Pharmaceutical biggies in India have turned out to be serious spenders in research and development activity. In a Pharmabiz study of 15 leading Indian pharmaceutical companies, it is found that their R&D expenditure has gone up by a record 56.5 per cent in 2003-'04 over the previous year.
These 15 companies spent as much as Rs 1,053 crore for R&D during 2003-'04 as against an expenditure of Rs 672.98 crore in the previous year. This would mean that their total spending on R&D as percentage of total turnover worked out to 6.85 per cent in 2003-'04 as against 5.29 per cent in the previous year.
Dr Reddy's Labs, third largest pharma company in India, remains as the top spender in terms of R&D expenditure as percentage of total turnover in the study. The company's total R&D expenditure stands at Rs 226.05 crore in the year ended March 2004 as against Rs 163.49 crore in the previous year. The ratio of spending on R&D as percentage of its total turnover works out to 12.99 per cent as against 9.92 per cent in the previous year. Dr Reddy's filed 56 DMFs during 2003-'04 and created strong pipeline for new products. It is planning to file 20 more DMFs in the current year. The company also filed 13 ANDAs with USFDA and total 35 ANDAs are in pipeline.
In absolute terms, Ranbaxy is the largest R& D spender amongst all pharmaceutical companies The company spent as much as Rs.276.13 crore for R&D in 2003-'04 which is almost 7.30 per cent of its turnover in the same year. Its R&D spend was only 6.47 per cent of the turnover in the previous year. Ranbaxy has entered into collaborative agreement for strengthening its research base with GlaxoSmithKline and exploring more tie-ups in near future. It also entered into a collaborative research programme with 'Medicines for Malaria Venture', Geneva for the development of an anti-malarial drug.
Industry sources are of the view that only through higher spending, survival of pharma industry can be guaranteed. Unless Indian companies launch new drugs in the domestic and international market they will not able to generate higher margins. High caliber talent required for research activity is easily available in India at very low cost as compared to advanced countries and Indian companies have started to encash the same during last couple of years. Several multinational companies are looking for research tie-ups with Indian companies for value additions. Currently MNCs in India are getting full support from there parent companies in respect of R&D and they don't have to spend any major amount in India.
Pharma analysts here say that Indian companies are mainly engaged in the reverse-engineering and are not focusing on basic research. A few companies like Dr Reddy's and Ranbaxy are undertaking basic research, but it is not possible for the mid cap companies to spend like them. Most of the companies are spending more on reverse-engineering process and try to find out new generics within short time. The basic research requires more funds and more time and carrying high risk of uncertainty. The analyst pointed out that tie-up with MNCs and research institutions will help Indian companies in long run.
With the implementation of the new patent regime in January 2005, the reverse engineering on products patented after 1995 will have to be stopped. Indian companies will have to look for new drug delivery systems to maintain volumes and margins. Investments in innovation, NDDS and original drug research will be critical for future growth. The pharma companies should adopt latest cost effective technology to produce quality products with higher purity.
Sun Pharma and Biocon are emerging as two major spenders in R&D activity after Dr.Reddy's and Ranbaxy. The R&D expenditure of Sun Pharma has gone up to Rs 65.77 crore from Rs 10.20 crore in the previous year. Its ratio of R&D expenditure to total turnover jumped to 10.20 per cent from 7.50 per cent and that of Biocon went up sharply to 10 per cent from 4.48 per cent. Biocon has spent Rs 51.40 crore for R&D as compared to Rs 11.40 crore in the previous year.
Cadila Healthcare is another serious spender in research in the year ended March 2004. The company spent Rs 88.20 crore during the year as against just Rs 38.30 crore in the previous. The ratio of R&D expenditure to total turnover of the company works out to 7.52 per cent in 2003-04 as compared to 3.72 per cent in the previous year. Wockhardt spending on R&D increased by 30.8 per cent during the year ended December 2003 to Rs 60.41 crore from Rs 46.18 crore in the previous year. Wockhardt is concentrating its R&D efforts towards biotechnology and its early initiatives in this field created strength in recombinant biotechnology - cloning of genes, development of production strains, capability in all major expression systems, formulations, etc.
Orchid Chemicals' R&D expenses worked out 5.56 per cent of its total turnover. Nicholas Piramal and Lupin, with total turnover of Rs 1200 crore or more during the year 2003-'04, are also spending huge amounts on R&D activities. Nicholas incurred total R&D expenditure of Rs 55.86 crore as against Rs 18.50 crore in the previous year. Its R&D expenditure as percent of total turnover worked out to 4.32 per cent as compared to just 1.82 per cent in the previous year. The company invested Rs 70 crore for setting up new R&D center in Mumbai to centralise its R&D activities. Nicholas has augmented its research efforts with an aggressive in-licensing strategy and collaboration with academic institutions in India and abroad.
Lupin invested Rs 45.99 crore on R&D during 2003-'04 as compared to Rs 36 crore, registering an R&D/Total turnover ratio of 3.90 per cent as compared to 3.49 per cent in 2002-'03. Lupin is investing in specialized R&D facilities to enable leading-edge process chemistry, NDDS and NCE capabilities. Its investment in internal research and development is continuously rising and it has made significant advances in its anti-psoriasis and anti migraine programmes, both are based on herbal-based NCE research initiatives. Aurobindo Pharma is also concentrating on R&D and its expenditure increased by 120 per cent to Rs 48.68 crore from Rs 22.05 crore. The company has setup a new R&D Centre at Mumbai.
Few mid cap companies like Shasun Chemicals, Alembic, Unichem Laboratories, Divi's Laboratories and J. B. Chemicals are also investing more funds in research activity. However, Cipla, the second largest pharma company in terms of net sales, is not undertaking any research activity.
Dishman, which recently entered the capital market, has been investing aggressively in R&D activities, with spending goes as much as 10 per cent of its turnover. Currently over 200 scientists are exploring new products. Dabur Pharma has setup its Research Foundation during 1979 to develop innovative products in the therapeutic segment of Oncology. Dabur Research Foundation has a well-established R&D capability that has led to the development of a number of significant anticancer drug molecules. A pipeline of potential therapeutic and NDDS molecules has been generated which are at different stages of development. The Company has approximately 16 novel molecules under development.
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