Top pharma firms to hike R&D spend next 5 yrs as mkt eyes $130 bn revenue

Industry captains feel pandemic has opened up opportunities for the sector in India to emerge as a second source of raw material and finished products, after China

Leading pharma companies in the country are looking at increasing their research spend over the next five years as the Indian pharmaceutical market eyes a $130 billion turnover in the next ten years. Meanwhile, industry captains felt that the pandemic has indeed opened up opportunities for the Indian pharma sector to emerge as a second source of raw material and finished products after China.

Speaking at the BioAsia 2022, Dilip Shanghvi, the MD of India’s largest drug firm by market share Sun Pharma said that from a current 7-9 per cent of their turnover, he sees Sun Pharma’s research spend to rise to 9-12 per cent of turnover in the next five years. “We expect to continue to invest in research and in the next five years we see ourselves spending around $600-650 million annually on research,” Shanghvi said.

Similarly, GV Prasad, co-chairman and MD of Dr Reddy’s Laboratories (DRL) said that they now invest around 10-12 per cent of their revenues in research and development (R&D). “Around two-thirds of this R&D spend is for our current business, while around one-third is invested to develop future pipelines in biologics and new chemical entities. We expect to continue at this 12 per cent rate over the next five years or so. But forging collaborations (for technology, science, products etc) would be a big part of our growth story,” Prasad said.

The chairman of Zydus Lifesciences, a firm that has already commercialized new chemical entities, Pankaj Patel highlighted that they too would continue to increase their R&D spend and have around 10 percent of their turnover being spent on research in the next five years.

Ajay Piramal, chairman of the Piramal Group said that Piramal has started investing in complex products and building capacities. Piramal said that a company’s existing business must have enough cash flow to make large bets (for innovation).

Prasad said that in the generics business, companies place a large number of small bets, but when we talk about truly innovative products; it involves making a small number of large bets. “Large portions of our R&D budget goes into managing the current business, and thus collaborations for global trials, product development, technology, science would be critical,” he added.

Shanghvi felt that it was important to have a diversified business portfolio to have a consistent cash flow to continue to invest in innovation.

Pharma firms felt that while the US would continue to remain an important geography for them, the pricing pressure and intense competition in that market would continue too.

Prasad thus said that DRL was focusing on emerging markets and India where once a scale or size of business is built, the margins were more sustainable. “We have tapered our plans for specialty products portfolio for the US as we did not achieve a critical mass with a few of our products in dermatology and neurology. Therefore, we are increasing capital allocation for other markets like India and emerging markets,” Prasad explained.

Patel’s firm already has four products under development in the US. “At least one or two of these would come to market. We have to thus continue to make money in our existing business – India and emerging markets. Emerging markets are fragmented, difficult to build size, but once done, they offer long term sustainable margins,” he added.

Meanwhile, Indian pharma has a huge opportunity as many global players are looking to diversify their pharma sourcing. “By the nature of this industry, players do not change their supply chains overnight as there are regulatory overhangs. But there is a trend to have a China plus one sourcing strategy, and India has an opportunity here,” he said.

Virtual audits to continue along with physical inspections: USFDA

Virtual facility audits will continue even as the pandemic wanes and travel restrictions ease out, said a senior USFDA official. Phil Nguyen, International Relations Specialist, US Food and Drug Administration said that virtual audits would not replace in person or physical inspections of manufacturing facilities globally by the USFDA, however, they would continue.

Surprise audits of manufacturing sites too are on the cards. S.Eswara Reddy, Joint Drugs Controller (India), Central Drugs Standard Control Organisation (CDSCO), said that local CDSCO officials accompany the FDA officials in the physical inspections. “According to a memorandum of understanding that we have with the USFDA, our officials would also be present during inspections, but we have the role of an observer,” he said, adding that Indian companies are always prepared for surprise audits.