New Delhi: Two years into India accepting a product patent regime, the country’s top 10 drug makers, with just one notable exception, when measured by research and development (R&D) spending have increased spending by nearly a third in the year ended March.
The highest jump in R&D investments has been for Sun Pharmaceuticals Ltd, currently India’s most valuable drug maker in terms of market capitalization. Sun has increased such spending 68% to Rs258 crore.
Ranbaxy Laboratories Ltd, the country’s second biggest pharmaceuticals firm by sales, is the only company among the big drug makers to reduce its research budgets, down by 24%, though the company says it is simply becoming more efficient at such spending.
India’s switch to a product patent regime in January 2005 and aspirations of local drug companies to bring out innovative medicines—as opposed to surviving on a staple diet of generics or non-patented drugs that they had done so far—have put a thrust on R&D like never before.
But industry experts and analysts are undecided if this is a harbinger of a new chapter in drug discovery in India.
“How much of it is going into discovery research and how much into generics development? R&D spend is bound to go up because the filings are going up,” said Awadhesh Garg, sector analyst with Mumbai-based Kotak Securities Ltd. “Investing in new drug research is what will yield long term gains.”
Adds Sanjiv Kaul, managing director with private equity firm, ChrysCapital: “Indian companies neither had the mindset nor the pocket to spend on R&D. In the new patent regime, even the business of branded generics will need more such investment. The pendulum has swung from the sales and marketing department to R&D.”
Does that mean that firms such as Ranbaxy are in danger of being left behind because of the seemingly sharp reduction in its R&D spending? A Ranbaxy spokesman termed the decline in 2006 R&D spend a conscious effort to get more out of each buck spent.
“We are the biggest spenders on R&D in the industry and there is no dilution of focus from research,” he noted. “There was a spike in our spend last year (2005) as we had to undertake a few refilings and bioequivalence studies.” He added that the figure will rise in 2007 on the back of new product launches.
Bioequivalence studies are used to prove generic drugs work as effectively as patented ones.
But one industry expert, who didn’t want his name used, called the drop in Ranbaxy’s drug filings with regulatory authorities globally, from 721 in 2005 to 618 in 2006, a sign of “a dilution of attention on basic drug discovery research”.
Despite the Ranbaxy hiccup, other companies remain gung ho. “The sector is very aggressive in every sphere right now and the research spends are bound to go up. There is a lot of catching up to do with the west given in terms of years of experience,” said Glen Saldanha, managing director, Glenmark Pharmaceuticals Ltd.
Another industry expert said it “will be magical” if the domestic drug industry comes up with a new molecule any time soon. Indeed, Cipla Ltd, for instance, only works on new drug delivery systems and stays clear of finding new drugs—a policy it has faithfully stuck onto for years.
However, others such as Dr Reddy’s Laboratories Ltd, Glenmark, Ranbaxy and Sun Pharma have clearly outlined new drug programmes.
Ranbaxy has a malaria molecule in second stage of clinical trials along with an anti-infective and a respiratory molecule in partnership with GlaxoSmithKline Plc. Dr Reddy’s has five molecules in its own pipeline and has placed four with Perlecan Pharma Ltd, a new company it floated for new drug research along with ICICI Venture and Citigroup. Glenmark has six molecules and Wockhardt is working on three new drugs.
Much like Ranbaxy’s stated focus on productivity of R&D spending, other companies are also eyeing their return on such investment as spending expands year after year. “Efficiency is going to be very critical if one has to be competitive. Wage inflation is going to be the biggest factor (to manage) there,” said Saldanha.
Another fallout of all the expanded effort on R&D has been a fuelling of allied industries. Clinical research organizations, clinical research educational institutes, companies specializing in toxicology, pharmacology, bioinformatics and cheminformatics are all seeing a spurt in demand.
The Institute of Clinical Research of India, a training company, has, for instance, seen an increased interest in their students. “While most of the clinical research work still comes from multinational drug makers, Indian companies are picking up people in large numbers for ‘pharmacovigilance’ and regulatory affairs. A boom is clinical data management has made Accenture and TCS our biggest recruiters,” said S.R.Dugal, chief executive of ICRI.