In the second half of September 2007, the Hyderabad-based Suven Lifesciences announced its intended deal with a US-based firm to develop drugs for cardiovascular disease. Though the deal is yet to be signed, Suven's efforts on drug discovery research in collaboration with foreign drug firms seems to get more strengthened, as the headcount of its research unit is expected to shoot up to 500 from 150 within next two years.
It is not the first venture of the company in drug development research collaboration. In August 2006, Suven had signed a pact with drug major Eli Lilly on pre-clinical research of molecules for central nervous system (CNS) disorders. As per the agreement, Suven will receive milestone payments from Lilly and potentially downstream payments, if the identified candidates are selected by the MNC for further pre-clinical R&D.
Suven's deal with the undisclosed company is currently the latest development in the Indian saga of creating alliance with foreign drug companies in new drug research. The Indian R&D majors have already identified the potential of the emerging alliance opportunities in New Chemical Entity (NCE) research.
Deals on board
The Mumbai-based pharmaceutical major Nicholas Piramal Industries Ltd (NPIL) has signed an agreement with Eli Lilly in the beginning of 2007 to develop drugs for metabolic disorders. According to the agreement, the company has to develop and in certain regions commercialize a select group of Lilly's pre-clinical drug candidates in multiple therapeutic areas. NPIL would receive a call back payment and potential milestone payments of up to $100 million, apart from royalties on sales upon successful launch of the first compound.
The agreement is for four molecules at present, but has a provision to extend the collaboration to more NCE research projects, if the partnership hits success, according to sources. "We are currently doing toxicology studies for the compound, after which we will be starting with phase I clinical trials," said a source from NPIL on the Eli Lilly deal.
The company has also alliance with overseas drug discovery firms like UK drug discovery firm Morvus Technology to develop drugs in areas such as cancer, diabetes and arthritis and Canada-based Biosyntech for R&D operations in Canada.
The Hyderabad-based drug major Dr. Reddy's has added yet another research collaboration in the last financial year with the Germany-based ClinTec International for the joint development of Dr. Reddy's anti-cancer compound DRF 1042. The molecule is in phase I stage and is scheduled to enter phase II study for solid tumors eventually. In the financial year 2005-06, the company had signed key collaborative deals for drug discovery with three companies - Perlecan, Rheoscience and Argenta.
Among these, Perlecan is the foster child of Dr Reddy's Lab and is handling major NCE projects from its portfolio. The partnership with UK-based Argenta is for developing asthma drugs, while it joined hands with Denmark-based Rheoscience to develop DRF 2593 for type 2 diabetes. The biotech research is scheduled to enter phase III in the current financial year.
The company is pursuing collaborative strategies to accelerate the development of its discovery molecules, averred the company officials. Further, Dr Reddy's integrated drug development company, Perlecan (formed by the end of 2005) would be engaged in the clinical development and out-licensing of NCE assets. As the part of its agreement with the two funding agencies - Citigroup Venture Capital International Growth Partnership Mauritius Ltd (Citigroup Venture) and ICICI Venture Funds Management Company (ICICI venture) - DRL had transferred all rights and title, including the development and commercialization rights of four NCE assets to Perlecan Pharma in 2006.
In yet another move, Ranbaxy Laboratories Ltd (RLL) has recently modified and expanded its alliance with GlaxoSmithKline (GSK) to jointly develop a drug for the treatment of respiratory inflammation. This multi-year R&D collaboration agreement affirms the emerging potential of MNC-Indian pharma synergy in NCE research.
GSK and RLL are collaborating on two research programmes - one in chronic obstructive pulmonary disease (COPD) and the other in anti-infectives. As per the multi-year agreement signed in February 2007, Ranbaxy is expected to further develop the drug candidate through pre-clinical studies to support an investigational new drug (IND) application. The company would also be responsible for conducting phase I and phase II clinical studies, while GSK would conduct further development, including final commercialisation.
Ranbaxy would receive over $100 million in potential milestone payments for a product developed by it. The amount may increase after the drug is subsequently launched by GSK in multiple indications and could net its double-digit royalties on worldwide net sales, according to a company release.
"The agreement presents a unique opportunity to demonstrate the India centric advantages of high quality research and development to deliver value at the cutting edge," said, Malvinder Mohan Singh, CEO, Ranbaxy.
Under the agreement between the two companies earlier in 2003, Ranbaxy conducted the optimization chemistry required to progress drug leads to the stage of candidate selection. The new agreement shows the alliance moving one step ahead with more responsibilities handed over to Ranbaxy.
The Mumbai-based Glenmark is a pioneer in NCE research alliance segment, with its landmark deal with US-based Forest Labs. The company had out licensed its anti-asthma molecule for the American market in 2003.
The deal involved a cumulative inflow of $190 million (Rs 840 crore) to be paid in stages, depending on the molecule clearing certain milestones in trials. The company has received two milestone payments at present, according to sources. Glenmark has also out-licensed the same molecule to Teijin Pharma of Japan.
In a very short span of time, Glenmark has built a NCE pipeline of six lead candidates in the two broad areas of inflammation and metabolic disorders. Glenmark's current licensing strategy focuses on out-licensing of NCEs at an early stage of clinical development for the markets of US, Europe and Japan.
The company currently has 11 molecules at various stages of development. With a target to progress 1-2 molecules every year into its clinics, the company's focus is to further strengthen its pipeline. This would be done through two different ways, continuing focus on in-house research for NCEs and NBEs and in-licensing/buying out of research molecules at an early stage of development, according to the company officials.
The number of out-licensing and in-licensing of NCE research alliances is yet to go high, as many research oriented companies are expected to embark on more ventures in this area in the near future.
Money & competition
What turned the companies in regulated, developed countries like Europe and US to collaborate with companies in a developing country, where the industry lacks expertise in NCE games? The major reason for MNCs to outsource research and refocus its business to developing countries like India in the last few years is due to increasing costs, pipeline shortages and patent expiries in new drug research, according to industry sources.
With the skills available in the country, Indian alliance can reduce around 40-50 per cent of the research cost for developing new drugs, according to industry sources. This would help the struggling big pharma to cushion up the hectic research spent in NCE research. "We think that the overseas companies are interested to forge alliance with Indian companies to carry out their research in low cost, quality labs and sites in the country. Definitely, the companies in the West are interested to come to India for drug discovery research," says an industry source.
"Even though India hasn't been doing this for long, drug discovery outsourcing offers tremendous potential for growth in the Indian market, as pharma companies continue to search for ways to save money and time," Satish Reddy, managing director and chief operating officer of Dr Reddys Laboratories quoted as saying in a recent pharma convention.
Affirming the emerging trend, Sagar Gokani, manager, investor relations, NPIL, said, "There is a huge potential for such alliances. Indian companies with their strong research skills and low costs are uniquely positioned to capture the fast growing opportunities in research alliances."
"Globally, innovator companies are under tremendous pressure as existing blockbusters are going off patent and new ones are hard to come by. The cost of bringing a new drug to market is increasing rapidly. This makes it imperative for large pharmaceutical companies to look into low cost regions like India for discovering their block buster drug," Gokani added.
Indian companies, with their known proficiency in synthetic and analytic chemistry have also attracted clinical developments through its vast human resource potential and ethnic variety.
Carrying out chemistry and clinical development in countries like India would help Western companies stretch their resources and put more molecules into development. In addition, research in India would help the MNCs to hit the market faster, according to industry players. "There is enormous benefit in bringing a drug to the market three years earlier. This benefit is more important than saving costs," Rashmi Barbhaiya, CEO, Advinus, quoted as saying.
Signing alliance agreement with GSK in February 2007, Malvinder Mohan Singh of Ranbaxy pointed out "I believe the arrangement with GSK is path-breaking and acknowledges the higher level of R&D maturity prevalent today in our state-of-the art labs in India."
Alliance models
With the emerging research alliance sector, the companies have customised their own models of agreement with its overseas partner. The models vary conveniently to the type of research and the risk involved, though there are some traditional patterns evolved through the recent years.
Normally, in a drug development research, a company has to spend an upfront payment of US $1-$10 million along with covering milestones of $2 million, $10 million and $100-350 million in the first, second and third phases, respectively. In the case of in-licensing a molecule for development, the Indian companies would retrieve it's spend and profits from its partner right from the upfront stage of a compound through milestone payments, upon completion of each phase.
Deviating itself from this traditional form, some companies has weaved out a model, in which no upfront payment has to be made from the company in the project. According to Dr Somesh Sharma, chief scientific officer, NPIL and head of its newly formed drug development research entity, the alliance would be more based on royalty on the developed product.
In NCE research out licensing business, the traditional model is said to be bringing alliance for a discovered compound after pre-clinical studies. In this, the upfront payment will follow milestone payments in each phase of clinical trials. However, most of the Indian companies that are active in this field, prefers out licensing the drug candidate at phase 2 studies, rather than choosing the high risk in forging alliance just after the pre-clinical studies, according to industry sources.
The mirror image
Industry analysts note that till past few years, the pharma players from West considered Indian companies more as a reliable franchisee for their business than forging alliance with them in research projects.
NCE research platform came as a fresh opportunity for Indian companies somewhere in the first half of last decade. The cited alliances show that the nascent Indian NCE research potential is also growing fast, winning the confidence of big pharma.
Nevertheless, with more queries on the opportunities of Indian companies to grab the drug discovery research alliance with big pharma, officials from MNCs have their own say on the issue.
The proficiency of the domestic R&D players in bringing up new drugs through research is yet to be proven, even as the alliances are only in the beginning stage or on the half way. Not many companies are tuned to the process of drug discovery and development and the present players have to prove that the efforts are fruitful. Once it is done, the business output through the NCE research and alliances would increase rapidly.
"An answer that I can give from my experience is that, there were certain drugs that we have not taken to the next level because we didn't have the resources to pursue. So we just killed the programme. There were certain programmes, which could be blockbuster products, but we just didn't have the bandwidth to do that internally. And we gave some of these outside - not just in India, but US and other markets. This is giving us a chance. Even if one out of 10 get succeeded you have earned that investment. That is the biggest advantage," said, Mukta Arora, director, global outsourcing India and global procurement, Eli Lilly and Company (India) Pvt. Ltd, in a recent discussion at a pharma convention.
From the recent MNC-Indian pharma alliances, it is evident that the big pharma is more confident on their Indian allies and are ready to deal as a partner rather than maintaining a contract relationship. The Indian majors have already improved their image to prospective innovators with strong R&D pipeline from mere generic companies.
The domestic companies, which are dedicated to NCE research faces challenges from various ends. First of all, there is no visibility of revenues in an NCE research programme. The milestone payments are only waiting at the end of each research milestones and in a project in which uncertainty prevails over each step of drug development, the Indian partner has to face the risk in each phase.
"The nature of business is quite risky and calls for a long term investment horizon," adds an industry specialist. The MNCs also fear about the uncertainty over the patentability of products in India, which may give an upper hand to the generic companies in the long run.
However, the Indian players with an appetite for risk are ready to go ahead with consolidating its strengths and patching up the flaws through more research works and deals with overseas companies. As a result, they will have expertise in drug discovery and development research to lead themselves in the market as a frontrunner.