Innovation 'key' to India's pharma future

Innovation 'key' to India's pharma future

The key to the future of India's pharmaceutical industry will depend on its ability to scale back its over-reliance on low-cost manufacturing and to foster innovation, with drug discovery and biosimilars presenting particular opportunities.

This was the message from Satish Reddy, managing director and chief operating officer of Dr Reddy's, speaking at the recent inaugural Interphex trade show, held in Mumbai, where Outsourcing-Pharma.com was in attendance.

"Innovation has only started to happen in India over the last few years but this is what will drive the real market value for the country," he said in his keynote presentation.

India currently dominates the world's active pharmaceutical ingredient (API) manufacturing arena - presently almost one in two APIs are now sourced in India and the market continues to grow.

However, Reddy warned that Indian firms involved in this industry must not develop a cavalier attitude.

His concern is that the country's domination in this area is only sustainable if such companies begin to focus on innovation and transform themselves into offering more value-added drug discovery services alongside more traditional ones.

The majority of Indian API manufacturers base their business models solely on offering a low cost base, however, according to Reddy, costs for these firms are rising 30 per cent a year - logistics costs are already high, and as wages increase, the rupee appreciates and time goes by, the country's cost competitiveness will become severely dented.

Looking forward, Reddy believes biosimilars hold a "tremendous" opportunity for India to capitalise on, following in its tradition of being a generics hub. The global biologics market is tipped to grow from its current size of $60bn (€43bn) to $100bn by 2010.

"Dr Reddy's has recently developed the world's first monoclonal antibody biosimilar," he said.

Another major area that Reddy believes API manufacturers and others can realise significant value in drug discovery activities, including both research and clinical services.

"Firms need to start now in finding a way to strike a balance between making high investments in innovation to help drive future growth, while still generating short term revenue growths, in order to partake the high risk drug development market," said Reddy.

"Even though India hasn't been doing this for long, drug discovery outsourcing offers tremendous potential for growth in the Indian market, as pharma companies continue to search for ways to save money and time," he said.

Indian firms have slowly been moving up the learning curve through their dealings with multinational companies - by entering partnership and co-development arrangements and collaborative discovery deals, as well as providing some services in this field and this has put them in the position to begin to dabble more and more in this new business area.

"Drug discovery in India is on the rise - current activities currently only scratch the surface of innovation-led drug discovery potential in India," he said.

"Indian companies are beginning to build front-end capabilities to leverage their low-cost advantages and position themselves as fully vertically-integrated players."

The country still has a mountain to climb however. There is still a lack of expertise in drug discovery, with no Indian firm yet having gone through the entire drug development process from discovery to commercialisation.

In addition, there are still a lack of world class research institutes and government funding; a dearth of trained domain-specific management talent; and a shortage of leadership in science, including thought leaders and those involved in cutting-edge activities - those that are generally prefer to work in Europe or the US, he said.

Furthermore, the patent reinforcement legal system is still nascent. Only last month this very issue caused Novartis to pull millions of planned investment dollars out of India in reaction to intellectual property (IP) fears after it lost an ongoing patent dispute with the government.

Meanwhile, Reddy pointed out that most API manufacturers in India currently do no have enough critical mass - only two generate revenues over $2bn a year - and said that consolidation will also be required for future sustainability