Research & Development (R&D) expenditures of Indian pharmaceutical companies are showing a substantial growth rate in recent years although none of them could bring out a new molecule into the market. What they have been successful so far is to file increasing number of ANDAs and Drug Master Files in the US, Japan and some European countries.
The R&D expenditure of 30 leading Indian pharmaceutical companies increased by 18.7 per cent to Rs.3,770 crore from Rs 3,177 crore in the previous year with significant higher product filings with regulated authorities in US, Europe, Japan and emerging markets.
The R&D expenditure as percentage of net sales worked out to 7.4 per cent in 2010-11 as against 6.9 per cent in the previous year. The standalone net sales of Pharmabiz sample of 30 companies increased by 11.5 per cent to Rs.51,152 crore from Rs.45,865 crore in the previous year. The India based MNCs are spending very small amount on R&D as they are getting necessary support from their holding companies in R&D activities.
The research based Indian pharmaceutical companies, including subsidiaries, have obtained 142 final ANDAs approvals and 49 tentative approvals from the US FDA during the year 2010 as against 132 and 34 respectively during last year. Investment in R&D has thus helped Indian companies to establish strong presence in the international markets. The Indian majors like Dr Reddy's Labs (DRL), Lupin, Glenmark Pharmaceutical, Aurobindo Pharma and Sun Pharma received higher approvals for ANDAs from US FDA during the first 8 months of 2011.
The similar trend is likely to continue in the current year also as the Indian companies captured US FDA approval for 99 ANDAs and tentative approval for 30 ANDAs during the first 8 months of 2011. The total US FDA approvals reached at 303 ANDAs and tentative approval at 74 ANDAs during the same period. This shows that Indian companies are set to enter highly regulated markets more aggressively. The recessionary economic conditions in US and Western countries may offer further opportunities to launch number of new cost effective products.
Similar is the case with Active Pharmaceutical Ingredients (API) segment and it has established strong presence with quality products in world market and moving ahead with investments in R&D, expansion and acknowledgment from US and European authorities for their Drug Master Files (DMFs). Both listed and unlisted Indian pharma companies, including subsidiaries, filed 184 DMFs during the first half of 2011 as compared to 311 and 271 DMFs in 2010 and 2009 respectively.
Dr Reddy's Laboratories (DRL) remained as the top spender on R&D during 2010-11 with investment of Rs.592 crore, a strong growth of 52 per cent. This was followed by Lupin at Rs.530.09 crore, Ranbaxy Laboratories at Rs.497.89 crore, Cadila Healthcare at Rs.301.70 crore and Cipla Rs.284.85 crore. Ranbaxy's R&D expenditure increased only marginally by 0.7 per cent, but that of Lupin and Cadila's R&D spending increased by 28.7 per cent and 38.5 per cent respectively. Ranbaxy realigned its R&D activity by transferring its New Drug Discovery Research (NDDR) to Daiichi Sankyo India Pharma Pvt Ltd and now focusing more on generics. It launched 81 new products in India which 24 were developed in-house, 53 were out-sourced and 4 were in-licensed.
The R&D spending of Fresenius Kabi Oncology jumped up by 145 per cent to Rs.85 crore from Rs.35 crore in the previous year. Sun Pharma Advanced Research Company, a demerged entity of Sun Pharmaceutical and Industries is spending more on R&D than its sales and its R&D expenditure amounted to Rs.70.13 crore as against Rs.64.22 crore.
The R&D expenditure of debt ridden Wockhardt declined by 8.1 per cent to Rs.110 crore during 2010-11 and that of Jubilant Lifesciences (formerly known as Jubilant Organosys) also moved down by 9.1 per cent to Rs.80 crore. The R&D expenditure of majors like Biocon, Orchid Chemicals, Claris Lifesciences, Shasun Pharma, Plethico Pharma and Suven Life Sciences declined during 2010-11. Though the R&D expenditure of Suven Life declined by 8.8 per cent, it spending as percent of net sales remained strong at 22.2 per cent.
The higher R&D expenditure translated in higher filing and approval for ANDAs during 2010-11 for several companies. The cumulative approval for ANDAs of DRL reached at 179 numbers and 76 are still pending. Similarly, the tally of ANDAs approved by US FDA of Ranabxy reached at 205 and that of Aurobindo and Sun Pharma Industries at 579 and 377 respectively. The higher growth in approval turned into higher sales in profitable market in US and Europe.
Global generics market continues to present a positive outlook and growth opportunities based on health cost cutting measures by developed countries, expiration of patent protections, rising income levels, improving healthcare coverage and product pipeline. Generic versions of out-of-patent products will experience an extended life cycle. New product development and commercialization involves substantial expenditure, which may not be recovered due to several factors including development uncertainties, increased competition, regulatory delays, lower than anticipated price realizations, delay in market launch and marketing failure. Despite several odds, Indian companies are strengthening R&D based with availability of skilled workforce and talent pool.
In discovery research these companies are taking risks of high rate of failure and long gestation period of discovery project coupled with significant upfront costs to be incurred before results are known. Considering the cost and high risk the Indian companies are entering partnership with international giants. Several companies are working on in-house New Chemical Entities (NCE) projects within the areas of diabetes and its related complications, metabolic and cardiovascular disorders, neuropathic pain, etc.
Growth in R&D spending of 30 Indian Companies