Me-too’ focus leaves R&D in backseat
Jan 04 2013 , Hyderabad
While a host of companies reiterate that they are not neglecting the R&D segment of business, a view from the fence may well suggest that the time-intensive process and eventual delayed benefits along with huge investments is something that sidetrack R&D.
The country is known to supply 20 per cent of the world’s total generics. But when it comes to revenues, the top 15 global companies grab 60 per cent chunk of the total market. The industry seems to prefer choosing to focus on the “me-too” segment, which could fetch an immediate return on balance sheets.
The “me-first” segment does not really identify with the Indian market yet. Companies here allocate around 6 per cent of their total sales to R&D. Despite improvement in the past few years, industry spends on R&D continues to be low compared with global standards.
“The estimated investment in R&D is only 4.4 per cent of total production in our country which is quite low compared with R&D investment in developed markets of 8 per cent. Through, National Pharmaceuticals Pricing Policy-2012, we have tried to create such environment of investment in research and innovation,” said V Rajagopalan, special secretary and financial adviser in the ministry of chemicals & fertilisers.
“For research towards new chemical entities, it could be more difficult as the risk reward ratio is too low. Sometimes half way through trials one realises that the product may not be significantly better than the existing one, as expected for US market approvals. While there will continue to be research, there will be more emphasis on diseases for the elderly, like Alzheimer’s or Parkinson’s,” said Lalit Nambiar, fund manager & head of research at UTI AMC.
Industry experts say that among the various barriers, companies need to spend a lot of money and resources on nurturing, before this space can considered promising. Scientific research here, unlike in other countries, is lacking even at the university level.
“The budget that local pharma companies allocate towards R&D is very low. Of the 1-5 per cent allotted, most goes to the generics segment, and a miniscule amount is spent on innovations. The productivity of proven innovations is too low and it may take a lot more time before India can be reckoned with R&D,” said Sarabjit Kaur Nangra – VP (research) at Angel Broking.
On the other hand, India and China have emerged as top destinations for contract research manufacturing owing to the cost advantage. With a lean pipeline of molecules, most companies look at outsourcing their non-core activities, including research. And this market is expected to grow as much as by 45 per cent.
Beginning from as early as 2005, multinationals like Merck, Astrazeneca, Pfizer and Novartis had struck down their research and manufacturing facilities, outsourcing to India, China among some European countries.
“We see 20 per cent of our topline growth coming from CRAMS. For NCE innovation, Indian investors are not patient enough to wait through the entire process. While there is no funding for small companies, the bigger ones do not enter because it will not affect their balancesheets and long term thinking is lacking,” said Venkat Jasti, CEO of Suven Lifesciences.
(With Inputs from Shruti Verma Khare)