Corporate May 9, 2011
Should pharma research be a standalone activity or integrated with the main drugs business? India's pharmaceutical industry has experimented with the idea and reverted to status quo and is still not any wiser about what works in new drug discoveries.
As things stand, even though the Indian pharma has played a crucial role in the global availability of inexpensive generic drugs, it hasn't made a mark when it comes to new, innovative drugs. But its experiments with this risky, even elusive, process continue.
Take Piramal. After hiving off its research wing, Piramal Life Sciences (PLS), into a separate entity in 2007, Piramal Healthcare has now "re-merged" the assets and liabilities of its new chemical entities (NCE) wing, bringing it back to the parent company's fold. The company says it wants to leverage Piramal Healthcare's (PHL) resources to take its new molecules further.
Piramal's manoeuvre reminds us of what Dr Reddy's Laboratory (DRL) did three years ago. When DRL spun off its R&D wing into a new entity called Perlecan Pharma in 2005 with a lot of bang and buck (Citigroup and ICICI Venture were high-profile investors), it was hailed as a strategic move. The idea was to keep the risk of drug discovery separate from the stable part of the business without losing the obvious synergies. It was, as DRL put it then, India's first "integrated pharmaceutical" company, which could attack its own funding.
Others followed. Sun Pharma demerged its research unit into SPARC. Around the same time, both Ranbaxy and Wockhardt said their boards had approved the hiving off of their R&D units, but they were overtaken by events. Ranbaxy got bought over by Daiichi and Wockhardt's debt woes became public.
But with drug research yielding no new molecules - NCEs with therapeutic properties - risk-aversion set in. In 2008, DRL bought back shares of Perlecan and merged it with itself. That was the end of India's first integrated drug development company. No new molecule has notably advanced in clinical studies since its formation in 2005.
Now Piramal has done the same, saying it's because of the heavy pipeline of new molecules which now need the parent company's wherewithal. The company argues that PHL can now expand its presence in the pharma space by launching its own patented products and get a 200% weighted average tax deduction for operational expenses and capital expenditure on R&D. But we'll have to see the outcome to believe this rationale.
What is Sun up to? Its R&D unit, SPARC, recently formed a joint venture with Merck & Co to manufacture and market generics. No new chemical entity is involved right now but over time Sun can presumably rein in R&D costs.
At a time when global pharma is on fire, (Pfizer might even break up into multiple entities later this year), one is not sure it is right to even ask when will a made-in-India drug make its appearance. The era of one-size-fits-all blockbuster drugs is probably ending.
Are the handful of Indian companies with R&D capabilities in any position to look for niche, targeted drugs (even derived from traditional medicinal plants that the Indian system of medicine has made use of)?
I think it's the right time for Indian pharma to step up the gas on the innovation engine, rather than look for escape routes. Probably even lending some might to Open Source Drug Discovery may not be a bad idea?
More From Seema Singh.