The ushering in of the product patent regime has made Indian pharmaceuticals companies to rethink their gameplan and reassess their positions, especially on research and development.
Faced with this new mix of opportunities and threats, Indian pharmaceuticals companies are looking for fresh growth models, which would permit them to leverage their strengths in a manner compatible with the changed environment. In fact, several companies, seeing the writing on the wall, had begun the exercise long ago. The focus is slowly shifting away from process improvisation to drug discovery and R&D. Indian companies are setting up their own R&D set-ups and also collaborating with research laboratories like Central Drug Research Institute, IICT etc.
Collaborative research
There is considerable scope for collaborative R & D in India. India can offer several strengths to the international R&D community. These strengths relate to availability of excellent scientific talents who can develop combinatorial chemistry, new synthetic molecules and plant derived candidate drugs.
Bigger companies naturally aim higher and are positioning themselves as "Partners of Choice" for R&D. According to D S Parekh, chairman, GlaxoSmithKline Pharmaceuticals Ltd, "with the introduction of product patent regime, research based pharmaceutical companies not present in India are expected to establish their presence in India. GSK positions itself as a 'Partner of Choice' for collaboration with such companies. The company will carry on with its strategy to continue licensing of new products in strategically important therapy areas to drive growth."
For Nicholas Piramal too, 'partner of choice' is a strategic thrust to bring new, innovative therapies to the Indian market. "We already have in-licensing partner like Biogen (world's no 2 pharma company), Genzyme (no 3) and Pierre Fabre a leading French dermocosmecutical company, and we will continue to have more of them. We are also working on several NDDS opportunities through in-house development as well as outsourcing," said Vijay Shah, executive director and CEO of the company.
Zydus Cadila has chosen Schering AG, Germany, a research-based pharma major and one of world's leading pharmaceutical companies to become a 'partner of choice' for marketing existing and new products.
New product development
Today, a number of Indian companies are building capabilities in original research, targeting new chemical entities [patentable drug options] and novel drug delivery systems. Their strategies are based on the realization that while the IPR assets they generate will sustain their earnings in a product patent regime, the financial risks involved are beyond the capacity of many of them.
As Anji Reddy, chairman of DRL, said in a letter addressed to shareholders in the company's latest annual report, "Excelling in the basic business operations will be necessary, but not sufficient. To maintain a long-term presence in the global pharmaceuticals markets and to grow profitably will require companies to be even more focused on R&D and creation of successful IPR's [intellectual property rights]."
Ranbaxy, with all its focus on emerging as a top global player in the generic market, wants to create a proprietory base. The target is essentially to move towards original drugs with a 'discovered by an Indian company' tag on them.
Glenmark Pharmaceuticals conducts original research, manufactures, and markets pharmaceutical products in the areas of dermatology, gynecology, respiratory, gastrointestinal, diabetes and cardiology. Recently, its GRC 3886 molecule received US FDA approval for further clinical trials in the US. It has also filed Phase I application for its anti-diabetic, DPP-IV inhibitor GRC 8200 in the UK. Last year, its arm Glenmark Pharmaceuticals S A (Switzerland) licensed out a new molecule for treatment of asthma to Forest Laboratories Inc. for US$ 190 million for further development and commercialisation in the US market.
Similarly, Torrent Pharmaceuticals, which spends about 9% of its sales on R&D, has a distinct focus on out licensing of its NCEs for development and global marketing. It actively pursues opportunities for undertaking contract and collaborative research.
Wockhardt has also developed a number of lead molecules mainly in the anti-infective field that are currently in various stages of development.
Funding R & D
The R & D expenditure by the Indian pharmaceutical industry is around 1.9% of the industry's turnover. This obviously, is very low when compared to the investment on R & D by foreign research-based pharma companies. They spend 10 - 16% of the turnover on R & D. However, now that India is entering into the Patent protection area, many companies are spending relatively more on R & D.
The pharmaceutical and biotechnology Industry is eligible for tax deduction for R&D expense up to 150%. These R&D companies will also enjoy tax holiday for 10 years. A promotional research and development fund of Rs.150 crores is set up by the government to promote research and development in the pharmaceuticals sector.
Government support, however, can only play a supplementary role in a field which necessitates large funds for a long time for an activity which has a high risk of failure. The slot is best suited for enterprising venture capital funds such as ICICI Venture Capital, Rabo Bank, ING Barings, Connect Capital and state-owned VC funds like in Andhra Pradesh and Tamil Nadu.
Of these, ICICI Venture has been an early investor in the pharmaceutical and biotechnology sectors. It provided DRL capital for developing and selling products through the ANDA (abbreviated new drug application) route. The deal's value is estimated at $56 million. Besides, ICICI also has leading companies like Intas Pharmaceuticals, Ajanta Pharma, Gland Pharmaceutiacls and Biocon India, in its portfolio. Further, ICICI Venture also has a track record of profitable exits in its investments in various life sciences companies like Sun Pharmaceuticals, Morepen Laboratories, Neuland Laboratories and Medicorp Technologies.
Another bank, Rabo India, has a life sciences and biotechnology knowledge management (KM) division, which undertakes strategic advisory and research based projects in India including venture capital funding, alliances with overseas players and R & D, mergers and acquisitions and strategic and financial advisory.
These are but a few examples. The situation is still emerging, offering new permutations and combinations. However, it is undeniable that at a time when most companies are faced with uncertainties in every sphere of their business, a strong R&D base gives them hope that they will overcome. The new patent regime will encourage research and development in India - it has the potential to make India an international hub for pharmaceutical research.