As molecule deals fall, pharma firms see cure in late licensing

Indian companies engaged in discovery of new drugs have twisted the model as many molecules licensed to foreign collaborators failed to reach the market. This so-called outlicensing strategy has been revised and the domestic companies are conducting a larger part of the initial trials themselves, choosing to license out the molecules much later than they used to.

Take the case of Glenmark. The company initially out-licensed its molecules in the pre-clinical phase itself, which is when the animal trials are done. It has now taken five potential drug candidates to the human-trial stage before putting them up for outlicensing.

“We have evolved from outlicensing pre-clinical candidates to outlicensing molecules after proof of concept is established,” said Glenn Saldhana, chief executive officer and managing director.

A strong candidate for outlicensing from Glenmark is a diabetic drug which was returned by Merck in 2008 as it exited diabetic research. It is now in advanced phase-II clinical trials.

Although Glenmark pocketed $115 million (over Rs 500 crore) from the four molecules it outlicensed — the first major one was to Forest Laboratories of the US, which fetched the company $41 million — none has passed the final test to become a commercial drug yet.
 

BITTER PILL MAJOR OUT-LICENSING DEALS BY INDIAN COMPANIES
Company	Therapeutic area	Foreign partner	Year
Dr Reddy’s	Anti-diabetic	Novo Nordisk	1998
Dr Reddy’s	Anti-diabetic	Novartis	2001
Ranbaxy	Prostate enlargement	Schwartz	2002
Glenmark	Chronic Bronchitis	Forest	2004
Torrent	Heart Disease	Novartis	2004
Glenmark	Diabetes	Merck	2006
Glenmark	Pain management	Eli Lilly	2007
Glenmark	Inflammation, Oncology	Dyax Corp	2007

Another company which outlicensed a promising molecule at the pre-clinical stage was Dr Reddy's Laboratories. The anti-diabetic drug failed in the final stage of pre-clinical tests by its partner, Novo Nordisk. The explanation given for halting further clinical development was that the medicine did not show any significant improvement or competitive advantage than the class of medicines already in the market.

Dr Reddy’s was not willing to say much on the changes it had made in its drug discovery and outlicensing model, but conceded there had been changes in its approach. “The business model remains similar but we have refined our approach over the years, based on the challenges we have faced," a spokesperson said.

Industry officials see this as the maturing of the Indian drug discovery industry, which has realised the benefits of late-stage outlicensing.

“The initial out-licensing was a learning process. Over the years, the companies have matured and learnt to protect their interests. They are far more sophisticated”, said D G Shah, secretary-general of the Indian Pharmaceutical Alliance, a grouping of the country’s leading pharmaceutical companies.

This move towards late-stage outlicensing is partly due to the lowered risk appetite of overseas partners. “Multinational companies have begun to prefer drug candidates in the final stages of clinical trials, as they are more prudent in their research and development spend in the days of economic slowdown,” said an industry expert.

Ranbaxy Laboratories, which became a subsidiary of Japanese drug major Daiichi Sankyo last year, had outlicensed a prostate enlargement drug candidate to Schwartz in 2002. It is re-orienting its research strategies to suit the parent company’s priorities.

“The later the stage at which a compound is licensed out, the higher the revenues. The licensor is also in a better position to select the licensee to ensure the licensee is actually interested in developing the drug for commercialising, so that the licensor can hope to earn royalties,” says Sudip Chaudhuri, a researcher on the pharmaceutical sector at the Indian Institute of Management, Kolkata.