Sunday Reading

New Delhi, 15 July 2009

Pharma Industry

KEEPING GOOD HEALTH 

By  Radhakrishna Rao

Notwithstanding recent custom duty concessions, the dynamic Indian drugs and pharmaceuticals industry is expected to log a steady and stable growth as it would stand to benefit to some extent by an increasing global demand for low-cost drugs and formulations. This news comes from a study by the rating agency Fitch. An excellently documented report: “Indian Pharmaceutical Sector 2009 Outlook”, released sometime back points out that the our pharma industry would remain stable since it is driven by both domestic as well as growing international demand for core pharmaceutical products, including generic drugs.

Clearly, the fact-filled study has highlighted the ground reality that a weak global economic environment in tandem with the appreciation of the American dollar against the Rupee is expected to contribute to a surge in the export of low-cost Indian made generic drugs and an increased demand for low-cost contract research and manufacturing activities. In the ultimate analysis, the study leaves an impression that the overall profitability of the sector could be under pressure on account of the stringent regulations in the markets of West Europe and North America, in addition to high depreciation costs and losses inherent in the violent fluctuations witnessed in the global currency market.

Despite odds, many Indian drugs and pharmaceutical companies are going ahead with their ambitious research plans aimed at producing new and novel drugs and pharmaceutical formulations. Though as of now there are no clear indications on the “cut backs” in research spending, the ongoing liquidity crunch could put pressure on the process of drug discovery and clinical trials, both of which are highly time-consuming and capital intensive. It is the mind-boggling investment required for brining a drug to the market that prevents many medium and small drug companies from investing on research and development focused on drug discovery.

Meanwhile, in a significant development, a Mumbai-based pharmaceuticals firm has stated that its novel molecule for diabetes melogliptin has successfully completed the Phase-II clinical trials and is now getting ready to go through the Phase-II trials by year end. Clinical trials are vital for proving the efficacy, reaction and safety levels of new drugs under development. The company is planning to invest around US$50-million on research and development activities during the year 2010. In fact, the company is asserting that it has moved a step closer to notching up the distinction of being the first Indian company to have a truly global innovative drug.

On another front, India is also emerging as a favourite and cost-effective destination for the global pharma, biotech and drugs’ outfits to set up their research hubs. In this case, the availability of skilled manpower at an affordable cost is a major advantage for these overseas companies to zero in on the potentials of India. For instance, Cell Works Group Inc, an American company based in California, has set up its research and development centre in the IT city of Bangalore with a focus on providing technology-based solutions for speeding up the process of drug discovery.

Cutting down the time involved in the evolution of a new drug makes for considerable savings on the cost. The thrust of the Bangalore research hub would be in areas of oncology, inflammation, metabolic disorders and skin ailments. Along with Hyderabad, Bangalore has emerged as a hub for research-related activities of many overseas pharma companies.  For many of these companies are keen on exploiting the IT and software expertise available in Bangalore for giving a forward thrust to their activities meant to discover new drugs and formulations.

India is also making its mark in the area of stem cell-based therapies aimed at tackling many of the difficult-to-cure diseases and disorders afflicting humanity. All said and done the technology of stem cell therapy is still in its infancy and it would be quite sometime before stem cell therapy emerges as a mode of routine treatment on a large scale. Another Bangalore-based company is involved in developing stem cell lines possessing potentials to treat a number of disorders and ailments including myocardial infarction, leg ischemia and diabetes.

However, the acquisition spree of the Indian pharma sector, whose value has been estimated at Rs.76,000-million seems to have slowed down on account of the liquidity crunch, lower profits and instability in the global currency market. Till recently, acquisition and consolidation was the mantra of growth for the pharma and drugs industry in the country. The export earnings of our pharmaceutical industry have been pegged at Rs.33,000-crore for the current year.

Interestingly, most pharma companies are export-oriented with 50 per cent of the revenues coming from export of drugs and pharma products to the developed countries. However, the earnings from export are likely to show a downward trend during 2009-10. At the same time, the pharmaceutical and drugs industry is worried over Chinese outfits flooding low-quality “made in India” drugs in the African market.

Today, the country’s pharma industry ranks fourth in the world in terms of volume and is able to meet the requirements of drugs and formulations of the people through indigenous production. Meanwhile, captains of the Indian pharmaceutical sector have made a strong plea to the Government of India to strongly back its research and development efforts aimed at developing new drugs. However, it has in this Budget, reduced the basic customs duty on influenza vaccine and nine specified life saving drugs used for the treatment of breast cancer, hepatitis-B, rheumatic arthritis etc on the bulk drugs used for the manufacture of such drugs, from ten to five per cent. They will also be totally exempt from excise duty and countervailing duty.

Well, if India has to move ahead in the development of innovative drugs, then the Central Government would need to provide significant breaks for the companies involved in high-end discovery research. For the innovative drugs could help boost the export market for our pharmaceutical outfits. Two other promising areas of growth for the pharmaceuticals and drugs sector is the contract research and manufacturing services and clinical trials. India has now emerged as an attractive destination for outsourcing clinical trials and contract research and manufacturing services. How healthy it will be, times will tell. –INFA

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