The contract research and manufacturing services (CRAMS) has emerged as a new arena for the thriving Indian pharmaceutical industry to accelerate its overall growth prospects. The Indian CRAMS market is known for its quality services at a lower cost. With global pharma majors searching for better options to lessen the risks involved in research through outsourcing, many of the domestic players are gradually entering into CRAMS business to enhance their bottomline.
The global contract manufacturing industry was estimated at US $36 billion in 2004. Looking ahead, the market is expected to be US $80 billion in 2008, as around US $88 billion of drugs are expected to go off patent by this time. The global contract research industry is expected to provide India an opportunity of around US $30 billion within a limited timeframe.
The key Indian players in CRAMS already have global pharma majors as their clients with more research and manufacturing portfolios in the pipeline. These companies are equipped to provide services on intermediates and active pharmaceutical ingredients (APIs) for new chemical entities and generic segment. The major CRAMS players in India are Nicholas Piramal India Ltd, Jubilant Organosys Ltd, Dishman Pharmaceuticals and Chemicals Ltd, Shasun Chemicals and Drugs Ltd and Cadila Healthcare Ltd.
The Mumbai-based Nicholas Piramal India Ltd. (NPIL) has done around Rs 55 crore of CRAMS business for the first 9 months of the financial year 2006-07. Though the figure is down from its projected Rs 60 crore, the company is confident of better performance in the future. NPIL is expecting to do business worth Rs 140 crore by 2008. The company is serving 7 of the top 10 global customers and expects to keep up the momentum through acquisitions of the UK-based Avecia Pharmaceuticals and Pfizer's manufacturing facility at Morpeth, UK. Avecia is a global custom manufacturing player focused on providing custom chemical synthesis and manufacturing services for the innovator pharmaceutical and biotechnology companies.
Referring to the company's perception on CRAMS business in India, Dr Swati A Piramal, director, strategic alliances and communications, NPIL, said "Indian companies have all the basic ingredients - strong chemistry and technical background, good price points and excellent quality systems - for success in this space. What we need is to build partnerships with pharma companies and truly approach this industry from a service standpoint. It is also clear that the future CMO leader will be a global player with a strong presence in Indian and China. Indian companies have to build themselves into such an organisation."
Jubilant Organosys, with its corporate house at Noida, Uttar Pradesh, has exhibited its keen interest to grow as a major player in contract manufacturing and research business, by adding contracts worth US $60 million to its 2007 order book. According to company sources, a substantial portion of these contracts - about US $54 million - is attributable to the regulated markets of USA and Europe, which have been the focus area for the company. As part of its normal business, the company executes half yearly, quarterly and monthly contracts and spot sales.
In the beginning of the current financial year, Jubilant acquired US-based Hollister-Stier Laboratories for US $122.5 million to strengthen contract manufacturing of injectables. The company has completed the acquisition process in June 2007 and is carrying out its capacity expansion programme, which is expected to be completed by 2008. According to company officials, Jubilant will expand the Hollister-Stier facility and use it to make it big in the US market, rather than using it for domestic business.
The company has recorded a volume growth of 36 per cent in CRAMS for the financial year 2007, while the overall growth of the pharmaceuticals and life sciences (PLSC) business was 8 per cent.
Upto the third quarter of FY 07, PLSC sales marked a growth of 39 per cent with higher volumes and better price realizations. The company's total sales of PLSC were Rs 2.35 billion upto the third quarter of FY07.
The company's API business, which accounts for 20 per cent of PLSC sales, saw a higher volume off take for some of its products. The management highlighted that its Eli Lilly contract was progressing well in the drug discovery space and is estimated to generate revenue of US $5 to 7 million annually. PLSC division accounted for 50 per cent of total sales, up from 43.6 per cent in Q3 of FY06 and 45.4 per cent in FY06.
According to Shyam S Bhartia, chairman and managing director and Hari S Bhartia, co-chairman and managing director, Jubilant, the addition of these annual contracts reaffirms the company's global position in CRAMS. The company will continue to focus on its twin strategies of investments in innovation and world-class manufacturing facilities.
Jubilant is equipped to service two type of contracts, a full-time equivalents (FTE) agreement and a molecule basis manufacturing production campaign. While FTE will allow the client to book scientists to work for them over a period of time in exchange for a capacity utilization charge, for molecule basis manufacturing production campaign a budget would be set in accordance with fee-per-kilogram and individual supplier agreements.
Jubilant expects that its CRAMS business will grow over 25 per cent annually with increase in volume. The company, which is ranked second in pyridine market, controls 21 per cent of the world market. Jubilant is also engaged in capacity building exercise, to increase its production to 32,000 tons in FY08, compared to 21,000 tons currently.
The Ahmedabad-based Dishman Pharmaceuticals and Chemicals Ltd with its core strength in contract manufacturing of APIs for drugs under patent and drug intermediates, expects multi-fold growth over the next ten years. With US $50 million FCCB proceeds, the company is planning to enhance its CRAMS business. In the financial year 2006-07, the company had acquired Carbogen-Amcis, a Swiss-based contract research company with three production facilities, for US $74.5 million.
The company has earmarked US $25 to 30 million for acquisitions and is looking at favourable targets in US, according to some sources. The company also has plans to raise around US $50 million through foreign convertible bonds to support these plans. With proven records as pioneer in CRAMS business, Dishman have MNCs like Astra Zeneca, Glaxo Pharma and Merck as its clients.
The Chennai-based Shasun Chemicals and Drugs Limited (SCDL), one of the major CRAMS players in the country with a proven track record, is recording a higher revenue growth in the segment with its acquisition of the pharmaceutical customs synthesis business of Rhodia Pharma Solutions (RPS) from Rhodia Group of France. The acquisition includes transaction of manufacturing sites at Dudley and Annan located in the UK with a few technological patents.
In the first nine months of the current financial year, the company's major share of the revenue was from the CRAMS business, thanks to the better performance of its UK subsidiary Shasun Pharma Solutions Ltd. "With the acquisition of Rhodia's pharmaceutical division, Shasun's revenue from CRAMS amounts to 55-60 per cent of the total revenues. In the past, it used to be less than 10 per cent," said, N Govindarajan, CEO and managing director, SCDL.
The Ahmedabad-based Cadila Healthcare Ltd (CHL) is also leveraging the potential of CRAMS business by adding more clients to its portfolio. CHL has signed several contracts in the past six months, taking total contracts to more than 20 with peak revenue potential of more than US $28 million.
The company had signed three contracts each in the second and third quarter of FY07. By the end of second quarter of FY 07, the total number of contracts was 17 with peak revenue potential of US $25 million. However, the company is not ready to divulge any details about the new CRAMS contracts, which they had signed.
CHL revealed that its joint venture with Mayne for oncology products is still on, though Hospira acquired Mayne. The management believes that numbers would be bigger than estimated earlier due to wider geographic reach of Hospira. According to the company sources, Cadila will hit Rs 200 million sales in FY07, largely supported by these projects.
The list of pharma companies in CRAMS continues to grow in the country, with US $45 billion worth drugs going off patent over the next three years. Suven Lifesciences, Divis Laboratories Ltd, Matrix Laboratories Ltd, Strides Arcolab and IPCA Laboratories Ltd are also notable CRAMS players in the country.
While Suven Life Sciences, which has filed around 30 patents in the central nervous system segment, gets a lion's share of its revenues from CRAMS business, Matrix expects its CRAMS business to grow steadily in the next 3 to 4 years. Matrix tries to leverage from its Chinese collaboration, MChem Pharma Group and business operations in Belgium focusing on the highly fragmented market in Europe.
The Hyderabad-based Suven Life Sciences forayed in CRAMS business in 1994 and is a pioneer in this field. The company entered into this segment with an aim of aligning with innovative pharma for the supply chain during the clinical phase of drug development for NCEs. The company, a collaborative research partner in drug discovery for global pharma majors has also commenced offering drug discovery development support services since 2005. The company's CRAMS segment is expected to grow at 15-20 per cent. Suven has worked on over 275 projects for several global pharma majors, and currently working more than 40 projects, said sources.