Biotechnology major Biocon, an integrated healthcare company delivering bio-pharmaceutical solutions, will increase its spend on research and development by about 20 to 30 per cent every year as its products are getting into advance stages of development, according to the company chairperson and managing director Kiran Mazumdar Shaw.
“There is a great deal of risk aversion among the big pharma companies as the return on investment is getting tough and also there is a high chance of failure,” she pointed out.
Also, the small companies are not getting enough capital to carry out innovations. Several big pharma companies are cutting their spend on innovation-driven products and preferring the generics segment due to the global financial crisis. This is proving an opportunity for some Indian companies to partner with global companies for innovations as the costs here are still less comparatively. “The costs of failure is also affordable in India,” she said.
According to Shaw, this is the right time to focus on innovations as most companies are exiting, making the markets less cluttered. This will ensure a better success rate and will boost Biocon to take bigger risks in phases. Ideally, the R&D spend is pegged at around 10 to 15 per cent of the total revenues. The company, for the first half of the current financial year, reported revenues of about Rs 734 crore (Rs 593 crore in the corresponding period last year) and a profit after tax of Rs 100 crore.
Speaking to reporters on the sidelines of “Emerging India: Strategic innovation in a flat world”, organised by the Strategic Management Society at the Indian School of Business, she said, “ IN 105, the oral insulin drug from Biocon stable, will go for the three-phase of clinical trials in a year. The company will take another year for collating the data to measure its success.”
With contract research organisations across the world looking to cut down the expenses, Shaw said there would be increased outsourcing to India and the global companies.