Sun Pharmaceutical Industries Ltd (SPIL) is setting up a massive research campus in Vadodara, which will be partially operational next year. Spread over 16 acres, the research campus will have facilities for drug discovery and drug delivery projects. Over the next few years, this will be manned by 150 more scientists, which will double the current scientific strength.

This was revealed by SPIL Director Hasmukh Shah who read out from a prepared statement on behalf of Dilip Shanghvi, Chairman and Managing Director of SPIL, at the tenth annual general meeting held at Vadodara today.

"Over the years, our research investments have exceeded Rs 120 crore, with Rs 35-40crore earmarked for investment in each of the next two years." Shah said that in Mumbai, they have increased the research site area in Mahakali with an additional 50,000 sq ft. The 40-strong research team there will continue to work on product development for the regulated markets.

The percentage spend on innovation, currently 30%-35% of the total R&D expense, will exceed 60%-70% in the next two years, he said. The extent of management time invested in research is also increasing. Currently, 101 patents have been filed for the work done at SPARC, up from 76 in March 2002.

"We are taking confident steps towards our research objective: to have 1 new molecule and 3 delivery system based products in human trials over the next two years. Drug discovery is one area where I would rather be working towards the next milestone, instead of being satisfied with the work so far."

Currently, at Sun Pharma, international markets account for 20 per cent of the turnover, with the export of bulk actives to Latam and Europe making up the majority. The company expects global markets, driven by formulation exports to account for over 30 per cent of turnover in the next four years.

Sun has always viewed speciality bulk actives as a separate profit center. "We see a distinct opportunity to increase our international presence by being the supplier of bulk actives both to large end user companies and generic companies. This business builds on our chemistry expertise, and to this effect, all our bulk plants have been designed and built to international regulatory requirements."

The infrastructure is well in place. All Sun plants have been built to international specifications. The Ahmednagar plant holds US FDA approval, ISO 9002, and ISO 14001 approval. The Panoli site holds ISO 9002 approval and is being submitted for USFDA approval. The Chennai facility recently completed the inspection process for ISO 9002 approval. These plants will be used to supply speciality bulk active to innovator companies or end-users in the international markets.

The company is readying for the future on three key parameters: building an international speciality business, building technical credentials with drug discovery and novel drug delivery systems, and developing the team.

Shah said that Sun Pharma was structured and designed to meet the needs of the speciality customer. "Our rankings in key therapy areas are based on the generation of long-term prescriptions from the consultant and the relationship we have with him. As we gain market share, we shall continue seek innovative ways to build on this equation. This speciality strategy is one we are working to replicate in new therapy areas and across new geographical markets. In the potentially high growth areas such as gynecology, oncology, respiratory, appropriate structure, people and strategy are now in place and we are working to establish similar levels of customer trust.

The US generics market accounts for $14 billion and expected to grow quickly as products with brand market of $40 billion go off patent by 2004. "As we begin to better understand the dynamics of regulated markets we expect to quickly move from being a plain vanilla generic manufacturer playing on the cost advantage, to product strategies that are more complex."

Sun Pharma participates in the US generics opportunity through the investments made in Caraco, which has 7 ANDAs approved, 6 more filings awaiting clearance, and expects a continuous stream of filings to be made.

Beginning this year, SPIL will also seek dosage form regulatory approvals for Europe from an Indian base. "We intend to make a start in carefully selected markets in Europe, working with a local partner who knows these markets well."

The Indian plant will be also submitted for USFDA approval this year, with ANDA filings to begin one year down the line. "Once these approvals are in place, we will be able to take advantage of a second manufacturing front for US and Europe," Shah said.

Opening a second front for dosage forms is a prudent strategy in terms of opportunity addressed, leveraging the cost advantage differential and sheer staying power to address vast regulated markets. "These plans, tailor-made to address specific markets, will help us establish an identity as an international speciality pharma company," Shah said.