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Discovery: the new Mantra: R&D spend shoots up as firms turn research savvy.

Innovation seems to be the new buzzword across India's pharmaceutical sector these days. Quite a few drug makers have been steadily stepping up their outlay for R&D in the past few years.

R&D spend of the top 30 Indian companies reached 6.5% of their revenue in fiscal 2015 from 3.8% a decade back, according to a report by Crisil Research.

These numbers are way below the double-digit figures of their well-heeled global counterparts. However, the unprecedented level of hike in research expenditure, which has long hovered around a mere 2% of Indian drug firms' yearly budgets, may mark a significant shift in focus.

Indian pharma left the discovery-led model of development somewhere in the beginning of the industry's evolutionary history itself. Instead, drug makers started looking at finding new processes to make copies of established molecules through reverse engineering. Ensuing patent policies that recognized novel processes--not new products until 2005--fostered the growth of today's domestic industry, driven, solely, by generic drugs.

Analysts cite several compelling reasons for the industry to re-embrace discovery-oriented growth paths. Many foresee export earnings sharply declining in the coming years impacting the prospects of the firms, which are anchored on overseas trade. Over 50 percent of the total revenues of some leading companies come from exporting to the U.S. market alone. Slowing growth of generics in the U.S. market, rising competition, consolidation of supply channels and heightened regulatory requirements are listed among the reasons behind the trend.

Sun Pharma raised R&D spending by 23% in the March quarter, which is over 9% of its sales. Lupin will be spending 12% more than FY16 to the level of 1215% of sales next fiscal. UmangVora, global chief operating officer of Cipla said his company would earmark more than eight percent for R&D, two percent more than that of the current financial year.

It's not just the big pharma firms increasing their R&D pens. The midcaps are also increasing fund allocation for R&D considerably. Torrent Pharma, for example, is aiming to move up its R&D spend to 7-8% of sales from the current levels of less than 4%, over the years. The Ahmedabad, Gujarat-based firm hiked 28% more during the year 2015-16.

India's drug makers have yet to approach regulators of any leading market seeking approval for a new drug from their discovery pipeline. The Crisil report shows that close to 40 potential new molecules are presently at various stages of development by 14 companies altogether.

Dr. Reddy's, Sun Pharma, Lupin and Glenmark Pharma are among the firms currently evaluating candidate drugs in advanced stages of clinical development.

Alongside working on candidate drugs from their own pipelines, drug makers are also exploring various propositions like co-development deals and other licensing pacts with innovators. Because huge investments are involved in the risky discovery business the need for a partner is vital.

Dr. Reddy's, India's second-largest drug maker by revenue, acquired the rights to two molecules late in March. The firm signed a $490 million licensing deal with XenoPort to develop and commercialize the CA-based company's XP23829, a pill to treat psoriasis. In the second agreement, the Hyderabad-based company bought out the exclusive rights to Eisai's investigational anticancer agent E7777. This fusion protein is currently undergoing phase 2 studies in patients with cutaneous T-cell lymphoma in Japan.

In May, Sun Pharma announced the latest data from two phase 3 studies of antibody tildrakizumab to treat plaque psoriasis. The Mumbai-based firm acquired the rights for the IL-23p19 inhibitor (MK-3222) from Merck in 2014. Merck will be responsible for the completion of phase 3 trials and regulatory filing with USFDA.

Even as select Indian firms do take up original drug discovery challenges, much of the R&D efforts is centered on innovating generic formulations such as novel drug delivery systems and process technologies.

Developing fast acting and controlled-release versions of widely used generic drugs is the priority as these products could face little competition in the marketplace. They also ensure speedier returns with less time and investment.

Recently, Cadila Pharma of Ahmedabad tied up with Sweden's Moberg Pharma for late-stage development of a novel lozenge formulation of bupivacaine for pain management in oral mucositis patients.

Cipla, Sun Pharma and Lupin are reportedly competing to bring on generic versions of GSK's Advair Diskus as the patent of the $5.6 billion inhaler is expiring this year.

The government has recently launched a 19-point action plan to boost innovation in biotech and healthcare under the Start-up India campaign, which offers tax exemption and other incentives for start-up businesses.

S. Harachand

Contributing Editor

S. Harachand is a pharmaceutical journalist based in Mumbai. He can be reached at
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Title Annotation:INDIA REPORT
Author:Harachand, S.
Publication:Contract Pharma
Geographic Code:9INDI
Date:Jul 1, 2016
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