Contract Research and Manufacturing Services (CRAMS) is a multibillion-dollar opportunity for Indian pharmaceutical companies possessing mandatory competence. The CRAMS industry in India is estimated to have earned revenues of approximately US $895 million in 2006. As part of cost cutting measures, multinational companies are turning to India to outsource some of their research and manufacturing activities.
To achieve desired cost reductions, MNCs and foreign companies are willing to increase the outsourcing of manufacturing of bulk activities and formulations. As it results in increased contracts, it gives far better prospects for countries like India that offer a low cost manufacturing base. Indian pharma companies are taking steps to expand their CRAMS business activity. Over the last five years, the CRAMS industry has been contributing nearly 8 per cent of the total Indian pharmaceutical business. Looking ahead, CRAMS segment is expected to grow at a CAGR of nearly 32 per cent from 2006 to 2013.
With many of the blockbuster drugs getting off-patent and increasing R&D costs, it is hard for the companies to maintain their bottom-line and remain unaffected. They have found recourse in outsourcing some of their research and manufacturing activities to save costs. This has led to the growth of CRAMS. It can be said that CRAMS business has come as a boon to the Indian mid-cap pharma companies.
Arch expands R&D facility
The Mumbai-based Arch Pharma Lab is expanding its R&D facility, to meet the growing demand in the contract manufacturing and research segment. Currently, the company is expanding its manufacturing site at Gurgaon. The Phase I expansion is expected to be completed by the end of 2007. The company's total annual turnover for the year ended March 2007 amounted to Rs 362 crore, including revenues from CRAMS business.
Ajit Kamath, chairman and managing director, Arch Pharma Lab, said, "We are investing huge funds to propel CRAMS activity. As of now we handle six clients from Europe and we are expecting two more clients from US. Our 15 per cent of the turnover comes from the CRAMS and in the next three-year we are expecting to increase its share to 50 per cent. Our target is to establish a few but dedicated long term clients under exclusive arrangement".
"To boost our CRAMS activity and investment, we are dedicating a clear portion of our staff for this activity. It shows our focus on CRAMS and FTE business. We are enhancing our staffing in R&D significantly with a view to capture more CRAMS business", Ajit added.
Indoco moves ahead on CRAMS
The Mumbai-based Indoco Remedies Ltd (IRL), an active player in the CRAMS business has recorded revenues of Rs 34 crore from CRAMS business for July 06 to March 07. The company is targeting annual revenues of Rs 45 crore from CRAMS business.
Speaking to Chronicle Phrambiz, Aditi Kare Panandikar, director, business development, said, "Indoco aims to transform itself into a completely integrated player in CRAMs space. India has emerged as a secure territory for research and manufacturing of patented products and the company would leverage this opportunity. We are expecting a growth of over 30 per cent in the current financial year. We have recently commissioned our R&D facility at Navi Mumbai at a cost of Rs 225 million to fully integrate CRAMS space. This facility will work for firms from Europe and US".
"We have already made a sizeable investment in the manufacturing facilities and the new R&D centre. In addition, depending on the specific CRAMS opportunity, we may sometimes have to invest in our manufacturing facilities. To fully integrate ourselves in CRAMS activities, we may in future set up a clinical research organisation for conducting clinical trials and bioequivalence studies," Aditi added.
Plethico shifts CRAMS to Sikkim
Attracted by the tax sops offered by the state government of Sikkim, the Rs 325 crore plus leading pharmaceutical company, Plethico Pharmaceutical Ltd, is shifting its entire CRAMS and OTC business units to this tax free state with a total investment of Rs 20 crore. This new facility will be operational by 2009. The company is expected to undertake the construction work from early 2008.
Talking to Pharmabiz, Sanjay Pai, CFO, said, "We are having robust business in CRAMS and OTC. We are shifting our entire CRAMS and OTC business to Sikkim, to save excise and sales tax. We are not engaging in contract research as of now. Approximately 30 per cent of our total revenues come from contract manufacturing and toll manufacturing. However, we do not focus on this segment, as it is only a capacity filling exercise for us. We deal with Indian pharma clients, including Nicholas, Ajanta, Ipca, Ranbaxy, Medley and Promed. Internationally we do work for Kuwait Saudi Pharma, Hovid etc."
Contract manufacturing service plays a major role in Plethico's strategic business development and revenue stream. The company's fully automated production capacities, trained technical manpower and managerial acumen combined with regulatory certified state of the art manufacturing facilities provide the ideal environment for delivering high quality out sourced products.
Sharon invests Rs 32 cr on Dehradun plant
The Sharon Bio Medicine has invested Rs 32 crore at Dehradun in Uttarakhand for contract manufacturing for the regulated markets. The Dehradun plant has the capacity to produce one billion tablets, 750 million capsules. The plant will have two lines for injectable from the future expansion. It has 20 - 25 products in its portfolio, and is planning to add another 30 products. Sharon has a two tier marketing strategy wherein it would focus mainly on both direct sales, contract manufacturing of intermediates and API's as the lower tier and contract manufacturing of formulations at the upper tier. The company has already started registering the dossiers in different countries. The company expects to trigger the UK MHRA by October and the US FDA by mid next year.
Hikal carves a niche in APIs
To boost its CRAMS business, the Mumbai-based 245 crore company, Hikal has signed a mutually exclusive long-term agreement with Alpharma Inc. to manufacture and supply an active pharmaceutical ingredient (API) for the veterinary sector. Hikal will be manufacturing the API at its US FDA approved plant at Jigani, Bangalore. The total value of the contract is estimated to be Rs.200 crore.
Commenting on the development, Jai Hiremath, vice chairman and managing director, Hikal Ltd, said, "We are glad to announce our long term alliance with Alpharma to manufacture a product that is well established in the market and has tremendous growth potential due to better cost competitiveness. This is in line with our strategic initiative of becoming a significant player in the CRAMS business.
"Given our strength in R&D and project implementation, we have carved a niche for ourselves in the CRAMS space. I am glad that our thrust in the pharma sector is paying dividends. This alliance will have a significant bearing on our financial performance and create value for our stakeholders. We are also working towards signing several other contracts with leading global life sciences companies in the near future," he added.