Ranbaxy Laboratories, an Indian pharmaceutical manufacturer employing about 70 people in Co Tipperary, is to sell its facility in the Republic and consolidate its European operations in Romania.

The company, which set up here in 1996 with the acquisition of another pharmaceutical group Rema, said yesterday it had decided to divest its manufacturing facility in Cashel.

The site was responsible for manufacturing generic drugs - those whose patent had expired - and as a result is likely to have been more susceptible to Ireland's rising cost base as generic drugs are significantly cheaper than those produced under patent.

Matt Moran, director of PharmaChemical Ireland, a unit of employers group IBEC, likened the activities of Ranbaxy to a general manufacturer and not a specialist pharmaceutical group.

"It's a bit of an anomaly, but at the same time it's a message that Ireland is becoming an expensive place for manufacturers," he said, adding that he does not expect such a move to be replicated by other pharmaceutical groups.

The decision to close the Irish operation and shift activities to Eastern Europe follows Ranbaxy's acquisition of Romanian group Terapia for $324 million (€253 million) earlier this year. Terapia was the largest independent generic drug company in Romania, with a strong pipeline, good research and development activities and most importantly low-cost production facilities - an area where Ireland is unable to compete.

At the time of the acquisition, Ranbaxy said it would help the Indian group expand its presence in Eastern Europe, an area that Mr Moran says is becoming increasingly attractive to Indian pharmaceutical groups seeking to expand their foothold in the European market. Terapia already has two manufacturing locations on Romania.

"Following the recent acquisition of Terapia in Romania, there are significant operational efficiencies to be gained from consolidating the company's European manufacturing operations in Romania," Ranbaxy said in a statement released yesterday.

The decline in the price of generic drugs in key markets such as the US, and aggressive patent defence by major pharmaceutical companies, is forcing generic drug producers to seek cheaper locations for their operations.

Costs in Ireland are known to be rising significantly and many traditional manufacturers have already been forced out of the market.

Ranbaxy reported a 7 per cent increase in sales in the second quarter to $317 million. Profit before tax and extra-ordinary items was 23 per cent ahead at $34 million.

The company attributed the gains to a reduction in its cost base and the expansion of its business into new markets. - (Additional reporting Reuters)