The Indian pharmaceutical industry, the fourth largest pharma market in the world in terms of volume, is now focussing sharply on research and development (R&D) by investing huge funds for developing new products. An increasing presence in high-value markets like USA and Europe has catalysed the industry growth. Several Indian pharma players are seeking generic opportunities by entering non-US markets. With new molecular entity (NME) and new drug approvals (NDA) not throwing up spectacular results, leading global innovator companies are seeking cost-effective research alternatives. In view of this, global R&D outsourcing is expected to accelerate and extend beyond in-house R&D spends. R&D outsourcing, including discovery and clinical research, is gaining traction.
The aggregate R&D expenditure of 20 leading pharma companies increased by 8.7 per cent to Rs 2113 crore during 2006-07 from Rs 1944 crore in the previous year, despite few leading companies like Ranbaxy Laboratories, Ipca Laboratories, Strides Arcolab, Glenmark and Shasun Chemicals and Drugs cutting down their R&D spending. The net sales of 20 companies increased by 25.6 per cent to Rs 27,540 crore during 2006-07. R&D expenditure as percentage of net sales during 2006-07 worked out to 7.67 as compared to 8.86 in the last year, basically due to reduced expenditure by the certain companies.
Sun Pharmaceutical and Industries has de-merged its R&D activities into separate company called Sun Pharma Advanced Research Company Ltd. Nicholas Piramal also decided to de-merge its NCE activities into a separate company. Biocon has invested in subsidiaries to focus more research and clinical trials area. Also, Shasun Chemicals and Drugs, a major player in CRAMs, is investing in biotechnology in the recent years in its quest to develop significant capabilities in the area of recombinant biopharmaceuticals.
Wockhardt acquired Negma Laboratories, an integrated research based pharmaceutical company, during May 2007 for $265 million. Negma has a patented product portfolio and holds leading position in the osteoarthritis / rheumatology, phlebotonic and hypertension segments. Wockhardt has forayed into the patented business acquiring 172 patents and Negma's strong research and life cycle management capabilities.
A strong product pipeline strengthens the foundations of a pharmaceutical company and assures a promising future. The Indian companies are also investing to retain large talent pool for development of new products.
With significant growth in R&D during last couple of years, the leading 75 pharmaceutical companies have posted a healthy growth in top line as well as bottom line during 2006-07. The standalone net profit of listed 75 companies, with net sales above Rs 75 crore, moved up sharply by 44.5 per cent to Rs 7,692 crore in 2006-07, while their net sales increased smartly by 23.5 per cent to Rs 46,008 crore. The growth can be attributed to the aggressive entry into the highly profitable regulated markets, higher filings of DMFs and ANDAs, notable growth in product approvals by regulatory authorities, expansion programmes, mergers and acquisitions and launch of cost effective products.
There are significant risks in execution, as the process of development and commercialization of new molecules is time consuming as well as costly. On average, it takes between 9 and 12 years to develop a new molecule from the laboratory stage to a form ready for patented commercial launch. However, in view of the number of patent expires in the near future, sales of generic version of patent expired drugs in the US as well as in Europe represent significant opportunity for all generics and API manufacturers.
Sun on DMF filing spree
Sun Pharmaceutical Industries, the Rs 2100 crore plus pharma giant from Mumbai, is moving ahead with filing higher number of DMFs, ANDAs and products in the highly regulated markets. The company recently demerged its R&D activity into a separate company - SPARC Ltd. At the end of the first quarter, the company was awaiting approval for 83 ANDAs from US FDA, including 8 tentative approval - 5 from Sun Pharma and 3 from Caraco Pharma, a wholly owned US subsidiary of the company.
The company's R&D expenditure for 2006-07 went up to Rs 153.63 crore from Rs 113.44 crore in the previous year. This worked out to 9.24 per cent of net sales for 2006-07, as compared to 8.78 per cent in the last year. The company filed 91 DMF/CEP applications and received approval for 43 DMFs. The total number of patents applications submitted stands at 414, while 72 patents were granted. The company's R&D spending during the first quarter touched to Rs 60.8 crore, representing a 9.9 per cent of net sales.
Sun Pharma is spending $45 million into SPARC, the new R&D based company with total scientists of 150. The company is planning to licence few products to fund the business.
SPARC received the entire innovative business comprising of research projects for new molecules and new delivery systems, scientists, intellectual property, space and equipment from its holding company in February 2007. Its new molecule projects are essentially in the areas of allergy/inflammation and modification of bioavailability.
Nicholas to de-merge R&D activities
Nicholas Piramal India Ltd. (NPIL) has decided to de-merge its NCE research wing into a separate company. Its R&D expenditure during 2006-07 amounted to Rs 107 crore as against Rs 91 crore in the prior year. This worked out to 6.7 per cent its net sales for 2006-07.
NPIL's investigational new drug application (INDA) for its lead molecule P-276 has recently been approved by US FDA and the company is expected to commence clinical trials for multiple myeloma - a devastating type of cancer in collaboration with Harvard Medical School and Dana Faber Cancer Centre, USA, soon. The company's R&D capabilities have also been recently validated by virtue of research collaboration with Eli Lilly for a metabolic compound of the US-based pharmaceutical company.
NPIL expects to have eight compounds in clinical trials by the end of the current financial year. This will result in increased expenditure, as clinical development costs constitute about 2/3rd of the total R&D cost of a drug. NPIL wishes to complete development upto proof-of-concept (end of phase II) for all its pipeline compounds and bring to market certain niche compounds on its own.
The dynamics of NCE R&D are different from NPIL's branded formulations or custom manufacturing businesses. Investment in NCE research calls for sharper research focus, longer time horizon and higher risk appetite. Keeping these factors in view, the board of directors of the company has approved de-merger of its NCE unit into a separate company in which NPIL will hold equity capital of Rs 45.5 million. This move will also facilitate bringing in strategic or financial investors in future, who want to invest directly in the NCE research programme.
Under the de-merger scheme, the NCE undertaking with net assets (at book value) inclusive of unutilized money collected under the Rights Issue of 2005 and intended for R&D to the extent of Rs 950 million will be transferred to the new company from NPIL. Apart, the new company will issue fully paid up equity shares aggregating to Rs 209 million to the shareholders of NPIL in the ratio of 1:10 (i.e. 1 equity share of Rs 10 for every 10 equity shares of Rs 2 each held in NPIL).
Post de-merger, NPIL will hold 18 per cent of the equity capital of the new company, while the remaining 82 per cent will be held by the shareholders of NPIL. The new company will be an independent company and will be listed on the BSE and NSE. At an appropriate time after listing, the new company will explore various options for raising further funds to meet its business requirements.
Ranbaxy Laboratories cuts R&D cost
Ranbaxy Laboratories has initiated a focused program to optimize the cost structure. The company's efforts have yielded significant results during 2006-07. R&D cost declined to Rs 484 crore from Rs 639 crore, without affecting the overall R&D deliverables. The company went ahead with its focus on select therapeutic segments of infectious diseases, metabolic diseases and inflammatory/respiratory diseases. It also initiated target-based research in the area of oncology.
For the first half of 2007, the company's R&D spending increased to Rs 175 crore from Rs 155 crore in the corresponding period of the last year. The company has successfully completed phase II studies of RBx-11160, an anti-malarial molecule, with the compound indicating good activity against malarial parasites.
In order to expedite its drug discovery activity, the company continues to focus on various research alliances. Ranbaxy and GSK have expanded the original agreement and the company now has the responsibility for advancing the selected compounds to proof of concept in man, wherein the company will be eligible for total milestone payments, excluding royalties, of over US $100 million. The two programs in the respective areas of chronic obstructive pulmonary disease (COPD) and anti-infective, identified under this alliance, are progressing as per plan.
Ranbaxy has also entered into an alliance with Anna University and is evaluating a number of medicinal plants as potential sources for novel pharmaceutical agents. Recently, Ranbaxy entered into a collaborative research agreement with International Centre for Genetic Engineering and Biotechnology (ICGEB) and the Department of Biotechnology (DBT), New Delhi, for developing novel agents for the treatment of dengue.
Apart, the company has introduced three products through novel drug delivery system (NDDS) in the domestic market during 2006. The company filed a total of 171 DMFs up to the end of December 2006 and received approval for 156. It filed an additional 24 ANDAs in US and 33 in UK for 26 products. The company is also undertaking herbal drug research, sticking to international quality standards.
Dr Reddy's enhances DMF profile
The company's R&D investment during the first quarter of the current year increased to Rs 83.70 crore from Rs 77.7 crore in the corresponding period of the prior year. This worked out to 7 per cent of its total sales. Apart, Dr Reddy's Laboratories (DRL) filed 107 DMF in US up to the end of June 2007 and three DMFs each in Canada and Europe.
DRL's R&D expenditure during 2006-07 went up to Rs 292.80 crore from Rs 253.94 crore in the previous year, largely due to greater development activities in generics and discovery segments. The company filed 33 ANDAs in the US, including 7 Para IV filings, taking the total ANDAs to over 100. As of March 2007, the company's US generic pipeline comprised of 69 ANDAs pending with US FDA, including 12 tentative approvals and 29 Para IVs. Similarly, the company filed 56 DMFs globally, taking its total DMFs to 227. The company entered into an agreement with ClinTec International for the joint development of its anti-cancer compound DRF 1042. It also finalized three R&D deals, namely, Perlecan, Rheoscience and Argenta.
Biocon strengthens R&D capabilities
Biocon, a discovery-led biopharmaceuticals company, is among the few innovator companies in the world, which is capable of balancing the high cost of R&D with market affordability. Its strong discovery capabilities, cost-effective drug development platforms and significant manufacturing capacity enable it to scale new heights in frontier science. The company's investment in R&D reached at Rs 48 crore during 2006-07 from Rs 40.10 crore in the last year.
The company has successfully developed Insugen, a recombinant human insulin in 2004 and Biomab EGFR, a proprietary cancer targeting Monoclonal antibody, in 2006. The company has systematically leveraged its expertise to recombinant proteins and antibodies from enzymes and small molecules. Through partnerships and alliances, it has a rich pipeline of biosimilar and discovery-led biologics programs in diabetes, oncology and inflammatory diseases.
Biocon entered into partnership with Bayer Healthcare to register and market its insulin in China. It has also entered into collaboration with a US-based pharma company to access the US market. Syngene International, a subsidiary of Biocon, is a leading, innovation-driven, research services company conducting high value R&D in early stage drugs discovery. Syngene entered into a nine-year discovery partnership with Bristol-Myers Squibb and set up research facility at Biocon Park to develop capabilities in the areas of medicinal chemistry, molecular biology, drug metabolism and pharmaceutical development.
Glenmark poised to benefit NCE research
Glenmark Pharmaceuticals, the research-led global and integrated pharma entity, has entered into several tie-ups, apart from setting up subsidiaries to spread its market reach. The company's Swiss subsidiary has purchased two new biological entities from Chromos Molelcular Systems Inc. Glenmark has licensed out its first asthma/COPD molecule oglemilast to Forest Laboratories and Teijin Pharma Ltd for the North American and Japanese markets. Its lead molecule, GRC 8200 also continues to process well in its phase II clinical trials.
The company completed phase I clinical trials for GRC 6211, lead vanniloid receptor (VRI) antagonist compound in Europe, on 72 human subjects, using single and multiple doses, during the first quarter of current year. The company has now initiated a phase IIA proof of concept study for dental pain in Europe and hopes to complete this study by December 2007. The company expanded its portfolio in the area of biologics research with the buy-out of the two new biologic entities.
Glenmark's R&D expenditure reached at Rs 45 crore during the year ended March 2007, slightly lower than previous year figure of Rs 46.69 crore.