Mumbai: Billionaire Ajay Piramal-led Piramal Enterprises Ltd, which sold its India drug formulations business in 2010 to US-based drug maker Abbott Laboratories, has decided to exit from the drug discovery research business after a review meeting this week.

The group, which focuses on drug discovery or new chemical and biological entity research under its subsidiary company Piramal Life Sciences Ltd, has circulated an internal note to the 180-odd employees, mostly scientists, in the discovery unit located in Mumbai, asking them to either take a retirement or to move to the group’s generic medicine development and contract research units.

“After a business review, we have taken a decision to stop all the early-stage discovery projects at Piramal Life Sciences and to announce a retirement or relocation scheme for the employees," said Swati Piramal, vice-chairperson, Piramal Enterprises, who oversees the group’s research business.

Owe Orwar, a Swedish scientist who heads Piramal Life Sciences’s discovery research unit as president, is heading back home. Orwar replaced Somesh Sharma, lead scientist and chief executive officer of Piramal Life Sciences, in 2012. He shared the responsibility for the drug research business with Peter DeYoung, president, Piramal Life Sciences, and son-in-law of Ajay and Swati Piramal.

While the company will continue its generic and contract research business, which is spread across four units located at Hyderabad, Chennai, Pithampur and Ahmedabad, it will immediately stop all the new chemical research work, except the ongoing projects in imaging and anaesthetics solutions, Swati Piramal added in a telephone interview on Tuesday.

Piramal Life Sciences has a team of over 400 scientists spread across the globe. It pursued research into novel and innovative medical solutions, but more than half of this team is engaged in generic drug development. The company also claimed to have at least 295 patents and some 808 pending patent applications, spread across various categories such as compositions of matter, treatment methods, biomarkers, diagnostics, pharmaceutical compositions and drug delivery systems.

“I am basically a scientist and I love the business of science, but as vice-chairman of a larger business group, I am also answerable to the investors. So I had to take a decision, which is most strategic (from) the investor point of view, that is to review the high-cost and long-gestation early-stage discovery business," Piramal added.

Piramal Enterprises has proposed a voluntary retirement scheme for the scientists at the discovery unit. The total cost of this scheme is yet to be estimated as it expects some employees may opt for relocation to other research units.

The Piramal Group’s drug research business was spun off into a separate company in 2007 as it had an impressive pipeline of early-stage discovery projects. It was merged back with the group in 2011 following the divestment of the domestic formulations business. This was also in anticipation of heavy investment by the parent company in discovery research.

But the company’s most promising late-stage biological drug for cancer failed in phase II clinical trials in 2012. It also could not take any other strong drug candidates forward to the advanced stages.

New drug discovery, a high-risk business that needs heavy investments in late-stage research, mainly in the clinical trials stage, has been a big challenge for Indian drug makers. The uncertainty involved with the success of even promising lead molecules is high and failure rates are typically 8 out of 10.

Many of Piramal’s domestic rivals, including Dr Reddy’s Laboratories Ltd and Ranbaxy Laboratories Ltd, which also tried drug discovery as a core area of business, faced similar problems.

Dr Reddy’s had formed a separate company for drug discovery, Perlecan Pharma Ltd, but had to close it down after its two lead diabetes molecules failed in late-stage trials, although these drug candidates were licensed to foreign drug maker Novo Nordisc SA. Co-investors in Perlecan Pharma, ICICI Venture and Citigroup Venture Capital International Mauritius Ltd, exited soon after.

Ranbaxy Laboratories, which developed a malaria drug in partnership with the Indian government at its discovery unit, transferred the unit to its Japanese buyer Daiichi Sankyo Co. Ltd after the promoters divested their 38% stake in the parent company.

Indian drug makers Glenmark Pharmaceuticals Ltd and Sun Pharmaceutical Industries Ltd are the two other companies still pursuing discovery research in the country. While Sun Pharma’s discovery research unit, Sun Pharma Advance Research Co. Ltd, still hasn’t come out with any new chemical entities, Glenmark has licensed seven lead molecules to foreign drug makers.

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