beyondbrics

Indian pharmaceutical companies have gained an unflattering reputation of being generic drug makers with little to show in the way of new product development and innovation. But a few companies in the sector are beginning to break the mould.

On Monday Glenmark, the Mumbai-listed pharmaceutical firm, signed a licensing agreement with Sanofi, the French pharmaceutical group, for the development and commercialisation of an antibody discovered by Glenmark.

The license is for a drug which could be used for the treatment of Crohn’s disease (an autoimmune disease affecting the gastrointestinal tract) and multiple sclerosis.

The deal, which will be completed in stages, could potentially mean rewards of up to $613m for Glenmark in double-digit royalty payments, development, regulatory and commercial milestone payments. The Indian pharmaceutical firm will receive $50m from Sanofi upfront and a further $25m at the close of the transaction, while $25m will be paid upon Sanofi’s positive assessment of data from Glenmark.

Glenmark’s discovery of the molecule is still a little way off commercialisation – the drug will not be available in the market until 2017 at the earliest. But the company is one of the few operating in the Indian pharmaceutical sector that focuses on development of new drugs.

Monday’s deal is one of a series of 5 similar deals that Glenmark has signed with various European and North American pharmaceutical companies over the last five years. The corporation has 5 research centres across the world and it is developing eight new molecules for pharmaceutical drugs in the pipeline.

India’s pharmaceutical companies have long focused on the sale of low-cost generic drugs in high volumes across the world. As a result, R&D spending of Indian pharmaceutical companies has remained low. On average, Indian drugmakers spend 3 -4 per cent of their sales on research and development activities, according to Sarabjeet Nangra, an analyst at Angel broking. In contrast, global big pharmaceutical companies invest up to 20 per cent of their sales on research and development.

Indian companies typically spend the bulk of their capital on meeting the regulatory requirements set by the US and EU drug authorities.

In the high-risk-high-reward investment pharmaceutical industry, Indian pharmaceutical corporations, including Glenmark, look to developed world markets to realize their investments, particularly at the advanced stages of drug development.

But Glenmark and a few other Indian companies, including Piramal and Sun Pharma, invest in research and development of new drugs too, said one analyst who asked not to be named.

In the past Indian pharmaceutical corporations have spun-off their research arms in deals with foreign pharmaceutical corporations who are attracted to the low cost of research in India. One the Indian side, foreign link ups have helped to increase the scale of research.

“Foreign investment and joint-ventures have definitely helped in scaling up R&D activities at Indian pharmaceutical companies, but as of now there is little that indicates that there has been commercial success out of these investments,” said Nangra.

Glenmark’s deal with Sanofi marks a significant first step for the Indian pharmaceutical sector, but it is unlikely that the deal might become a trend for the sector as a whole in the near future.

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