Investments in Research & Development (R&D) by Indian pharma companies have assisted well to establish strong presence in the highly regulated market as well as in emerging markets. The stiff competition in the international market and patent expiration motivated Indian companies to step up R&D expenditure to have a steady growth in sales. With higher investment in R&D, Indian companies grab larger share of approvals from highly regulated authorities and introduced several new cost effective generic products in the international market. These companies are focusing on high-barrier-to-entry products that are difficult to formulate, difficult to manufacture or may face complex legal and regulatory challenges. Currently, several products are in pipeline and may reach clinical trial stage.

The R&D spending of 25 leading companies studied by Pharmabiz, with R&D spending of over Rs.35 crore, went up by 24.1 per cent during 2015-16 to Rs.11,710 crore from Rs.9,439 crore in the previous year. On an average basis, Indian companies are spending above 7 per cent of their net sales on R&D. The Investment in R&D to net sales increased to 7.8 per cent in 2015-16 from 7.1 per cent in the previous year and 6.6 per cent in 2013-14. The higher spending translated into spreading presence in highly regulated market like US, Europe, Japan and even in emerging markets. Though the growth in R&D efforts was creditable, these companies failed to launch any new molecule or new chemical entity in the past.

Compared to R&D expenditure of Indian companies, the global 15 pharmaceutical companies are spending huge amounts on R&D activities. According to Pharmabiz study of 15 international major pharma companies, R&D expenditure of these companies worked out to over 17 per cent of their net sales as compared to 7 to7.5 per cent by Indian companies.

During the first nine months ended September 2016 Indian companies secured US FDA final approval for 141 ANDAs out of 432 total final approval and tentative approvals for 56 ANDAs out of total 116 tentative approvals. This worked out to 33 per cent and 48 per cent of total final and tentative ANDAs approval respectively. During the same period of last year, US FDA approved 372 final ANDAs and 102 tentative approvals, Indian pharma companies received final approval for 113 ANDAs and tentative approvals for 32 ANDAs. Thus, US FDA approved higher number of approvals in 2016 as compared to 2015 and Indian companies secured large part of this with the help of R&D investments.

Aurobindo Pharma remained on top with final approval for 42 ANDAs during first nine months of 2016 followed by Sun Pharmaceutical 17 (including Taro Pharma), Glenmark Pharma 16, Ajanta Pharma and Zydus Pharma 7 each. Aurobindo Pharma also received highest number of tentative approvals for 15 products.

Sun Pharmaceutical remained on top with R&D expenditure of Rs.2,303 crore during 2015-16 as compared to Rs.1,955 crore in the previous year. Dr Reddy's Laboratories R&D spending increased by 6.2 per cent to Rs.1,790 crore as against Rs.1,685 crore in the previous year and remained on second spot among 25 pharma companies. Lupin's R&D expenditure increased by 54.8 per cent to Rs.1,732 crore from Rs.1,119 crore and that of Cipla increased by 22.7 per cent to Rs.1,035 crore from Rs.844 crore. Alembic Pharma and Ajanta Pharma registered strong growth in R&D spending of over 100 per cent to Rs.255 crore and Rs.149 crore respectively.

The R&D expenditure of few companies like Ipca Laboratories, Piramal Healthcare, Venus Remedies, Unichem Laboratories and Panacea Biotec declined during 2015-16 by 12.4 per cent, 48.8 per cent, 10 per cent, 10.8 per cent and 1.1 per cent respectively. All other companies registered growth in R&D spending of over 20 per cent during 2015-16.

Orchid Pharma and Jubilant Lifesciences lost entry in the list of Pharmabiz 25 companies due to lower spending on R&D during 2015-16. Orchid Pharma's R&D expenditure declined to Rs.28.84 crore from Rs.60.16 crore and that of Jubilant Lifesciences' to Rs.14.35 crore from Rs.54.03 crore in the previous year. Pharmabiz did not include Syngene International, belonging to Biocon, as it is a leading contract research organisation (CRO) offering a range of integrated end-to-end discovery and development services for novel molecular entities with the help of over 2,500 research scientists.

The R&D expenditure as percentage of net sales of Sun Pharma Advance Research Company (SPARC) worked out to over 146 per cent during 2015-16 as compared to 128.8 per cent in the previous year, basically due to size of net sales of Rs.161 crore only. DRL, Lupin, Glenmark Pharma, Wockhardt, Suven Life Sciences and Venus Remedies R&D spending worked out over 10 per cent to their net sales. Similarly, R&D expenditure as percentage of net sales of Sun Pharma, Alembic Pharma and Ajanta Pharma worked out to over 8 per cent. Biocon's R&D spending as percentage of net sales worked out to 7.9 per cent to Rs.274 crore in 2015-16. Its R&D expenditure increased by 37.2 per cent in 2015-16.

With highest investment in R&D, Sun Pharma has comprehensive portfolio of 572 ANDAs filed upto March 2016 and 413 approved across various therapies. Currently, more than 159 ANDAs were pending for US FDA approvals, comprising complex generics, first-to-file opportunities and other generics. Similarly, Lupin has a portfolio of 124 in-market products in US and 163 filings pending approval. It has 45 first-to-file products in US market. Its cumulative ANDA pipeline reached at 343 as compared to 210 in 2014-15. DRL's 82 generic filings were pending for approval which includes 79 ANDAs and three NDAs. The company has 768 cumulative DMF filings.



R&D Expenditure during 2015-16 & 2014-15