Indian Pharmaceutical Industry has been growing at record levels in recent years but now has unprecedented opportunities to expand in a number of fields. The industry is making shift from low-cost, low-risk chemical research to capital intensive, high-risk discovery research.
The "organized" sector of India's pharmaceutical industry consists of 250 to 300 companies, which accounts for 70 % of products on the market, with the 10 firms representing 30 %. However, the total sector is estimated at nearly 20,000 businesses, some of which are extremely small. Approximately 75% of India's demand for medicines is met by local manufacturing.
According to German Chemicals Association, Indian-owned firms currently account for 70 % of the domestic market, up from less than 20 % in 1970. In 2005, nine of the 10 companies in India were domestically owned, compared with just four in 1994.
India's top pharmaceutical companies include: Ranbaxy Laboratories Ltd, Cipla Ltd, Dr Reddy's Laboratories Ltd, Lupin Labs Ltd, Nicholas Piramal India Ltd, Aurobindo Pharma Ltd, Cadila Pharmaceuticals Ltd, Sun Pharmaceuticals Ltd , Wockhardt Ltd and Glenmark Ltd .
Key strengths
*Well developed industry with strong manufacturing base
* WoN-established network of laboratories and R & D infrastructure
*Highly trained pool of scientist & professionals (especially in chemistry & process engineering
*World class quality products
*Strong marketing & distribution network
*Very strong reverse engineering skills
*Potential ground for clinical trials
*Fast growing healthcare industry
*Cost competitive clinical research
*Low cost manufacturing
*Large markets for modern and lifestyle drugs
*Rich biodiversity
*A growing biotechnology industry
Competitiveness
*Setting up plant in India is 40% cheaper, compared to develop countries
* Cost of bulk drug production is 60-70 % less compared to develop countries
*India is in alignment with the global IPR regime. Product patents regime came in force from January2005.
*Maintaining world-class quality, Indian drug prices are among the lowest in the world, 1/10th of international prices.
Export scenario
The exports constitute almost 40% of the total production of pharmaceuticals in India. In the pasts years the pharma exports grew by 30% per annum. India's pharmaceutical exports were to the tune of $3.Sbn in 2004, of which formulations contribute nearly 55% and the rest 45% comes from bulk drugs. India is among the top 20 exporters worldwide.
The export revenue now contributes almost half of the total revenue for the top 3 pharma majors. Dr Reddy's, Ranbaxy and Cipla. The other major exporters are Wockhardt Ltd, Sun Pharmaceutical Industries Ltd. and Lupin Laboratories. The formulations and exports are largely to developing nations in CIS, South EastAsia,Africa, and Latin America.
Research & Develpment (R & D)
The Indian pharmaceutical industry has achieved significant progress in terms of infrastructure, technology base and range of production. Research and development is the key to the future of pharmaceutical industry. The pharmaceutical advances for considerable improvement in life expectancy and health all over the world are the results of a steadily increasing investment in research.
In the global pharmaceutical industry, research is one of the important drivers of growth. On the basis of research focus, pharmaceutical research can be classified into discovery of New Chemical Entities (NCE), New Drug Delivery Systems (NDDS) and generic drugs (copy of the original drugs). In developed countries, bringing a new drug into the market costs a company about US$ 800 to US$ 900 million, but the launch of a new molecule in India can be done at around US$250-US$300 million, average time frame approximately 12-15 years.
Some of the leading Indian companies like Ranbaxy Laboratories, Dr Reddy's Laboratories (DRL), Wockhardt Ltd, Nicholas Piramal India Ltd, Torrent Pharma, Glenmark Pharma and Lupin Ltd have made substantial investment to upgrade their R & D infrastructure in an effort to climb the research value chain and sustain global challenges and competitiveness, to avail the global opportunities. In a short span of about 6-7 years, some of these companies have significant R & D milestones to their credit.
Major focus of Indian pharma companies is on the following areas:
* Metabolic Disorder
*Bacterial Infections
*Oncology
*Urology
* Cardio cerebral vascular Respiratory
* Anti Inflammation
*Diabetology
The R& D investment is ranging from 3.7% to even 12.3% of sales where as the international standard is in the range of 16-20% of sales. Number of scientist talents pool resources applied to this area of R & D is over 2405 amongst all top 7 companies. Average more than 300 scientists are working in different research set-up. Leading Indian pharmaceuticalscompanies are becoming R & D focused organizations. Capital required for R & D activities is very large and Indian companies are looking at various ways of funding their R & D ventures.
Companies like DRL have been adopted risk-reward sharing model with venture capital firm. Companies having good infrastructure are looking at sharing their capacity with other companies through contract research or collaboration. These funds are mostly used to perform activities which support their business strategies with a focus on R&D. Companies intending to go through generic route are investing in reverse engineering process and NDDS technology as it requires less capital and risks are low.
R & D strategies
The Indian pharmaceutical companies are adopting the following six R & D Strategies. These strategies are derived from the strength and opportunities of the pharmaceutical industry.
1. De-risking R&D
Indian Pharmaceutical companies are minimizing their risk by de-risking R & D. DRL has set up India's first integrated drug company "Perlecan Pharma Capital Ltd' with equity capital commitment of $ 52.5 million from India's leading venture capital investors, Citigroup Venture Capital International Growth partnership Mauritius Ltd (Citigroup Venture) and ICICI Venture Funds Management Company (lClCl Venture).
Citigroup Ventures and ICICI Venture will contribute $ 22.5 million each and DRL will contribute $ 7.5 million towards Perlecan Pharma's initial equity capital. Perlecan Pharma will be engaged in the clinical development and out-licensing of NCE assets. Perlecan Pharma's early priorities will be to advance the clinical development of NCE assets received from DRL through Phase II and thereafter seek out-licensing, co-development or joint commercialization opportunities. Perlecan will build on its initial pipeline through a combination of in-licensing and alliancing opportunities.
2. New Drug Delivery Systems (NDDS)
Expertise in process re-engineering, availability of lower cost scientific manpower, relatively lower capital requirement for NDDS research and faster clearances from regu-latory authorities have enabled Indian companies to capitalize on opportunities in NDDS. In fact, a number of domestic companies have stated developing NDDS for various molecules, making them suitable partners for foreign alliances.
For instance, Ranbaxy has licensed out an NDDS of ciprofloxacin to BayerAG. The company is also working on various NDDS platforms such as gastro-retentive delivery, aero gel, multiparticulate and modified delivery. Lupin is developing an innovative pipeline for oral-controlled release systems and platform technologies. Wockhardt and J B Chemicals are some of the other Indian companies, which are doing significant work in NDDS development.
3. Licensing
In-licensing and out licensing arrangements are becoming popular in the Indian market. These represent yet another opportunity for partnership, with mutual advantage for Indian as well as foreign players.
These arrangements enrich the product portfolio of the in-licensing partner besides providing them access to new technologies (where technology transfer is a part of the arrangement). For the out licensing partner, such arrangements usually bring in royalties payable by the license and lead to wider geographical coverage at minimal financial and managerial investment.
4. Out-licensing deals by Indian companies
The Indian companies are ready for a start-to-finish model for NCE research. However, their financial position does not allow them to conduct the entire clinical development of a new molecule, hence they out- license such molecules to big pharma companies for further development. A partnering alliance helps both the Indian company and the foreign partner to meet their strategic objectives while operational independence.
Followed by the success of the Novartis-Torrent alliance, Novartis has set up a dedicated office in Mumbai to co-ordinate its in-licensing activities for the Asia Pacific Region. The licensing deals struck by Indian companies so far have been product deals finalized at pre-clinical stages however going forward greater late stage licensing deals are foreseen.
5. Collaborative R &D
With increasing pressure on R & D spends amongst the big global pharma companies, India's superior and relatively low cost chemical synthesis skills are suited for collaborative R & D in drug discovery, GlaxoSmithKline (GSK) has entered into an R & D alliance with Ranbaxy Laboratories to collaborate on developing new drugs, which shows that India is moving up the value chain. The tie-up is expected to assist both the companies bring new drugs for infection, inflammation and diabetes to the market.
After animal testing by Ranbaxy, GSK will take the potential drug through human trials. If finally launched, GSK will have exclusive rights to sell it in significant markets like the US, Europe and Japan, while in India it will co-market the drug with Ranbaxy. Ranbaxy may also co-promote the drug in Europe and US with GSK prior consent.
A deal between Wyeth and Hyderabad-based GVK Biosciences on providing research services for drug discovery has closely followed a similar deal between Eli Lilly and Jubilant Organosys, both these deals are fee based research services, with Indian counterparts working on leads provided to them till the pre-clinical stage. This model ensures fixed returns, no intellectual property rights and is independent of "milestone payments", making Jubilant& GVK free from risk.
6. Contract Research
The complexity of research has led to widening of the productivity gap, characterized by newer challenges and novel mechanisms of action. Globally 15 of the 55 blockbuster drugs are in-licensed and in the next few years more than 20% of the global research spends would be on in- licensing.
There is now a widespread understanding that outsourcing various processes such as compound syntheses, high throughput screening, safety assays or ADME and toxicology studies in drug discovery is not just an option, but a necessity. Some of the key divers for this shift in strategy are:
*Increasing cost pressure
*Speeding drug discovery process
*Regulatory norms
*Intellectual property
*Minimize risk
Issues & Challenges in R&D:
R & D is a high-risk and high-return activity. It involves huge costs and years to discover a molecule and bring it to market. Apart from the cost and time, there are a lot of bottlenecks that hinders Indian pharmaceuticals industry to become a full fledged R & D driven industry.
Infrastructure: Adequate infrastructure is essential for R & D purpose. Now, it is difficult for Indian companies to create entire infrastructure in-house. Government must facilitate the establishment of common resources that can be used both by academia & industry. Regulatory environment: Indian pharmaceutical sector has been marred by lack of regulatory environment to provide a clear framework for operations. Intellectual property: India entered into the product patent era in compliance with the Trade Related Intellectual Property Rights (TRIPS) provisions of World Trade Organization. Academia & industry networking: With India embracing global product patent regime, there is a need for leaders in industry, academia and the government to come together to brainstorm on a strategy to leverage India's advantages to make the country in innovation powerhouse.
High failure rates: Drug discovery and development is characterized by high failure rates. It takes 10-12 years of R & D wherein 5,000-10,000 compounds are screened before a new drug reaches the market. Manpower: Drug discovery and development is a knowledge-based endeavor. It is a common phenomenon that Indian researchers relocate to the western countries in quest of higher education in science & technology and for better career prospects. India is unable to stop the brain drain which is crucial for success. (Source : FICCI & Frost& Sullivan)