GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC

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GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
Pharmaceuticals and Life Sciences

Global pharma looks to India:
Prospects for growth
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
Table of contents

Introduction                                                                  03
Background                                                                    04
 A fast growing economy
 An expanding pharmaceutical market
 Government-provided healthcare improving, but private healthcare dominates

Domestic market overview                                                      09
 Background
 Consolidation underway, despite challenges
 Contract manufacturing
 Vaccines
 Over the counter market holds significant potential
 Reaching the untapped rural market

Growing Research & Development                                                15
 Overview
 Clinical trials
 Biotech and biosimilars on track for growth

Other growth areas                                                            20
 Bioinformatics
 Stem cell research
 Medical devices

Global Pharma’s evolving business models and options in India                 23
 Background
 Export-oriented business (Contract Research and Manufacturing Services)
 Licensing
 Franchising
 Joint ventures
 Wholly-owned subsidiaries

Practical concerns                                                            27
 Infrastructure
 Tax environment
 Counterfeiting
 Intellectual property

Conclusion                                                                    30
Related reading: Pharma 2020                                                  31
References                                                                    32
Acronyms                                                                      38
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
Introduction

The pharmaceutical industry’s main                   promise, either as places with untapped      Indian companies have also started
markets are under serious pressure.                  demand for effective drugs or as             entering into the realm of R&D; some of
North America, Europe and Japan jointly              suitable areas for conducting research       the leading local producers have now
account for 82% of audited and                       and development (R&D) and/or clinical        started conducting original research.
unaudited drug sales; total sales                    trials. In this paper we shall examine the   India has the world’s second biggest
reached US$773 billion in 2008,                      opportunities available in India.            pool of English speakers and a strong
according to IMS Health. Annual growth                                                            system of higher education, so it should
in the European Union (EU) has slowed                India’s population is growing rapidly, as    be well-positioned to serve as a source
to 5.8%, and sales are increasing at an              is its economy – creating a large middle     for research talent. A new patent regime
even more sluggish rate in Japan (2.1%)              class with the resources to afford           provides better protection of intellectual
and North America (1.4%).1 Impending                 Western medicines. Further, India’s          property rights, although some issues
policy changes, promoting the use of                 epidemiological profile is changing, so      remain. Clinical trials can also be
generics in these key markets are                    demand is likely to increase for drugs       conducted here much more cost-
expected to further dent the top- and                for cardio-vascular problems, disorders      effectively than in many developed
bottom-line of global pharma majors.                 of the central nervous system and other      nations, and some local companies are
The industry is bracing itself for some              chronic diseases. Together these factors     beginning to develop the required
fundamental changes in the                           mean that India represents a promising       expertise. All of these factors add up to
marketplace and is looking at newer                  potential market for global                  a strong case for partnering with Indian
ways to drive growth.                                pharmaceutical manufacturers.                companies around R&D, including
                                                                                                  clinical testing.
Further, higher R&D costs, a relatively              More than that, India has a growing
dry pipeline for new drugs, increasing               pharmaceutical industry of its own. It is    Further, healthcare has become one of
pressure from payers and providers for               likely to become a competitor of global      the key priorities of the Indian
reduced healthcare costs and a host of               pharma in some key areas, and a              Government and it has launched new
other factors are putting pressure on the            potential partner in others. India has       policies and programmes to boost
global pharmaceutical companies.                     considerable manufacturing expertise;        local access and affordability to
Pharma companies are looking for new                 Indian companies are among the world         quality healthcare.
ways to boost drug discovery potential,              leaders in the production of generics
reduce time to market and squeeze                    and vaccines. As both of these areas         Global players in the pharma industry
costs along the whole value chain.                   become more important, Indian                cannot afford to ignore India. The
                                                     producers are likely to take a large role    country, many predict, will be the most
How can industry leaders best face                   on the world stage – and potentially         populous in the world by 2050. India will
these challenges? Analysis by                        partner with global pharma companies         make its mark as a growing market,
PricewaterhouseCoopers (PwC) shows                   to market their wares outside of India.      potential competitor or partner in
that several regions offer considerable                                                           manufacturing and R&D, and as a
                                                                                                  location for clinical trials.

Global pharma looks to India: Prospects for growth                                                                                         3
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
Background

A fast growing economy                         Figure 1: India is forecast to grow by at least 5% a year for the next 41 years

The Indian economy is worth about
US$1,243 billion and rapidly getting
bigger.2 Real GDP growth reached 9%
in the year to March 2008.3 The rate of
increase has since slowed down due to
the global financial crisis; in the year to
March 2009, growth eased to 6.7%.4
Even so, most forecasters believe that
India will continue to show robust
growth over the long-term; a survey of
professional forecasters performed for
the Reserve Bank of India (RBI)
anticipates growth improving to 6% in
the year ending March 2010,5 and
expects robust growth of 7.8% p.a for          Source: BRICs and Beyond, Goldman Sachs, November 2007.
the next ten years.6 Previous forecasts
such as those of Goldman Sachs
suggest that India will be the only
emerging economy to maintain such an           Figure 2: India is shifting from agriculture to services
outstanding pace over the longer term,
i.e. to 2050 (see Figure 1).7

Two factors underlie this favourable
outlook: India’s demographic profile and
a robust services sector. India’s
population is currently just over 1.1
billion and projected to rise to 1.6 billion
by 2050 – a 45.5% increase that will see
it outstrip China as the world’s most
populous state.8 India has also utilised
its strengths in IT to become a major
offshore business services provider, in
marked contrast with most of Asia,
which has relied on manufacturing for
its recent growth. As a result, services       Source: Reserve Bank of India Annual Reports.
now account for 64.5% of India’s GDP
(see Figure 2).9 While a strong services
sector heralds well for continued
economic prosperity, it also suggests
why India looks to be important for
research and development as well as
drug manufacture; the country’s
experience delivering on outsourcing
opportunities in other knowledge-critical
areas such as IT should serve it well in
its bid to offer such services in pharma,
biotech and related areas.

4                                                                                                              PricewaterhouseCoopers
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
An expanding pharmaceuticals                         drugs by virtue of the Drugs Price
market                                               Control Order (DPCO), supervised by
                                                     the National Pharmaceutical Pricing
India’s pharmaceuticals industry looks
set for a solid long-term growth. It
                                                     Authority (NPPA). The 347 price-
                                                     controlled drugs included in 1979 were
                                                                                                    The bottom line:
already ranks fourteenth in the global               reduced to 143 in 1987.16 At present, 74       Increased buying
league table, with sales of almost                   bulk drugs are covered under the
US$19 billion in March 2009.10 However,              DPCO.17 The Government’s draft                 power and
PwC estimates that it will rise to                   pharmaceutical policy in 2006 sought to
approximately US$50 billion by 2020 –                expand the scope of essential drugs            epidemiological
a 163% in the space of eleven years.11
Indeed, in our report, Pharma 2020:
                                                     and evoked a sharp reaction from the
                                                     industry. They argued that it would
                                                                                                    changes should
The vision, we anticipate that India will
be one of the industry’s top 10 markets
                                                     adversely affect R&D activities in India,
                                                     as companies would stay away from
                                                                                                    spur dramatic
by 2020.                                             investing in new drugs. To date, no            growth in sales
                                                     further action on the proposed policy
This growth will be driven by the                    changes have been taken and it                 volumes, but India
expanding economy and increasing per                 currently looks unlikely that the DPCO
capita GDP. In 2008, India’s middle                  will be expanded.                              remains a price-
class constituted 13% of the
population, according to the National                The Indian Government’s Department of
                                                                                                    sensitive market.
Council of Applied Economic                          Pharmaceuticals has also initiated
Research.12 While this remains a fairly              operations for a peoples’ medicines
small proportion of the total population,            shop, called ‘Jan Aushadhi,’ in various
it represents a substantial increase from            locations. These shops sell generic
a mere 3% in 1995.13 If the economy                  medicines at much cheaper rates
continues to grow faster than those of               than the price of corresponding
the developed world and the literacy                 branded medicines.18
rate keeps rising, around a third of the
population (34%) is expected to join the             Some multinational pharma companies
middle class in the near future.14 While             are already taking measures to reach a
these consumers still earn substantially             larger patient population by reducing
less than their US or European                       drug prices and increasing affordability.
counterparts, they are rapidly acquiring             One example: Merck & Co. has
the buying power necessary to afford                 launched differential pricing through
modern healthcare, particularly if                   Januvia, its anti-diabetic drug, which is
purchasing power parity is considered.               priced at approximately US$1 per dose
One source estimates that at least 60                in India – a fifth of its price in the US.19
million Indians – a market as big as the             Indian companies like Biocon have also
UK – can already afford to buy Western               followed a similar pricing strategy.
medicines.15 Aggressive pricing                      Biocon has launched its monoclonal
strategies will be necessary, however, to            antibody BIOMAb EGFR at one-fourth
make in-roads into India’s price-                    of its price in the global markets.20
sensitive market.
                                                     It’s also likely that India will require
India’s federal Government currently                 different types of drugs in the future.
mandates price controls on essential                 Like almost every other emerging
drugs, however, these are under review.              economy, India is experiencing
Price controls are carried out on certain            epidemiological changes. Thanks to

Global pharma looks to India: Prospects for growth                                                                       5
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
greater affluence and better hygiene,               companies. It currently represents about
    India’s insulin dependence            the population is ageing; by 2028, an               8% of the global drugs market by
                                          estimated 199 million Indians will be 60            volume and only around 1% by value,23
    The number of Indians with            or older, up from about 91 million in               but the Indian consumer’s rapidly
    diabetes is projected to reach        2008.21 Besides that, it has the largest            increasing purchasing power and the
    73.5 million in 2025. The direct      pool of diabetic patients, for example,             country’s changing epidemiological
    and indirect costs of treating        with more than 41 million people                    profile could jointly improve its price/
    such patients are currently about     suffering from the disease (see sidebar             volume mix.
    US$420 per person per year. If        on India’s insulin dependence).22 The
    these costs remained the same
                                          pattern of demand for medicines is                  In order to get drugs to consumers at
    as they are now, India’s total
    bill for diabetes would be about      shifting accordingly. In 2001, anti-                the right price, though, improvements to
    US$30 billion by 2025. But as         infective and gastrointestinal drugs and            local supply chains will need to take
    its economic wealth grows and         vitamins accounted for 50% of the                   place. One source estimates that
    standards of care improve,            domestic market. By 2012, they are                  logistics comprise 45-55% of the costs
    treatment costs are likely to rise.   expected to account for just 36%.                   in the Indian pharmaceutical supply
    The US spends an average              Conversely, drugs for cardio-vascular               chain from factory to shelf.24 India has
    US$10,844 per year on each            problems, disorders of the central                  historically had a pharma supply chain
    patient with diabetes. If India’s     nervous system and other chronic                    with a number of stops between the
    per capita expenditure rose to        diseases will account for 64% of                    initial production and final consumer.
    just one-tenth of this level, the     total sales, up from 50% in 2001                    The arrival of Goods and Services Tax
    total cost of treating all patients   (see Figure 3).                                     (GST) may prove to be a strong
    with diabetes would be US$79.7                                                            incentive for greater streamlining, as
    billion by 2025. The value of
                                          These factors help to explain why India             such middle men could potentially add
    prophylaxis in India alone would
    thus be substantial; preventing       is expected to be among the top                     substantially to the final cost of
    10% of the population from            markets for many pharmaceutical                     medications in a price-sensitive market.
    developing diabetes would save
    nearly US$8 billion a year.           Figure 3: India’s therapeutic needs are changing

    Source: PricewaterhouseCoopers,       100%
    Pharma 2020: The vision
                                                            9%                                                              Pain/Analgesics,
                                                                                      20%                        21%        Gynaeclogical &
                                                            10%                                                             Dermatology
                                           80%
                                                            12%                        9%                        9%         Respiratory

                                                                                      11%                        11%        Gastrointestinal
                                                            14%
                                           60%
                                                                                       9%                        8%         Vitamins/Minerals

                                                            24%
                                                                                      18%                       17%         Anti-infectives
                                           40%

                                                                                       5%                        6%         Neuro/CNS
                                                            5%
                                                            8%                        10%                       10%         Cardiovascular
                                           20%
                                                            3%                                                   5%         Antidiabetic
                                                                                       4%

                                                            15%                       13%                       13%         Others

                                            0%
                                                          2001-02                   2006-07                   2011-12
                                          Source: ORGIMS Data, Crisil Research, Pharmaceuticals: Review Indian formulation market (2008)

6                                                                                                                     PricewaterhouseCoopers
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
Further, the consolidation of the pharma             workers without access to hospitals or
industry and emergence of pharma retail              pharmacies (see Table 1).26 Many of
chains are likely to lead to more                    the poor rely exclusively on alternative
concentration in the supply chain. The               forms of treatment such as Ayurvedic        The bottom line:
increasing requirements posed by some
formulations like biologics, which
                                                     medicine27, Unani28 and Acupuncture.
                                                                                                 India’s healthcare
require advanced expertise such as the
ability to maintain the cold chain and
                                                     The Indian Government has made the
                                                     provision of healthcare as one of its
                                                                                                 system is
avoid shocks during the distribution
process, will also play a role. Inventory            Table 1: India healthcare facilities
                                                                                                 struggling to
reduction and the reduction of order
                                                      Doctors         60 per 100,000 people29
                                                                                                 meet the needs
cycle time will be key objectives for
companies looking to optimise their                   Nurses          80 per 100,000 people30    of its vast
                                                      Pharmacies      367,000 (urban),
supply chains in order to offer their
drugs at affordable prices.25                                         183,000 (rural)31          population, but
                                                      Hospitals       30,000 (67% public,        government
Government-provided                                                   23% private)32
healthcare improving, but                             Hospital        1.7 million
                                                                                                 programmes and
private healthcare dominates                          beds            (one per 1,000 people)33   reforms in the
                                                      Health          171,687 (including
The Indian Government is currently
in the throes of a much needed
                                                      centers         145,272 sub-centres        health insurance
                                                                      with basic facilities)34
programme to reform the health care                                                              industry should
system. After years of under-funding,                Sources: World Health Organisation (2008)
most public health facilities provide only           Modern Pharmaceuticals (December 2008);
                                                     Health System in India: Opportunities and
                                                                                                 improve the
basic care. Moreover, three quarters of
medical facilities are located in urban
                                                     Challenges for Improvement (July 2005)
                                                     Expresspharmaonline.com (2007); and         situation.
                                                     World Health Organisation (2007).
areas, leaving the majority of rural

Global pharma looks to India: Prospects for growth                                                                    7
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
key priorities. It launched a new policy   2010-11 also allocated US$ 2,920           who do have some insurance, the
to build more hospitals, boost local       million under the National Rural Health    main provider is the Government-run
access to healthcare and improve           Mission (NRHM), an increase of 15%         General Insurance Company (GIC),
the quality of medical training, and       over the previous year.40                  along with its four subsidiaries, but
promised to increase public expenditure                                               private insurance is on the rise. The
on healthcare to 2-3% of GDP, up from      However, critics suggest that the          health insurance market in India has
a current low of 1%.35 The 2008-09         authorities are doing too little too       undergone liberalisation in recent years.
Union Budget highlighted a five year       late, and those who can afford it have     Further, the Insurance Regulatory
tax holiday for setting up hospitals       turned to the private sector instead. In   and Development Authority (IRDA)
anywhere in India, especially in tier-2    2008, fee-charging private companies       eliminated tariffs on general insurance
and tier-3 towns.36 The Government         accounted for 80% of India’s US$48.6       as of January 1, 2007, and sales have
further allocated US$51 million for a      billion expenditure on healthcare,         been going up accordingly. In 2007-08,
new health insurance scheme to provide     while central and local Government         almost US$1.2 billion worth of medical
a health cover of US$745 for every         accounted for only around 20%. Private     insurance policies were sold in India –
worker (including his/her family) in the   firms are now thought to provide about     up from US$160 million in 2001-02.42
unorganised sector falling below           80% of all outpatient care and as much     But widespread use of health insurance
poverty line (BPL),37 which was            as 55% of all in-patient care.41           could take many years, not least
increased to US$76 million in 2009-10                                                 because the insurance companies lack
budget.38 The recent budget (2010-11)      Some costs for care may be covered         the data they require to assess health
extended the coverage to another 20%       by the insurance industry in the future,   risks accurately and the only products
of the Indian population covered by the    although the current lack of general       they sell work on an indemnity basis
NREGA (National Rural employment           coverage remains a challenge. In 2007,     – that is, they reimburse the patient
Guarantee Act) programme, who have         only 11% of the population had any         after he or she has paid the healthcare
worked for more than 15 days during        form of health insurance coverage.         provider’s bill, making such policies
the preceding financial year.39 Budget     For the small percentage of Indians        less attractive.

8                                                                                                        PricewaterhouseCoopers
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
Domestic market overview

Background                                           2005 (see Intellectual Property Rights
                                                     on page 29), so market strategies are
India’s domestic pharmaceutical                      changing and some generics
industry was worth around US$11 billion              producers are looking further afield       The bottom line:
in March 2009 and PwC estimates it
will rise to approximately US$30 billion
                                                     for new markets.
                                                                                                2008 saw M&A
by 2020.43 The domestic market is very
fragmented; more than 10,000 firms
                                                     India’s manufacturing clout has made it
                                                     a massive threat to established generics
                                                                                                in the pharma
collectively control about 70% of the                firms – India now produces more
                                                     than 20% of the world’s generics.46
                                                                                                sector in India
market.44 Many of the local players
are generics producers specialising                  Moreover, around US$70 billion worth       more than
in anti-infectives. In 1972, the federal             of drugs are expected to go off patent
Government passed a law allowing local               in the US over the next three years,       double against
producers to manufacture drugs that
were still under patent, as long as they
                                                     and India is well-positioned to take
                                                     a substantial share of the resulting       the previous
used different processes.45 The lack
of a patent system that conformed to
                                                     new generics markets.47 Indian
                                                     companies today account for 35% of
                                                                                                year, despite
international standards helped spawn                 the Abbreviated New Drug Application
                                                     (ANDA) approvals granted by the US
                                                                                                the challenges
a domestic industry that excelled in
reverse engineering novel drugs and                  Food and Drug Administration (FDA)         posed by the
launching copycat versions at home and               until February 2009.48 India’s generic
in other emerging markets. Wholesale                 houses are now entering into strategic     global recession.
marketing of generic versions of drugs               alliances with global pharma companies
patented since 1995 and still under                  to strengthen their generic portfolio
patent has not been permitted since                  and jointly market these drugs globally,

Global pharma looks to India: Prospects for growth                                                                  9
GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
for example Pfizer has entered into            largest active pharmaceutical ingredient    was second among industry sectors in
alliances with Aurobindo and Claris to         (API) manufacturers globally.               terms of deal value at US$5.57 billion,
market their drugs in offshore markets.                                                    marginally below the Telecommunication
Similarly, GlaxoSmithKline (GSK) has           Cipla is another company with               sector which had total transactions worth
acquired exclusive rights for Dr. Reddy’s      revenues of over US$1.1 billion, 56%        US$5.78 billion in 2008. In the same year,
Laboratories’ (DRL) pipeline of over 100       of which come from outside India.51         India’s largest pharma company, Ranbaxy
generics for sale in emerging markets.         It is one of the largest manufacturers      Laboratories, was acquired by Japan’s
In addition to partnering with global          of antiretroviral drugs in the World.52     Daiichi Sankyo. This was a landmark
pharma, some Indian companies are              In 2007, an Avesta-Cipla joint              deal in the Indian pharma history, where
also setting up their own marketing            venture acquired Siegfried Biologics,       Ranbaxy’s promoters relinquished
subsidiaries abroad.                           a Switzerland based company, to             their entire stake to the acquirers. The
                                               manufacture US FDA and European             transaction paved the way for other
India’s pharmaceutical exports totalled        Medicines Agency (EMEA) compliant           promoters to consider whether they are
around US$8 billion in 2009 and PwC            biopharmaceuticals for the global           better served growing their businesses
estimates they will rise to approximately      markets.53 Meanwhile, Lupin is the          independently or by realigning with other
US$20 billion by 2020.49 Over the              biggest producer of Lisinopril, an API      partners who may be able to help them
past several years companies such              used in the treatment of hypertension.54    to take their businesses to the next level
as DRL, Cipla and Lupin have grown             Lupin’s acquisition of Multicare            of growth.
internationally in their own right as well.    Pharmaceuticals of Philippines has
Other Indian pharma companies like             propelled it into position as a top         In 2008, the world went through a credit
Glenmark Pharma, Orchid and Aurobindo          generics player in the Phillipines.55       crunch, followed by a prolonged global
also have wholly owned subsidiaries in         The deal represented Lupin’s sixth          economic downturn in the last quarter of
different parts of the globe.                  acquisition since 2008.                     2008 and throughout 2009, both of which
                                                                                           have also had a negative impact on the
DRL has grown from a small firm into           Consolidation underway, despite             Indian pharma industry. The impact of
an international business with annual                                                      the downturn, coupled with volatility in
                                               challenges
sales of more than US$1.4 billion,                                                         the Rupee, depleted the financial
about 84% of them outside India.50 The                                                     position of several Indian pharma
company’s acquisition of Germany’s             The Indian pharma industry as a whole is    companies, especially those which had
Betapharm positioned it as one of the          moving on a consolidation path. The year    substantial foreign borrowings on their
largest generics companies in the world;       2008 saw 57 mergers and acquisitions,56     balance sheets.
it is currently one of the largest suppliers   a 128% increase over the previous year.57
of drugs to the US. It is also one of the      Total investment in pharmaceutical,         Sustaining acquisition heavy structures
                                               healthcare and biotechnology sectors        became increasingly difficult in 2008.

10                                                                                                            PricewaterhouseCoopers
Some Indian companies which made                     Further, in 2009 another landmark deal
significant acquisitions were now finding            was announced, with sanofi-aventis
it difficult to integrate their foreign              acquiring controlling stakes in the
acquisitions with the Indian operations              leading Indian vaccine manufacturer          The bottom line:
due to severe pricing pressures.
Legislative reforms imposed in
                                                     Shanta Biotech.
                                                                                                  2008 saw M&A
acquisitions’ home markets also had an
impact. Further, some companies
                                                     Elsewhere we discuss some of the
                                                     strategies that Indian companies
                                                                                                  in the pharma
booked losses on foreign currency
convertible bonds (FCCBs), negatively
                                                     employed to stay afloat during the crisis,
                                                     including greater focus on leveraging
                                                                                                  sector in India
impacting overall profitability.                     their strengths in newer structures like     more than
                                                     Contract Research & Manufacturing
Nonetheless, investor confidence has                 Services (CRAMS), biotech & clinical         double against
remained fairly stable and deals continue
despite challenges. The average deal size
                                                     trials, and increasing penetration in
                                                     rural markets.                               the previous
in 2008 was around US$15.34 million,
20% higher than US$12.82 million in
                                                                                                  year, despite
                                                     Contract manufacturing
2007. The pharma sector had 57 deals,
of which 17 deals were domestic. There
                                                                                                  the challenges
                                                     Contract manufacturing is a strong
were a total of 22 pharma private equity             segment of the domestic market. Indian       posed by the
(PE) deals worth US$337.41 million.
Private equity players and investment
                                                     firms have several advantages over their
                                                     Western rivals. The expertise gained in
                                                                                                  global recession.
funds played an active role in the deal              manufacturing generics through reverse-
market. Some of the investments were                 engineering has helped some companies
those of Citi Venture and Everest Capital            streamline the process for getting
of about US$23.6 million in Nectar                   manufacturing up and running. Costs are
Lifesciences.58 Similarly, Kotak Private             very competitive; indeed, they are only
Equity Group, an arm of Kotak Mahindra               two-fifths of those involved in setting
Bank, invested about US$10 million                   up and running a new manufacturing
in Intas Biopharmaceuticals.59 Gujarat               facility in the West.61 They can operate
Biotech Venture Fund invested US$12.7                on significantly lower margins, given
million in Century Pharmaceuticals and               their low development and labour costs.
SME Growth Fund invested US$7 million                Currently their key area of strength in
in Centaur Group.60

Global pharma looks to India: Prospects for growth                                                                    11
outsourcing is the manufacture of APIs.                   expected as patents expire over the next
                           Some Indian pharma companies could                        five years.65
                           probably benefit significantly by moving
     The bottom line:      towards specialty APIs in the future.                     Some Indian manufacturers are also now

     Indian pharma         The Indian contract manufacturing
                                                                                     incorporating Lean Manufacturing and
                                                                                     Six Sigma principles to help them boost
     companies have        segment was worth around US$605
                           million in 2008 and is expected to reach
                                                                                     operational efficiency and further improve
                                                                                     quality, while facilitating compliance.66
     solid expertise       around US$916 million in 2010.62 The
                           US FDA has already approved over                          Vaccines
     in contract           100 manufacturing sites – more than
                           in any country except the US (see
     manufacturing         Figure 4).63 Among six offices that the
                                                                                     Vaccines are another prominent area
                                                                                     of growth. India is one of the largest
     and recent            US FDA has overseas, two are located
                           in India, in Delhi and Mumbai.64 All
                                                                                     vaccine producers in the world, with
                                                                                     many new vaccines set to be launched
     scrutiny around       domestic producers are also obliged to
                           comply with India’s Good Manufacturing
                                                                                     in the next five years. The vaccines
                                                                                     segment was around US$780 million in
     quality issues is     Practices, under Schedule M of the
                                                                                     March 2008, growing at a compounded
                           Drugs and Cosmetics Act, 1940.
     driving significant                                                             annual growth rate (CAGR) of 15%.67
                                                                                     India currently exports vaccines to
                           Indian manufacturers are currently facing
     improvement in        some scrutiny around quality issues. In
                                                                                     about 150 countries. It also meets
                                                                                     around 40-70% of the World Health
     manufacturing         2009, the US FDA took action against a
                           few Indian companies after conducting a
                                                                                     Organisation (WHO) demand for the
                                                                                     DPT (diphtheria, pertussis or whooping
     standards.            series of inspections and issuing warning
                           letters against these drug makers.
                                                                                     cough, and tetanus) and the BCG
                                                                                     (bacille calmette-guérin) vaccine against
                                                                                     tuberculosis, and almost 90% of its
                           While such sanctions clearly pose
                                                                                     demand for the measles vaccine.68
                           significant challenges, some analysts
                                                                                     The Serum Institute of India, founded
                           see an opportunity as well. Indian
                                                                                     in 1966, is a leading player which
                           companies are aggressively improving
                                                                                     produces and supplies low-cost, life-
                           their manufacturing standards in
                                                                                     saving vaccines for children and adults.
                           response, and are therefore likely to
                                                                                     The Institute is also the world’s largest
                           be better positioned to take advantage
                                                                                     producer of measles and DPT vaccines.
                           of the upsurge in generics production

                           Figure 4: India has more US FDA-approved manufacturing plants than any country
                           except the US

                           Source: Crisil Research, Bulk drug exports to scale up in the regulated markets (December 2008) for India;
                           ICICI Securities, Indian Pharma Sector: Sector Update (December 2008) for Italy, China, Spain, Taiwan, Israel
                           and Hungary.

12                                                                                                             PricewaterhouseCoopers
It has been commissioned by the WHO                  prescription drugs (or OTC drugs). OTC
to develop vaccines against the latest               proprietary drugs are also regulated by
strain of H1N1. An estimated two out                 the Drugs and Cosmetics Act and the
of every three immunised children in                 Drugs and Cosmetics Rules. However,        The bottom line:
the world have received a vaccine
manufactured by the Serum Institute.69
                                                     as they do not require a drug license
                                                     they can be sold by non-chemists, so       OTC sales
As the risk of global pandemics
grows, so do potential markets for
                                                     sales channels are more extensive. As
                                                     discussed, much of India’s population
                                                                                                are on the
new vaccines.                                        relies on self-medication, and the         increase, offering
                                                     purchasing power of the middle class
OTC market holds significant                         is growing. These trends should drive      opportunities
                                                     growth in cough and cold formulations,
potential
                                                     gastrointestinals, analgesics, and         to achieve high
Globally, over-the-counter (OTC) drug
                                                     dermatologicals. Only a few OTC
                                                     active ingredients, e.g. acetylsalicylic   volumes and
sales have been increasing in recent
years. This trend is driven in part by
                                                     acid and ephedrine and its salts, fall
                                                     under the current DPCO price control.
                                                                                                enhance pharma
aggressive efforts of global pharma
companies to leverage the brand equity
                                                     Counterfeits of popular OTC drugs are      brands in India.
                                                     however a major issue.
that major products have attained
during the patent period. Other major                Indian consumers are also placing more
winners in the OTC category include                  emphasis on prevention and wellness,
products where patients continue to buy              which should contribute to continued
particular remedies following an initial             increases in sales of OTC vitamins
doctor’s prescription.                               and minerals. The market is already
                                                     growing strongly. Profitable OTC drugs
OTC drugs may have even stronger                     for some of India’s largest pharma
potential in India. An increasing number             companies include artificial sweeteners,
of Indians are already dipping into their            emergency contraceptive pills and
own pockets to buy OTC drugs. The                    nutritional supplements.
OTC market was worth about US$1.8
billion in 2009 and is expected to grow              The popularity of Ayurvedic therapies
at 18% a year to reach about US$3                    should also contribute to the sales of
billion in 2012.70 The Government is                 related OTC formulations. Some of
now considering plans to expand the                  the leading OTC brands in India are
list of drugs which can be sold outside              registered as ‘Ayurvedic Medicines’
pharmacies, since many common                        because of their plant-based natural
household remedies are more difficult                active ingredients. There are no price
to obtain in India than in other                     controls on ‘Ayurvedic Medicines’.
developing countries. An expansion of
the list would substantially increase                Some global pharma companies are
the potential market opportunity in                  already launching OTC products in India
this segment.                                        or buying OTC products. Novartis India
                                                     launched Calcium Sandoz as an OTC
Although the term ‘OTC’ has no legal                 supplement in 2000 and has now come
recognition, all the drugs that are not              out with Otrivin nasal drops in a spray
included in the list of ‘prescription                form.71 Pfizer has launched Listerine,
only drugs’ are considered as non-                   Benadryl, Caladryl and Benylin in India,

Global pharma looks to India: Prospects for growth                                                                   13
which were later sold to Johnson and        more lucrative and will continue to
                         Johnson.72 In the future, India may         represent a focus for the industry,
                         also serve as a manufacturing location      the untapped potential of Indian rural
     The bottom line:    for OTC products destined for other         markets is now seen as the next volume
     While urban         markets. In August 2009, US-based
                         OTC manufacturer Perrigo announced
                                                                     driver. Rising income levels leading
                                                                     to more affordability, improving health
     markets will        the purchase of 85% of Indian contract
                         manufacturer Vedants. The company
                                                                     infrastructure, and increasing incidence
                                                                     of lifestyle diseases along with the use
     remain the focus    plans to shift some of its current          of health insurance are fuelling the
                         production from facilities in Israel and    growth in rural areas.
     in the near-term,   Germany to India by 2011.
                                                                     Indian companies are devising a
     getting treatment   India’s regulatory framework permits        number of strategies to increase rural
     out to the 70%      advertising for OTC products, and
                         consumers can buy them without a
                                                                     penetration. For instance, Lupin has
                                                                     a strong brand franchise in the anti-
     of the population   doctor’s prescription. However, a wider
                         distribution network will also boost the
                                                                     infective, pain management, and
                                                                     gastrointestinal segments – these three
     residing outside    growth of such products. Currently          areas account for 40% of domestic
                         about half of OTC sales come from           formulations sales. The company
     of these areas      chemists, while grocery stores and          has a dedicated rural field force of
                         general stores account for over a third     more than 300 people and is rapidly
     represents the      of the sales.73 Pharma companies are        expanding it. Piramal Healthcare has
     next volume         also targeting post offices to sell OTC
                         drugs in rural India. This move could
                                                                     also announced a new initiative to target
                                                                     the mass market, focused on general
     driver.             substantially increase the access of
                         OTC drugs, especially in areas where
                                                                     practitioners, to cater to rural markets.
                                                                     Piramal plans to employ a field-force of
                         there are no pharmacies.                    approximately 800 people.

                         Reaching the untapped rural                 Companies looking to access rural
                                                                     markets face many hurdles, including
                         market
                                                                     lack of communication, language
                                                                     barriers, high penetration of spurious
                         Although urbanisation continues,            drugs, lack of adequate infrastructure,
                         around 70% of India’s population still      such as marketing and distribution
                         resides in rural areas. As already noted,   channels for niche therapeutic
                         the population residing in villages has     segments in particular, poor storage
                         significantly reduced access to quality     facilities, and insufficient sales
                         treatment and medicines. Many pharma        personnel deployment. Global pharma
                         companies are thinking beyond larger        companies eyeing rural markets will
                         cities and targeting rural sectors.         need to forge alliances and partnerships
                         While urban markets are currently           to overcome these obstacles.

14                                                                                      PricewaterhouseCoopers
Growing Research
& Development

Overview                                             However India offers limited capabilities   has formed an alliance with Eli Lilly. By
                                                     in preclinical and complex Biology          selling developing and licensing rights
PwC estimates that India’s 10 largest                research. Preclinical capabilities in       for the US, Japan and Western Europe,
drug firms spent US$480 million on R&D               India are limited to clinical trials in     but retaining rights within emerging
in 2008. The bulk of this investment                 rodents and dogs, with almost none          markets, some Indian pharmaceutical
went towards developing new                          for primates. The capabilities mostly       companies are able to gain immediate
formulations, however R&D in the Indian              reside with Indian pharmaceutical           revenues, while retaining future access
pharmaceuticals industry is changing.                companies, developed through in-            to India’s growing domestic market.
The new patent regime means                          house R&D programmes – Government
companies need to be more innovative,                involvement in this area is minimal.        A number of Indian pharma companies
rather than relying solely on reverse-               Some Government institutes do offer         have spun off their R&D divisions
engineering existing formulations. The               basic biology services, but the level of    into separate units in order to scale
reliance on anti-infectives is also likely           innovation generated by such facilities     up resources and to attract focused
to lessen. As already noted, as the                  is fairly modest. Multinationals will       investments. DRL started the trend
illnesses of affluence and age increase,             need to partly/completely own or            in R&D spin-offs in 2005. Piramal Life
the demand for many other types of                   share technology with available Indian      Sciences, Piramal Healthcare’s R&D
pharmaceuticals will rise, and Indian                Contract Research Organisations             division, was recently demerged from
pharma companies need to begin                       (CROs) in order to achieve innovative       the latter. Sun Pharma Advanced
transforming their portfolios accordingly.           results. The Indian contract research       Research and Ranbaxy Life Science
                                                     segment was estimated at around             Research have also been demerged
India has widely acknowledged                        US$485 million in 2008 and is expected      from their parent companies Sun
chemistry skills. Several leading                    to reach around US$1 billion in 2010.74     Pharma and Ranbaxy respectively.
domestic producers have begun to                                                                 Some spin offs have faced difficulties
conduct original research into new                   Despite Indian pharma companies’            stemming from uncertain resources
chemical entities and novel drug                     growing expertise in later stages of        and declining PE interest in research.
delivery systems. Amongst others,                    the R&D process, many of the drug           Several companies are now seeking a
Ranbaxy has commenced phase-III                      candidates initially formulated in India    collaborative approach towards drug
clinical trials for its new anti-malarial            are likely to be further developed by       discovery, in order to mitigate the
combination drug. Other companies are                Western drug makers, because few            risk associated with failure of a
looking to shift to clinical areas with a            Indian companies can afford the high        drug molecule.
growth opportunity, such as diabetes                 costs and failure rates associated
(see sidebar on India’s insulin                      with pushing a drug right through           India’s R&D base is still small, but it has
dependence on page 6). Piramal Life                  the pipeline. Several Indian firms          several advantages that should serve
Sciences has initiated phase-I trials of             have already entered into research          it well in the future. Some 70 million
a new experimental drug for diabetes-                partnerships with multinationals; DRL       people speak English75 – more than in
metabolic syndrome in Canada. DRL is                 and Torrent have joined forces with         any other country except the US – and
conducting phase–III trials for its Type II          Novartis, for example, while Ranbaxy        it has an excellent tertiary education
diabetes drug. Other areas of innovation             has formed alliances with GSK and           system; every year, it turns out about
are also being explored; Biocon has 7                Schwarz Pharmaceuticals. Glenmark           115,000 scientists with Master’s
and Wockhardt has 10 new chemical                    has formed an alliance with Napo            degrees, and 12,000 with PhDs.76 Many
entities in their R&D pipelines.                     Pharmaceuticals and Piramal Healthcare      of these scientists have traditionally

Global pharma looks to India: Prospects for growth                                                                                        15
gone abroad, but companies like              successes in the global software and         few India pharma companies for testing
Ranbaxy are now actively trying to           IT services market. In this respect,         new drugs without getting patients’
lure them back with the prospect of          India offers one of the very few             consent or for violating protocol.
opportunities for original research.         examples of an emerging economy              However, during the past few years
Salaries are also very much lower than       that has managed to attract Foreign          a number of big contract research
they are in North America or Western         Direct Investment (FDI) in the area          organisations have set up businesses
Europe. Wage costs within the Indian         of high-tech software development,           in India, including Quintiles, Omnicare,
pharmaceutical industry are about one-       while successfully inserting itself as       PharmaNet and Pharm-Olam. Most
third of those in developed countries.77     a competitive presence in the very           of the multinationals, Novo Nordisk,
                                             heart of Silicon Valley. Biotech, another    sanofi-aventis, Novartis and GSK
To achieve its potential and convert         knowledge-based sector, is now               among them, have likewise started
these opportunities into global              experiencing a similar boom. Drawing         running clinical trials here – and some,
success stories, the Indian pharma           on the success of IT enterprise parks,       such as Pfizer and Eli Lilly, have been
industry requires the support and            the Government also inaugurated the          conducting tests locally for a while.
collaboration of all stakeholders,           first phase of its first biotech-IT park
including the Government, academia           – Bangalore Helix in June 2007. The          In January 2005, the federal
and financial investors. Collaboration       project is part of efforts to position       Government amended Schedule Y
will be essential; but to date only a few    India as a global hub for bioinformatics     of the Drugs and Cosmetics Act to
Indian pharmaceutical companies have         and biotech.                                 make the rules on clinical trials more
partnered with academic institutes                                                        consistent with international practice.79
to carry out basic research.78 Such          Clinical Trials                              The Health Ministry is planning to add
cooperations can help accelerate                                                          a new Schedule Y-1 to the Drugs and
the research process in some areas.                                                       Cosmetic Rules 1945 to further improve
                                             India’s developing research skills are
Partnering with academia can also                                                         the situation.80 Early stage testing of
                                             matched by its growing involvement in
help develop the sophisticated skills                                                     molecules discovered outside India is
                                             clinical testing. The country historically
needed for high-level research.                                                           still restricted, but multinationals can
                                             lacked the expertise to perform clinical
Pharma players who can leverage the                                                       now conduct trials where, previously,
                                             trials because most companies only
research capability of academic and                                                       they could only conduct trials in any
                                             tested different processes for producing
Government institutes, through mutually                                                   particular phase after completing the
                                             copycat versions of Western products
beneficial collaborative models, will gain                                                same phase of testing elsewhere.81
                                             and the rules were quite lenient. Several
significant competitive advantage.
                                             drug makers have also been caught
                                                                                          At present, though, the industry still
                                             behaving unethically or even illegally.
Amongst emerging economies, India                                                         lacks a strong regulatory framework.
                                             The Supreme Court and Drug Controller
has the unique advantage of its recent                                                    Good Laboratory Practices (GLP)
                                             General of India (DCGI) have criticised a
                                                                                          certification remains a voluntary

16                                                                                                           PricewaterhouseCoopers
process, although most Indian pharma                 to boost the Indian clinical trials market.
companies dealing with international                 Expectations are already high; some
clients or exporting to foreign regulated            observers expect the market could
markets look to attain such certification.           reach US$2 billion annually by 2012, up                The bottom line:
The National Good Laboratory Practice
Compliance Monitoring Authority was
                                                     from just US$300 million in 2008.86
                                                     The strong anticipated growth reflects                 Insufficient
established under the Department
of Science and Technology in April
                                                     some of the attractions India holds
                                                     for this market. According to a study
                                                                                                            regulatory
2002. While this was undoubtedly a
step in the right direction, there are
                                                     by Rabo India Finance, a subsidiary
                                                     of the Netherlands based Rabo Bank,
                                                                                                            oversight is
still only about 33 GLP inspectors82                 the huge patient population offers vast                currently a barrier,
and about 12 GLP certified labs in the               genetic diversity, making the country
country.83 In addition, the ruling on                “an ideal site for clinical trials.” Further,          however India’s
whether a trial design violates ethical
principles is left to individual local ethics
                                                     many people are “treatment-naïve” and
                                                     relatively easy to access. The United                  many advantages
committees. There is no central register
of Ethical Committee decisions. Better
                                                     Nations reports that around 30% of the
                                                     population lives in urban areas;87 and
                                                                                                            - overall costs
infrastructure for regulation, ethics
review and monitoring is required.84
                                                     over 67 million people live in India’s six
                                                     biggest cities alone (see Table 2).
                                                                                                            are only 50%
                                                                                                            of comparable
Registration of new clinical trials is now
mandatory on the Indian council of
                                                     Table 2: Urban India                                   US-based
                                                                                    Population
medical research's (ICMR) web based
clinical trials registry. The government                                           (Data in ‘000)           programmes
plans to make inspection of clinical trial
sites an ongoing activity by increasing
                                                      City                         2005           2010
                                                                                                            - should spur
                                                      Bangalore                    6,465         7,229
the number of inspectors, training them
for site inspection and developing
                                                      Kolkata (Calcutta)         14,282        15,577       dramatic growth
a checklist for audits. Further, the                  Chennai (Madras)             6,918         7,559      in clinical testing
government is also working on a                       Delhi                      15,053        17,015
proposal to register CRO’s in India.85                Hyderabad                    6,117         6,761      in the next 2-5
This type of more rigorous regulatory
                                                      Mumbai (Bombay)            18,202        20,072       years.
                                                     Source: United Nations, World Urbanization Prospects
oversight, together with increasing                  (2007)
interest from foreign firms, should help

Global pharma looks to India: Prospects for growth                                                                                 17
The ratio of doctors to patients – at         service tax.                               Table 3: India’s top 10 biotech firms
60 per 100,000 people – is also
                                                                                                                          Revenues
relatively high, although the quality         Biotech and biosimilars on track                                           (US$ million)
of medical training is not as good as
                                              for growth                                  Company                          2008–09
it is in some other emerging nations.
                                                                                          Serum Institute of India              242.12
The country’s 289 medical colleges
are over subscribed and the emphasis          India is home to a small biotechnology      Biocon                                198.29
is on quantity rather than quality.88         industry, based largely in Karnataka,       Panacea Biotec                        129.79
These problems are compounded by              with other clusters of activity in West
                                                                                          Rasi Seeds                            81.63
lack of experience. India has only 500        Bengal, Maharashtra, Andhra Pradesh,
                                              Hyderabad, Kerala and Ahmedabad. In         Nuziveedu Seeds                        79.11
to 1,000 investigators in the country
                                              2008-09, the sector generated sales of      Novo Nordisk                          71.72
as compared to 50,000 in the United
States, suggesting that most companies        US$2.64 billion93 representing a CAGR       Siro Clinpharm                         60.86
would need to make a major investment         of 26%, but both the federal and state      Novozymes South Asia                   54.34
in training during study start-ups.89         Governments have been actively
                                                                                          Shantha Biotech                        53.68
                                              promoting biotech research initiatives
                                              and are targeting revenues of US$5          Jubilant                               52.60
Some Indian pharma companies are
already developing a reputation for           billion by 2010 -11.94 The leading          Source: Biospectrum – ABLE, 2009 95

a nimble, rapid approach to clinical          domestic players include Serum
testing that looks to streamline the          Institute of India, which focuses on       research and development. The
clinical trial process and bring new          immuno-biologicals and vaccines;           DBT has also drafted the National
drugs to market faster. For example,          Biocon, which concentrates on              Biotechnology Regulatory Act in order
Glenmark now routinely looks to               recombinant DNA technologies,              to set up the National Biotechnology
incorporate “proof of mechanism” into         bioprocesses, fermentation-based           Regulatory Authority (NBRA). The NBRA
every phase–I study.90 Most pharma            small molecules and enzymes; and           is expected to be an autonomous body
companies save this step for phase–II.        Panacea Biotec, which specialises in       formed specifically to regulate the
                                              novel drug delivery techniques and         biotechnology segment and reduce
But the most obvious benefit of               pharmacogenomics (see Table 3).            regulatory overlap.96
conducting clinical trials in India is the
potential for cost savings. Clinical trials   Several initiatives have been launched     Further funding support from the
account for over 40% of the costs of          by the Government to give impetus          Government will be critical in ensuring
developing a new drug.91 In terms of          to the thriving biotech industry. The      continued growth in the biotech
cost efficiency, India offers substantial     Biotechnology Industry Partnership         industry. The Government can play a
advantages – the cost of conducting           Programme (BIPP) has been launched         vital role in funding incubation and early
a trial here is lower by 50% than in the      by the Department of Biotechnology         stage ventures.
United States.92 The federal Government       (DBT) to support high-end
is alive to the strength of this argument.    biotechnology research programmes          A growing biotech industry should
Drugs and materials imported for clinical     capable of generating globally             help India to gain a share of the global
trials are exempt from customs duties.        recognised intellectual property. It       opportunity currently emerging around
Clinical trials also remain exempt from       specifically focuses on transformational   biosimilars. The biosimilars market is

18                                                                                                              PricewaterhouseCoopers
likely to grow by around US$2 billion                glaritus. DRL has already launched
by 2014, to reach a total of US$19.4                 filgrastim and rituximab in emerging
billion, following key patent expiration             markets and has a pipeline of 10
for epoetin alpha, filgrastim, interferon            biogenerics in various stages.104           The bottom line:
beta 1a, interferon alpha, human growth
hormone (hGH), and insulin-glargine.97               The challenge for the development of        India’s developing
This represents a CARG of 89.1% from
2009 to 2014. All told, around US$25
                                                     biosimilars arises from the fact that
                                                     biologics are more complex than small
                                                                                                 biotech industry
billion worth of biologics are expected
to go off patent by 2016.98 These
                                                     molecules and chemically synthesised
                                                     drugs; therefore their replica are – in
                                                                                                 and cost
patent expirations open the route for                contrast to ‘traditional’ small-molecule    advantages
biosimilars, the equivalent of generics              generics – ‘similar’ but not identical to
for biologics.                                       the original drug. Consequently, the        should drive
Indian biotech companies are slowly
                                                     registration of biosimilars requires more
                                                     data than is required for generics, and     significant
building capabilities in development
and manufacturing of biosimilars. Intas
                                                     manufacturers have to demonstrate
                                                     efficacy and safety in pre-clinical
                                                                                                 growth in local
Biopharmaceuticals is now developing
a biosimilar of a protein used to treat
                                                     and clinical studies. This makes the
                                                     registration of biosimilars a costly and
                                                                                                 development of
the side effect of cancer therapy,                   time-consuming process, and lessens         biosimilars for the
for example.99 Biocon has initiated                  the chances of a successful launch.
registration of its human recombinant                Developing biosimilars is costlier than     global market.
insulin with the European regulatory                 developing chemical based generics,
agency, EMEA and intends to launch it                requires a greater capital investment
by 2011.100 Reliance Life Sciences has               and operating costs of manufacturing
launched three biosimilars—ReliPoietin               are higher. These factors mean that
(Erythropoietin), ReliGrast (GCSF),                  developing biosimilars represents a
and ReliFeron (Interferon Alpha 2b) in               higher risk area of R&D.
the domestic market in 2008 and is
currently conducting clinical studies                Pharma companies need to balance
for erythropoetin and granulocyte                    the risks and rewards when considering
colony stimulating factor (GCSF) in                  whether to enter the biosimilars
Europe.101 Wockhardt has launched                    market. The decision to enter the
its recombinant erythropoietin, Wepox                market should only be made based on
and insulin, Wosulin in the domestic                 a clearly defined long-term biosimilar
market102 and is conducting clinical                 strategy, including development and
trials in the US for Wosulin.103 It has built        manufacturing capabilities, marketing,
capacities in erythropoetin, hepatitis               pricing and regulatory expertise. India’s
vaccine, recombinant insulin and insulin             cost advantages in many of these areas

Global pharma looks to India: Prospects for growth                                                                     19
Other growth areas

                          could help it gain a stronghold globally        companies are integrating bioinformatics
                          in this growing market.                         services into a complete portfolio of
                          Bioinformatics in India                         research capabilities.
     The bottom line:                                                     India is now actively targeting the

     India’s existing     The modern process for drug discovery
                          and testing now generates very large
                                                                          bioinformatics market, with the
                                                                          construction of its first biotech-IT park
     knowledge            quantities of data through computer             in Bangalore, at a total cost of about
                                                                          US$87 million.106 The first phase of the
                          modeling and simulations, genetic
     capital in IT        sequencing, and other data-intensive            park has been completed and a tender for
                          processes. Further, as we noted in Pharma       the development for phase–II is expected
     provides a natural   2020: The vision, pharma companies are          soon from the local state Government.
                                                                          Several Indian companies, including the
     base for the         under increasing pressure to document
                          the efficacy of their products; tracking        Bangalore based Strand Genomics and

     development of       patient outcomes represents a further
                          source of large quantities of data. In order
                                                                          Ocimum Biosolutions, have already made
                                                                          forays into the bioinformatics industry.
     bioinformatics       to facilitate the storage, management,          Recently, Ocimum was granted a patent
                                                                          for its method and system to manage
                          retrieval and analysis of this large pool
     research and         of data, a new subsector of the IT sector       and query gene expression data based
                          has emerged – bioinformatics. Tools have        on quality.107
     operations.          been developed which can help lower
                          cost, improve efficiency, and streamline        The Institute of Bioinformatics has also
                          the process of documenting a drug’s             developed a comprehensive database
                          efficacy throughout development until           of all known human proteins and their
                          launch and beyond.                              characteristics, and the Centre for
                                                                          DNA Fingerprinting and Diagnostics in
                          India’s strength in the IT sector and its       Hyderabad along with Sun Microsystems
                          growing pharmaceutical sector are driving       has operationalised a Centre of
                          growth of this emerging area. Revenues          Excellence focusing primarily on medical
                          for the Indian bioinformatics industry          bioinformatics.108 Some global pharma
                          were around US$48 million as of March           companies are already drawing on the
                          2009. It is an export driven segment with       emerging resources. Tata Consultancy
                          earnings of around US$37 million from           Services has signed a deal with GSK
                          overseas. Domestic revenues contribute          to set up a support centre in Mumbai
                          around US$11 million.105 Some companies         for the company’s global drug
                          provide only specialised bioinformatics         development programme. Biocon has
                          services; in other cases, local life sciences   taken its tie-up with Bistol-Myers Squibb

20                                                                                           PricewaterhouseCoopers
further by setting up a dedicated                    the National Centre for Cell Sciences in
research facility, through its subsidiary            Pune and the National Brain Research
Syngene International.                               Centre near Delhi, are investigating the

Stem cell research
                                                     use of stem cells to regenerate nerve,        The bottom line:
                                                     heart and adult muscle cells, and repair
                                                     damaged bone tissue. The L.V. Prasad          India has made
Stem cells are seen by many as a
powerful tool for improving the research
                                                     Eye Institute has also treated blindness
                                                     using stem cells derived from the eye.
                                                                                                   considerable
and development process in the pharma
industry. Stem cells are being used to               While the Indian Government is strongly
                                                                                                   progress in stem
develop some types of direct therapeutic
applications; they are also becoming
                                                     promoting biotech generally, concrete         cell research
                                                     Government funding for stem cell
increasingly important as a tool to test             research in India still lags far behind       and is well-
potential drug toxicity.                             that provided in other countries such
                                                     as the US. There are also no laws             positioned to
India has already made considerable
progress in this area. India’s entry into
                                                     per se governing stem cell research,
                                                     although there are specific guidelines
                                                                                                   leverage growing
stem cell research has progressed
from a few institutions to currently
                                                     which classify stem cell use into three
                                                     categories: permissive, restricted,
                                                                                                   capabilities in this
over 40 institutions and hospitals
involved in stem cell research.109 In
                                                     and prohibited. The Indian Council of         area.
                                                     Medical Research is currently drawing
2008, Stempeutics, a leading stem                    up plans for a national stem cell
cell company, launched its second                    initiative to promote clinical applications
stem cell laboratory on the Manipal                  of stem cell research in ophthalmology,
University campus for advanced stem                  cardiology and spinal cord repair,
cell research in human embryonic stem                and build links between scientists
cells.110 Further activities followed in             and doctors. India’s ex-president Dr.
2009 – one example is a joint venture                A.P.J. Abdul Kalam had also identified
formed by StemCyte in India with Apollo              stem cell research as one of the
Hospitals and Cadila Pharmaceuticals                 areas on which the country should
to provide stem cell therapies.111 Several           focus its efforts.
major research institutes, such as the
National Centre for Biological Sciences              Given India’s growing presence in
in Bangalore, the Centre for Cellular                biotech, drug discovery, and clinical
and Molecular Biology in Hyderabad,                  testing, the country may be well

Global pharma looks to India: Prospects for growth                                                                        21
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