of the Netherlands for supplying the Dutch company''s global bulk drug requirement of the anti-ulcerant molecule pentaprazole.

Says Dilip Sanghvi, managing director, Sun Pharmaceuticals, "Our philosophy is to seek an opportunity where we can add value. Rather than go in for vendor-type contract manufacturing, we would prefer to partner an international manufacturer. That will give us the chance to contribute and learn. For instance, taking country-specific rights, product development and dossier preparation. This moves us up the learning curve for developed markets."

With an eye on the burgeoning generics market in the US, Sun Pharma acquired a 45 per cent stake in the US-based Caraco Pharmaceuticals. The Indian company has transferred technologies for 21 products to the American company so far.

Sun Pharma will supply bulk drugs for all the products for which Caraco has received US FDA approval for its abbreviated new drug applications. The ANDA approvals are a mandatory requirement for marketing generic drugs in the US. Caraco, in turn, will formulate the brands for marketing in the United States.

Not to be left behind, Dr Reddy''s Laboratories has commissioned a Rs-60 crore formulation unit in Hyderabad, dedicated solely to contract manufacturing.