Multinational drug firms have been circling India, waiting for the opportune moment to enter the market. With several domestic pharmaceutical giants ripe for the picking, it is only a matter of time before they may be acquired by global firms. Thus far, price is the primary obstacle holding back suitors such as Teva, Merck KGa, Boerhinger Ingelheim, Pfizer, and GlaxoSmithKline.

Several India-based companies have increased in value significantly. Consider the recent Ranbaxy-Daiichi deal, for example, or the Sanofi-Shantha deal. Also, Abbott paid close to nine times the value of Piramal’s formulation unit sales to propel itself to the leading position in the $8-billion Indian pharmaceutical market.

With IMS Health predicting that leading emerging markets (i.e., India) will have annual pharmaceutical sales growth of 14-17% through 2014, the bargaining has really only just begun. There are several well-positioned Indian firms that have healthy cash flows and strong drug pipelines. Cipla, Glenmark, Torrent, Claris Lifesciences, Zydus, Strides, Aurobindo, and Dr. Reddy’s have already teamed up with Western pharma companies. For most, more than 50% of their revenue comes from overseas markets.

Two years after Ranbaxy, the Indian pharma giant, was acquired by Japan’s Daiichi Sankyo in a $5-billion deal that shook the industry, Abbott entered the stage to snag Piramal Healthcare for $3.72 billion. Abbott clearly spent its money well, according to Miles White, chairman of the 120-year-old Abbott Laboratories when speaking about the deal. With domestic pharma sales in India expected to more than double over the next five years, Abbott managed to vault itself to the number one position. Several other multinationals have been salivating at a similar prospect.

And why not? Sheer market size and strong annual-growth indicators aside, the Indian pharmaceutical sector is coming into its own, says Y.K. Hamied, chairman of Mumbai-headquartered Cipla. “It all depends on what is available. Buyers are willing to pay a handsome premium for available assets,” he says. Cipla grew nearly 15% between May 2009 and April 2010. So, is Cipla for sale? He guffaws. “Cipla is never going to be sold,” he asserts.

The same, however, might not be true for Hyderabad-based Dr. Reddy’s, which has been battling several challenges following its 2006 acquisition of Betapharm in Germany. Immediately after, the German government’s reforms brought about a slide in drug prices, which have yet to be stemmed. Dr. Reddy’s Chairman K. Anji Reddy has said that chatter about Dr. Reddy’s being for sale is merely rumor-based.  The company’s revenues reached $1.56 billion at the end of 2010, and Dr. Reddy’s aims to earn revenues of $1 billion per year from branded generic drugs alone over the next three years. In its arsenal are 141 ANDAs filed with the FDA, of which 13 are first-to-file products. (Recently, the US District Court of New Jersey allowed the firm to launch the generic version of Allegra-D 24 in the US. Approved by FDA on Mar. 16, 2010, the market size of the drug is around $200 million.)

With a new drug offering just around the corner, Reddy maintains there is no time like now for an Indian drug company to show off its true colors as a multinational firm. One must keep in mind that Ajay Piramal of Piramal Healthcare had a similar position before bailing out his generic-drug business to Abbott. The Piramal group is using part of Abbott’s $3.7-billion in proceeds to bring to market the country’s first domestically developed drug by 2012. With 14 new chemical entities in its product pipeline, Piramal Life Sciences could carve a niche for itself. As for the other Indian-based firms, only time will tell how long they hold out before jumping to a multinational partnership or merger.