The Indian Pharmaceutical segment is moving ahead strongly with three business models such as supply partner, generic manufacturing and as innovator. The patent regime has forced Indian companies to invest in basic R&D during last couple of years. According to a report published by ENAM Securities 'Indian Pharma Sector - Emerging Trends', the lifescience research growth is expected at a CAGR of 15-18 per cent upto 2009. The significant growth in R&D expenditure leads to CRAMS opportunity for Indian pharma segment. The report has touched on various aspects of Indian pharma segment including R&D, CRAMS, domestic market, generic markets, mergers & acquisitions and MNCs in India.
The ENAM report pointed out that with several drugs going off-patent, rising cost of research on new molecular entity and relatively lower approvals put pressure on margins of major players during last couple of years. These companies are looking to improve margins through cost-effective research and manufacturing. India is enjoying cost effective manufacturing process as compared to highly regulated market like US and EU. With the maximum US FDA approved plants outside of the US, India is able to offer significant low cost structure. The major players in US and EU are not interested in executing small contracts. However, Indian CRAMS players have benefited by getting many contracts of small sizes.
While discussing the findings of the reports, Gaurang Mehta, Head of Pharma Practices of ENAM said, "The CRAMS business is adding significantly to Indian companies' valuation and this business has good potential to grow. Indian companies are efficient in pricing and mainly concentrating on chemistry related services than biology services. India is very strong in chemistry services with skilled manpower."
According to the ENAM report the growth of domestic pharmaceutical market has gone up to 12 per cent now from 8 per cent due to factors like doubling of disposable incomes and number of middle class households, rising prevalence of chronic diseases, adoption of product patents, aggressive market penetration by smaller companies, expansion of medical infrastructure and greater penetration of health insurance. Over the past year, growth in rural markets has outstripped that in the urban markets, across most therapeutic categories. However, the lower potential productivity of a rural field force prevents many players from entering the segment.
The report said many MNCs are likely to use the 100 per cent subsidiary route to launch new products in the country. Further, MNCs may retain product abroad by importing API or formulations from the parent, reimbursing the local subsidiary for marketing costs. Given the declining number of NCEs being launched, the growth may increasingly have to come from combination products, NDDS or biotech products; the first two areas are equally open to domestic players. Major Indian players will not give up their franchises easily. If products based on genomics do take centre-stage, Indian companies may bid for in-licensing rights as aggressively as MNCs.