Glenn Saldanha
MD & CEO, Glenmark Pharmaceuticals [Get Quote] Limited

Over 7 years, we have invested $25mn in drug discovery R&D and got $60mn so far - we'll get more as the drugs progress.

The pharmaceutical business is a scientific business and requires a very high level of commitment from the management towards new chemical entity (NCE) research.

Glenmark also faced several challenges in reaching this stage of evolution, as seven years back, heavy investments in R&D were viewed negatively by most financial communities. They questioned the company's small size, limited resources, limited talent and ability to do novel work.

At every stage, until the first out-licensing deal, financial investors were cynical about anything coming out of the research efforts.

One of the key strategies that can deliver success in NCE research is a project-based strategy in development and collaboration/partnering with more experienced players. Also, large unmet needs exist in various therapeutic categories (both acute and chronic) the world over.

With a total of 11 molecules (NCE's and biologics) in development, Glenmark is viewed as the leader in R&D in the Indian pharmaceutical industry.

Currently, Glenmark has three molecules in phase II clinical development, two of which have been out-licensed to Merck, Forest and Teijin Pharma for total milestones exceeding $500 million and success-based royalty if these molecules make it to the market. Besides, Glenmark has three pre-clinical candidates entering clinical trials this year.

India is on its way to becoming the preferred global supplier for bulk drugs and dosage forms, and a hub for contract research and manufacturing, contract research organisations and R&D activities.

With its enormous advantages, including a large, well-educated, skilled and English-speaking workforce, low operational costs and improving regulatory infrastructure, India has the potential to become a hub for pharmaceutical and biotechnology discovery research, manufacturing, exporting and healthcare services within the next few years.

In addition, the introduction of the product patent law in India from January 1, 2005 has brought a fundamental change to the Indian pharmaceutical space. The law is expected to put an end to some of the earlier practices followed by Indian companies and prompt them to focus on discovery-led research to introduce patented molecules.

Glenmark adopts an approach called 'analogue research', which entails working on certain pre-identified targets that are currently being worked on by Big Pharma for specific diseases and developing a robust patent estate.

While analogue NCE research is also time-consuming and expensive, it enjoys a lower risk profile compared to basic research that commences with target identification. Keeping all these aspects in mind, we believe that India can be a global hub for NCE research.

Sanjiv Kaul
Managing Director, ChrysCapital

Value creation will depend upon chasing new drugs, but the current US-centred strategy is wrong, risky and expensive.

Since 1990, exports, alongside domestic sales, became the two major value creators for the industry. Overall, the sector saw huge expansion in earnings and multiples, especially for the big players like Ranbaxy [Get Quote], Cipla and DRL.

Post-2005, upon India becoming fully TRIPS-compliant , we have seen the emergence of contract research and manufacturing services and innovative research as potentially two major value drivers. A different set of players like Glenmark, Biocon [Get Quote] and Sun Pharma [Get Quote] were the first off the block and started investing big bucks in this space. Big pharma firms have not been as responsive to this as one would have liked them to be, especially given this is the only value creator that is truly sustainable in the medium to long term.

Generally, when a company does well in the generics space, it allocates a certain amount of profits for innovative research but when the generics business takes a hit, the first item that get significantly reduced is innovative research.

A stark indicator of the lukewarm approach exhibited by Indian pharma is that only $125 million was spent on innovative research (including capital expenditure) as against a generic research spend of $400 million in 2006. In the same timeframe, global spend on innovative pharma research was $52 billion and it costs around a billion dollars, if not more, to introduce a new chemical entity (NCE).

High risks and higher costs associated with drug discovery and development are the principal reasons for Indian pharma not being more forthcoming and aggressive on this value creator. It is not mandatory that all R&D activities have to be necessarily US-centric.

Unfortunately, the conventional approach of pharma players in India is that for R&D to be successfully leveraged, the NCE must be commercialised in the US. No one has yet tested the hypothesis of conducting R&D to market an NCE in non-US markets or even non-US and non-European market segments. The costs of R&D will be significantly reduced and yields will be better if a segmental approach is adopted. Thereafter if the NCE has the requisite merits and credentials, it can be launched in developed markets either directly or in collaborative marketing tie-ups with large MNCs.

The government, Indian pharma and financial investors would do well to apply an integrated approach to this opportunity that, if not leveraged, will go to some other geography. As starters, the ecosystem could be simplified with the creation of a single-window approval process and a single regulatory body. Collaborative research, out-licensing pre-clinical candidates and a novel drug delivery system (NDDS) can be a good start and would help build value in the medium term. But for Indian pharma to maximise value creation, it will necessarily need to go the entire distance of drug discovery and development.