India is definitely making a strong comeback in the clinical services arena. The country offers many advantages like large pool of patients, highly skilled medical investigators, lower drug development costs and timely completion of clinical trials. However a major challenge will be to maintain its cost competitiveness for outsourcing. Markets like China, Taiwan and South America are fast emerging as viable option for outsourcing. In the recent years, there has been a focused approach on the part of the Indian government to create a conducive regulatory framework providing better clarity and flexibility to conduct clinical trials in India. This will surely boost the clinical services industry and help it to regain customer confidence, said Jonathan Hunt, CEO, Syngene International in an email interaction with Nandita Vijay. Excerpts:
How do you perceive the clinical and contract research services in India and globally?
Globally, the trend towards outsourcing R&D activities by pharma and biotechnology companies is a strong one and I believe the best of the Indian firms are well placed to meet this demand and play a leading role. This outsourcing covers not only preclinical activities but also clinical studies which is evident both with small molecules and increasingly with the biologics. The global CRO market is expected to grow from US$ 43 billion in 2014 to around US$ 67 billion in 2018 registering 11.5 per cent CAGR.
The traditional driver of outsourcing is to reduce R&D costs by accessing lower labour costs. While this continues, we now see much of this activity being driven by the need to ‘variabilize’ R&D costs to closely match manpower and resources to changing pipelines. It could also be a recognition that the very best of the Indian CRO’s are capable of matching and even surpassing the highest levels of scientific innovation and productivity that our clients can either deliver through their own laboratories or get from western CROs. This last trend; the marrying of India’s distinct economic cost advantage with the ability to deliver scientific innovation at the highest level via an integrated CRO model is a key one for Syngene.
What are the key emerging trends in this space?
There are a number of key or emerging trends. One of the most important is the shift amongst large pharma and biotech companies from a predominantly transactional or fee for service model to a more long-term, integrated, end-to-end partnership with large CROs. This shift is enabling the integration of disparate elements of the R&D process and is allowing or forcing CROs to offer ever more sophisticated or complex services to their clients. For example, companion diagnostics, genomics and biomarker are becoming a more critical part of the development process as companies require more customized and complex clinical trials. Early phase clinical development protocol designs and risk-based monitoring are new areas that are also gaining momentum.
Biosimilars and large molecule development is yet another promising area with many pharma companies focusing on this segment. Adapting new and innovative technology is also critical to improving the efficiency, productivity and quality of clinical trials as also increasing transparency. One of the biggest challenges in conducting clinical trials is finding the right patient group especially if the trial is in a rare disease field. To overcome this challenge, CROs will increasingly look at partnering with diagnostic agencies to identify specific patient populations to suit their study requirements.
In your view does India continue to be a prime location for clinical services and contract research?
Yes. India definitely is making a strong comeback in the clinical services arena after a period of negative sentiments. The country offers many of the advantages our clients look for. These cover a large pool of patients, highly skilled medical investigators, lower drug development costs and timely completion of clinical trials. There is an abundant pool of skilled professionals like physicians, nurses and clinical research assistant as well as clinical practitioners holding first rank in fields like mathematics and computer science. Timelines including recruitment process, timely completion of trials that translates into faster drug launch, a faster return on investment and a potential edge over the competitor are also very encouraging factors for conducting clinical trials in India. It is estimated that India offers 35 to 60 per cent cost advantage compared to the western markets. In the recent years, there has been a focused approach on the part of the Indian government to create a conducive regulatory framework providing better clarity and flexibility to conduct clinical trials in India. This will surely boost the clinical services industry and help it to regain customer confidence.
Would you agree that outsourcing has become a viable business strategy enabling pharmaceutical firms to transfer non-core activities to external partners in order to restructure their distribution networks?
Yes indeed. There is an increasing trend amongst the global pharma and biotech players to outsource increasing parts of their R&D activities to matured and experienced CROs who have the scale and capacity to undertake these research activities. Global R&D expenditure is expected to increase from $139 billion in 2014 to $152 billion in 2018 growing at a CAGR of 2.3 per cent.
The global CRO market is expected to grow from US$ 43 billion to US$ 67 billion during this period at an expected CAGR of 11.5 per cent. This is reflective of the increasing shift towards outsourcing.
At a time when there is increasing pressure on clients to reduce the R&D cost or show better value and output from their R&D investments, then outsourcing offers the advantage of shifting from a fixed to variable cost model. It can enhance productivity and ROI (return on investment) besides reduce cost on infrastructure. Matured CROs like Syngene have the scale, capacity and capability to conduct high-end research on novel molecules. Our world-class infrastructure and talent pool enables us to provide global quality research alongside a significant cost arbitrage. Since we have an integrated business model that allows us to be a one-stop solution for all the requirements of our clients across the discovery, development and manufacturing continuum, we can become strategic partners of companies in their research activities.
Would you be able to share the new developments at Syngene since you took over from Peter Bains early this year?
Syngene has established itself firmly as a reliable partner in the contract research space. It is now all set to transition into a full-fledged CRAMS player. As you may know, we have earmarked a CAPEX budget of US$ 200 million to be invested over the next two to three years towards increasing our capacities and enhancing our capabilities. We have received most of the regulatory clearances for our upcoming large-scale commercial manufacturing facility at Mangaluru and the construction is expected to commence shortly. Our new Syngene Research Centre; advanced research facility with 200,000 sq ft of lab space together with the formulations development unit are also slated to commence operations in Q1 of this fiscal. We are already seeing a high level of interest from existing and prospective clients in both of these new facilities.
What are the strategies to increase the business from contract research and clinical services for the company?
Given the strong growth we have seen in these areas over recent years, we are confident that our strategy is working well and is delivering great value for our clients. I expect to see continued growth in our core or traditional areas of operation as well as new growth coming from the increasing demand as we are seeing from clients for services to support their R&D in the biologics arena. As you look across the pharma and biotechnology industry, many major players are moving to a more ‘platform or modality’ neutral approach to drug discovery and development.
Consequently, we expect that many of them will want their CRO partners to match that offer with an integrated range of services covering both small and large molecules.
Which of the areas: drug discovery, formulation development or safety assessment among others that indicate ample growth prospects?
Let me first broadly outline the way Syngene’s operations are structured. Our business is divided into three major verticals: dedicated R&D Centres, Discovery Services and Development & Manufacturing Services. The dedicated R&D Centre vertical includes our long-term strategic collaborations with Bristol-Myers Squibb, Abbott Nutrition and Baxter International. For each of these partnerships, we have customized infrastructure and scientific teams supporting dedicated client engagements. Discovery Services incorporate the Discovery Chemistry and Discovery Biology activities for both small and large molecules. Development and Manufacturing Services vertical encompasses our capability in Preclinical, Small and Large
Molecule Manufacturing for Clinical Supplies, Formulation Development, Stability and Clinical Development Services.
I am pleased to share that our growth is driven by an all-round robust growth in each of these verticals. The growth in dedicated R&D centre business was underpinned by the expansion of the services that we provide under the integrated operating model to our three long-term clients. Discovery services grew on the back of strong traction in the discovery biology area. This is an emerging area where we see good future growth potential, as this reflects the growing interest of the pharma and biotech industries in large molecules.