R & D to decide pharma cos' future

By Ramnath Subbu

MUMBAI, SEPT. 8. With an eye on the 2005 deadline for the post- patents regime, the global pharma majors are gearing up in right earnest.

The Indian counterparts are also undergoing a similar consolidation to the one that commenced globally a couple of years ago and the more dynamic companies are moving swiftly to build up a critical mass in order to face competition.

Also, the new pharma policy is to be announced in October and it is expected that far reaching changes in the industry would be brought about.

McKinsey & Company, in its report `Vision 2010' has said that the Indian pharma industry could grow to $75 billion by 2010 by adding value and exporting bulk and generics to the regulated markets where $80 billion worth of bulk drugs are to go off patent in the next ten years. The key factors for survival in this industry are exports and research and development (R&D). There is also a need to enter the generics market where there is a cost advantage and then plough it back to R&D. All successful Indian pharmaceutical firms have forayed into the export market with some degree of success.

Bigger players have gone in aggressively for R&D activity and are spending on an average 4-5 per cent of their turnover. R&D cost is much lower in India, but only a fraction of compounds synthesised is launched commercially. In effect, it is extremely difficult for companies to `discover' new molecules. An option is for companies to get into research exclusively and enter into contracts with larger players.

In fact, a new phenomenon has been the tie-ups taking place between players. Two leaders like Ranbaxy and Cipla have announced an alliance to co-market Ranbaxy's once-a-day formulation of Ciprofloxacin, which has recently received DCGI approval for marketing in India. This unique dosage form of the anti-bacterial is from Ranbaxy's Novel Drug Delivery Systems (NDDS) research pipeline. The product would be marketed under their brand names Cifran OD (Ranbaxy) and Ciplox OD (Cipla). Ranbaxy would manufacture the products for both companies and has also tied up with Glaxo as part of its co-marketing arrangement for ciprofloxacin OD.

Last week, a division bench of the Bombay High Court held that seven bulk drugs - ciprofloxacin, norfloxacin, cloxacillin, doxycycline (all anti-infectives), salbutamol, theophylline (both asthma drugs), and glipzide (diabetes drug) do not fall under the purview of the DPCO. At present, 74 drugs come under the DPCO and with this, the number will come down to 67. This is expected to benefit among others Ranbaxy and Cipla.

Cipla could benefit as it has revenues of around Rs. 60 crores from the ciprofloxacin market (brand Ciplox), Rs. 50 crores from norfloxacin and Rs. 125 crores in the asthma segment where its brands Asthalin and Aerocort are market leaders.

Ranbaxy has the largest exposure in the ciprofloxacin category of Rs. 65 crores with Cifran being the market leader.

Cipla created waves in the global pharmaceutical industry by offering to supply a `cocktail' an anti-AIDS retrovirals to `Doctors without Borders' for $350 per patient per annum, a fraction of the rates charged by multinationals.

Antibiotics form about 40 per cent of its product portfolio. The company topped in terms of product launches and notched 60 new products in 2000-01.

Cipla is also considering a foray into the area of biotechnology through a joint venture and is now in talks with prospective partners. It is also keen on genetic engineering along with stem cell research.

In anti-AIDS retrovirals, the company will be distributing its drug nevirapine, used to prevent mother to child transmission of AIDS, free through the National AIDS Control Organisation (NACO) for two years.

For the current year, the company has projected a turnover of Rs. 1,200 crores of which Rs. 350 crores would come from exports. Cipla has also filed an international patent for certain anti- histamines and their related compounds.

Ranbaxy had a setback in 2000 but for the first six months of 2001, the company's net profit was Rs. 102 crores (Rs. 79.50 crores) on a turnover of Rs. 945 crores.

The country's largest Indian pharma company in terms of turnover, has a basket of close to 30 approved products in the U.S. generics market and about a dozen are seeking approval. The company also plans to file a dozen abbreviated new drug applications (ANDAs) annually and record global sales of $600 million this year with its international subsidiaries expected to turn the corner. Ranbaxy will be launching its first branded product in the U.S. by 2004.

In the domestic market, the company is keen to reduce dependence on anti-infectives which contributed about 45 per cent of formulations turnover. This segment has been affected by competition from generics leading to lower price realisations.

The company is likely to launch Olanzipine OD in India by the end of this year and may also enter into other tie-ups as in the case of ciprofloxacin OD.

Dr. Reddy's Laboratories (DRL) announced a net profit of Rs. 53.50 crores for the first quarter of 2001-02 on a turnover of Rs. 284 crores (Rs. 215 crores).

Significantly, exports were up 83 per cent at Rs. 150 crores. Its 100 per cent export oriented facility is to be approved by the U.S. FDA, the U.K. MCA and others. Following this, DRL is expected to be more skewed to exports. In 2000-01, exports contributed 49 per cent of revenues and in the first quarter of the current year, it was up 54 per cent.

In branded formulations revenues from international markets were Rs. 46 crores half of what the domestic market generated.

DRL is planning to set up a global marketing organisation to take its products directly to market. It has six multi-tonne bulk drug manufacturing facilities with the U.S. FDA approvals.

Also, the company's custom chemical synthesis business is to start contributing from the current fiscal. This SBU among the eight formed last year, caters to process research, chemical development, chemical synthesis and contract manufacturing needs of global pharma companies.

The company has initiated the launch of oncology products in Russia, Ukraine, Sri Lanka and other non-regulated markets. It also initiated marketing activities in Yugoslavia and is planning an entry into the ASEAN region.

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