The alliance signed between Ranbaxy Laboratories and GlaxoSmithKline for collaborative drug discovery and clinical development sector should be seen as international recognition of India's capability in field of drug discovery. That also shows that the apprehension of the MNCs to enter into a major R&D tie up with Indian companies is changing, according to senior analysts here.

MNCs have been skeptical about the feasibility of such an arrangement for some years in the current IPR scenario. Also there was doubt regarding the capabilities of Indian partners in such an arrangement. With R&D capabilities demonstrated by Ranbaxy, Dr. Reddy's Labs, Wockhardt, Shantha Biotech and other companies in the recent years, the fear from the MNCs has started to fade away, which was ably displayed with the GSK-Ranbaxy tie up, they added.

Although MNCs have partnered with Indian companies for research even before, the scope, responsibility and recognition that Ranbaxy would be getting is the first of its kind in the country and in the developing world, said the analysts.

"It is a tie-up where both the companies (GSK and Ranbaxy) would be sharing the work load on the basis of their strengths. Unlike the earlier research partnerships here the Indian partner would get benefit not only from the research, but also for manufacturing and marketing the molecule across the globe," said Shahina Mukadam, the pharma analyst at the Mumbai-based Motilal Oswal Securities, an equity research outlet.

"It is a case where the MNCs could reduce their drug discovery and development cost at the same time get quality research work from the scientifically talented Indian work force," said Vijay Bhambwani at Bhambwani Securities Pvt Ltd (BSPL).

"The average cost of drug development right from the discovery to commercialization is $ 800 million per molecule and nearly 80 per cent of this cost is devoted on drug development alone. This cost can be reduced considerably with an Indian tie up. Simultaneously the MNC would be able to offer the needed financial assistance to Ranbaxy," added Mukadam.

According to the analysts, the future appears to be bright for the Indian R&D horizon. After the 2005 WTO deadline, more MNCs are expected to work out similar tie-ups with reputed Indian companies. The trend also seems to be ideal for Indian CROs, said analysts, provided Indian government makes stringent IPR related regulations. "If a tight IPR law can assure more Forex inflows, the government should not delay in enforcing the law. It should go ahead with the thought of setting up exclusive courts for IPR and copyright violations with strict punishment for the violators," said Bhambwani.

As per the understanding in the current tie up, Ranbaxy will be responsible for activities ranging from optimisation of a lead compound to generation of a development candidate. Leads may be provided by either GlaxoSmithKline or Ranbaxy.

For a proportion of the candidate drugs selected within the collaboration, it is expected that Ranbaxy will conduct early clinical work. GlaxoSmithKline and Ranbaxy will form an executive steering committee to oversee research. Once a compound is selected as a development candidate, in most cases GlaxoSmithKline will complete the development.

It will have the exclusive commercialisation responsibilities worldwide, while Ranbaxy will take the lead in India. Ranbaxy, with the consent of GlaxoSmithKline, may co-promote the drug in the US and EU. The financial terms of the agreement have not been disclosed.

Ranbaxy, which is investing $50-60 million in research and development in 2003, and is targeting to have around 1,000 scientists on its rolls by the end of the year, has interests in therapeutic segments like metabolic disorders, anti-infectives, urology and anti-inflammables.