While the big names in the global pharmaceutical industry are cutting down their research and development (R&D) expenditure day-by-day, Indian drug makers, who are relatively new to new drug R&D, are making more investments in this lifeblood of pharma industry in an earnest desire to bring out innovative new drugs to global market from the country.
A recent Pharmabiz study on the R&D expenditure of 25 pharma companies showed that their R&D expenditure increased 8.4 per cent to Rs 2,747 crore during the year ended March 2008 from Rs 2,534 crore in the previous year. Going back to 2006, these players' R&D expenditure was Rs 2,203 crore.
Till March 2008, the R&D expenditure of the studied 25 drug makers worked out to over 8 per cent of their net sales. Despite worldwide recessionary conditions, the increased R&D investments by Indian companies are likely to continue in 2009 also.
Though the R&D expenditure figures are not available for all pharma companies for the nine months period ended December 2008, the R&D expenditure of leading 10 pharma companies, which have published their R&D spends for the period under review, increased by over 15 per cent with significant growth of over 50 per cent by Lupin and Matrix Laboratories.
"The Indian pharmaceutical segment is going ahead strongly to establish its international presence with significant investment in R&D activities. Several Indian pharma players are engaged in filing their products in highly regulated markets. Also, these drug makers are upgrading their facilities as per the highly stringent norms set up by regulated markets like US, Japan and Europe," according to a source.
Besides, on its part, the government is also taking steps to give more focus on innovations in pharmaceutical R&D activities. The proposed Pharma Vision 2020, a project to make the country one of the top five global pharma innovation hubs by the year 2020, will reportedly lay more emphasis on R&D, especially in the fast growing biotechnology sector. The project is designed to create more than 5 lakh high value jobs for the youth to provide the country with low cost healthcare services for chronic and life threatening ailments like malaria and tuberculosis.
The government is learnt to implement the project in phased manner with an investment of US $1 to US $2 billion with the support of the pharma industry.
The proposed government project reportedly intends to upgrade and enlarge specialised human resource to take up the global research works and infrastructure development to meet the growing demands. The project also proposes to set up environment for drug discovery and get into financial funding to manage the undertaken projects. The new drug R&D consumes 8 to 10 years and involves higher risk profile, compared to generic R&D projects.
Referring to the need for making huge investments in R&D, Nilesh Gupta, group president and executive director, Lupin, said, "India is one of the foremost destinations that pharma majors are eyeing globally. It has great potential as the next R&D hub and the requisite talent pool and infrastructure to support the same. For it to become the next R&D hub, there are many factors that will play a crucial role, including large investment in terms of capital and resource, government commitment to promoting R&D as also increased spends therein. We would also at the same time need to focus on creating the necessary environment, including infrastructure and SEZs, to realise our growth potential."
R&D STRATEGIES
To focus on R&D output, Indian drug majors like Sun Pharmaceuticals, Piramal Life Sciences and Dr Reddy's Laboratories have adopted new strategies to meet new challenges and de-merged their R&D operations into separate entities during last few years. In this context, Glenmark Pharmaceuticals, another pharma major of India, de-merged its generics segment to focus more on R&D activities.
"The strategy of de-merging appears to be the right move as it results in a more dedicated and focused approach towards drug discovery research. It appears to be more appealing also from the investor perspective as it assists in procuring finance by attracting dedicated long term investors, who can appreciate risks better. Also, spin-offs results in faster development of the intellectual property on account of more focused approach. It enables collaborations and smooth scale-ups. It can result in greater flexibility and value creation for the company thereby attaining higher success rate and better results," said, Hitesh Gajaria, executive director, KPMG India.
"As far as the risk factor is concerned, this move is beneficial as it helps in separating the risk involved with discovery from that of the normal business," he added.
The success of de-merging of R&D activities entirely depends on final outcome and commercialisation of new patented products. The investment in R&D is attached with high risk of returns, time factor and competition from other players. However, Indian companies are taking these risks to tap future opportunities.
Asked whether the strategy of spin-off has yielded any dividends, a spokesperson of Sun Pharma Advanced Research Company Ltd., said, "It certainly has. The rationale for the spin-off has been validated though as you are aware R&D activity of the kind being undertaken by Sun Pharma Advanced Research Company Ltd (SPARC) is a long gestation investment."
COS ON DE-MERGER PATH
Sun Pharmaceuticals: Sun Pharma de-merged its R&D activities into a separate company called Sun Pharma Advanced Research Company (SPARC) Ltd in February 2007 to focus more on innovation and new product development activities. SPARC undertakes innovative research and technology for new chemical entities (NCEs) and novel drug delivery systems (NDDS).
"We have active projects in new molecules as well as novel delivery systems, with four molecules and four delivery system platforms shared. In new molecules, we are working on an antiallergic, a soft corticosteroids, a drug for convulsions and restless leg syndrome as well as a spasticity drug. In novel drug delivery systems area, we are working on a dry powder inhaler, two controlled release platforms, new targeted drug delivery system and depot formulations," said the spokesperson of SPARC.
Glenmark Pharmaceuticals: The company reorganised its business into speciality and generics. The reorganisation process was commenced in Q3 FY 2007-08. With the reorganisation, Glenmark transferred its generics and active pharmaceutical ingredients businesses to the newly created Glenmark Generics Ltd (GGL).
The parent company Glenmark Pharmaceuticals Ltd will continue to directly manage the novel R&D, biologics and branded formulation businesses in India, Brazil, Rest of Latin America (excluding Argentina), Russia/CIS, Africa and Asia.
Glenmark's R&D efforts look attractive with a pipeline of 13 NCEs and NE molecules. The company has one in-licensed molecule, Crofelemer, which is progressing well in phase III clinical testing.
Piramal Life Sciences: Piramal Life Sciences (PLS), a de-merged new entity belonging to Piramal Healthcare, focuses on NCE R&D. The spin-off took place in April 2007. The de-merger has caused the company's R&D expenditure to accelerate downhill to Rs 64.70 crore during the first nine months of 2008-09 from Rs 121.03 crore in the corresponding period of the last year.
Piramal Healthcare management decided to de-merge its R&D unit to concentrate and focus on further development of NCEs. The company's four compounds have reached in clinical trials and another four are waiting to enter the clinics.
ON MOVE
With costs of innovative, new drug R&D skyrocketing in the highly regulated markets and efforts by the governments in those countries to curtail the healthcare costs, the Indian R&D based companies are better positioned to tap emerging opportunities in these markets by making an entry.
(With inputs from Anil Mathew)