Now, Indian pharma companies like Jubilant Group, TCG Life Sciences and Piramal Life Sciences venture to share new drug R&D risks
Drug research and development (R&D) collaborations between Big Pharma and Indian companies are evolving from being struck for cost considerations alone, but progress has been slow as both sides come to terms with what it takes.
Since the late-2000s, Indian companies such as Jubilant Group, TCG Life Sciences and Piramal Life Sciences have ventured to share new drug R&D risk with Big Pharma. To commercialize a new drug takes millions of dollars and several years, and more drugs fail in R&D than succeed.
By doing so, they stand to gain from the potential upside and to learn from their experienced partners. "Collaborative R&D is the way to create an innovative base in India," says Sri Mosur, CEO and president of global drug discovery and development at Jubilant, which has partnered Belgium's Janssen Pharma and UK's AstraZeneca. For Big Pharma, facing drying R&D pipelines and cost pressures, such an alliance could enhance R&D output, and leverage innovation outside their labs at lower costs.
Most of these Indian companies are contract research organisations (CROs), which provided cheap chemistry services-such as made-to-order drug compounds- to western companies for a fee, and they realised its many challenges. "The vendor model is very difficult to scale," says Bart Janssens, partner,Boston Consulting Group. "It is people-intensive and companies have realised they are not that good at managing such businesses."
The CEO of a Bangalore-based R&D company says that riskreward-sharing comes as a natural extension of doing CRO work. "The CRO says to the Big Pharma customer 'I want to add more value to you and I will put skin in the game'," says the CEO, not wanting to be identified.
POSSIBILITIES IN INDIA
One popular alliance structure is where the Indian company has to come up with potential drug candidates that may work on Big Pharma's proprietary targets (proteins, enzymes, genes etc in the body affected by a disease) in exchange for upfront and milestone payments. In such an agreement, the compounds are passed back to the foreign owner. In some cases, if it generates new intellectual property, the Indian partner could earn royalties if a drug is ever marketed.
The risk is that the payments do not fully cover the cost of research undertaken. The CRO also bears the opportunity cost of putting its scientists on this instead of something else. Mosur believes that such tieups give Jubilant the skills to bring more judgement to the research process than it if were merely following protocol laid down by a Big Pharma customer.
"The knowledge you get is phenomenal," he says. For instance, he adds, its alliance with Janssen has helped it understand "tough biology and created innovative starting points" for future research and provided insights into central nervous system diseases-the collaboration's area of focus.
Yet, collaborative R&D in India has barely skimmed the surface of what's possible. Global companies are veering around to understand what else Indian players bring to the table other than low-cost chemistry. "They bring value in areas such as new molecule design and in constructing integrated drug discovery programmes," says Raman Govindrajan, India R&D head at European drug maker Sanofi, which is scouting for Indian partners.
But by and large, India is still about cost. In a 2011 BCG survey of senior executives from American and European drug makers, 73% of respondents cited "low cost" as the capability they expect from the Indian partner (See graphic). Mostly, partnering has been about enhancing research bandwidth inexpensively. "Suppose an MNC had two drug candidates in mid-stage chemistry, of which one is a back-up," says Janssens. "Rather than park it on the shelf, it asks 'why not send it to India to take it to proof of concept?'. Such projects may not necessarily have a great business upside."
Initially, Indian companies accepted these projects to associate with and learn from Big Pharma, says Janssens. But the bigger ones are less eager now. "They don't want to put their best scientists on this." There are other issues. Faced with blockbuster drug patent expirations, Big Pharma is restructuring extensively. "Big Pharma is going through so many changes that the guys you start working with may not necessarily stay there," says the CEO of the Bangalore-based R&D outfit quoted earlier. "And rebuilding technical and managerial relationships is challenging."