Focus acquisitions also point towards a scramble amongst

Focus on: India

Pharma vision 2020: pinning hopes on biologics and biosimilars

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The Indian pharmaceutical industry is poised for growth. Growing at a compound annual growth rate (CAGR) of 17.6% over recent years, the industry is expected to be worth US$55 billion by 2020. The life sciences sector in the country is expected to employ close to 3.5 million people by 2022. Over the last five years, the industry has moved up the pharmaceutical value chain to become the leading API and finished dose drug exporter to Western markets.

Drug approvals by the US Food and Drug Administration (FDA) to Indian drug makers have nearly doubled from 109 (2014-15) to 201 (2015-16). The Government of India is providing further impetus to the sector by working alongside businesses to provide incentives for growth. 

Speaking at the inauguration of CPhI & P-MEC India, held in November last year, Yogesh Mudras, managing director of UBM India, said: “India is among the fastest-growing pharmaceutical markets in the world and has established itself as a global manufacturing and research hub. A large raw material base and the availability of a skilled workforce give the industry a definite competitive advantage over other countries.”

The 2017 India Pharma Market report released by CPhI India identifies two-tier manufacturing markets and predicts an increase in acquisitions by Indian pharmaceutical majors. The report projects: “Over the next one to three years, 36% of Indian pharmaceutical companies are planning acquisitions; 20% are looking at facilities in the USA and Europe, with 7% exploring options in the rest of the world. Domestic acquisitions also point towards a scramble amongst many smaller companies for greater size and scale, with 25% looking at facilities within India itself.”

Focus on generics

“India has the largest US FDA-approved plants outside the US, which only adds to the growth of the pharmaceutical industry in the country. Companies in India have made impressive progress in aligning quality with international standards. India is very strong in providing generic medicines,” says Jitendra Tyagi, managing director of Bristol-Myers Squibb India.

The drivers for growth in the industry include strong domestic sales predicted over the next two to three years, generic APIs exports, as well as finished formulations for developed markets. India is a significant provider of complex generics, branded drugs/OTC, and biosimilars, because of its cost-efficient and high-quality products. 

It is predicted that India will now look beyond the US and UK markets. The country is keen on establishing a stronger foothold in Japan with generics, after many years of largely on-patent drugs yielding greater profit opportunities. 

API manufacturing: India versus China

India has traditionally been the leading API exporter for low-cost, high-volume APIs. However, in the last decade, China has emerged as a very strong contender – particularly in developing markets – where cost considerations are the primary driver. Seventy percent of India’s intermediary formulations are imported from China.

Speaking on the manufacturing challenges in APIs, one of the speakers at CpHI suggested, “The Made in India approach should actually percolate down to the API level. Today it’s largely only up to the formulation level. At any point in time, India should be totally reliant as far as API is concerned.”

“We could manufacture early-stage APIs and intermediates that are currently imported from China. This will enhance opportunities for SMEs and fit into the whole ‘Made in India’ initiative, while reducing uncertainty of intermediate supplies from outside,” Nitesh Mehta, founder of Newreka Green Synth Technologies said. “If the APIs imported could be identified in a systematic manner and a greener alternative is developed in collaboration with the researchers and academia, it could also help to reduce the environmental footprint.”

The Drugs Technical Advisory Board (DTAB) has suggested a protectionist strategy, proposing a levy on imports as a move to reduce dependence on China. Consolidation amongst SME pharmaceutical providers is highly likely as they progress-up the value chain and move into formulations with greater margins. Domestic use of Indian-made APIs should also increase and alleviate some of the supply chain risks associated with dependence on intermediate/ingredient imports from China. 

Forward vision: tapping opportunities in biotech and biosimilars

As a result of lower margins in API manufacturing, many pharmaceutical majors are pinning their hopes on opportunities in the biotechnology and biosimilars space. The Indian biosimilar industry has grown by a staggering 30% CAGR since 2008. Biosimilars are more expensive to make and develop (with higher barriers for entry). But they deliver a higher-margin, which is acting as a key driver in investment decisions. 

Many believe Indian-made biologics will be able to deliver cost benefits comparable to that already achieved for conventional generics. Furthermore, with patents for 12 biologics expected to expire by 2020, estimates suggest that the global biosimilars market could reach US$25 to US$35 billion by 2020.

The government is providing financial assistance to biotech start-ups through the Biotechnology Industry Research Assistance Council (BIRAC) targeting 2,000 new businesses by 2020. Biocon will be launching its first biosimilar product in Europe by 2018 and targets three other product launches in the USA and Europe. Similarly, Dr Reddy’s has four biosimilar products for both emerging and developed markets, namely rituximab, filgrastim, pegfilgrastim and darbepoetin.

“Biosimilars is expected to be the next wave. With healthcare spend increasing and stringent regulations imposed across the globe, we see growth of companies like MSN with a strong regulatory record and portfolio of diverse products. We also anticipate growth for the pharmaceutical sector in the country at 15-20% year-on-year in the near future. We started a programme six months ago that focuses on biosimilars. We are working on three to four biosimilars currently, which will be introduced onto the market by 2020,” says Bharat Reddy, executive director of MSN Labs.

Growth anticipated despite slowdown

Despite the recent slowdown in India’s pharmaceutical market, many believe that the industry is well-set for another period of explosive growth after consolidating its services and regulatory approach. The gentrification of the Indian healthcare economy is leading to an unprecedented surge in demand for domestic pharmaceutical products. Domestic sales will drive growth of the industry in India for the next three to five years. 

Vivek Kamath, managing director of MSD Pharmaceuticals, says: “We need a huge quantum leap in terms of policy, regulatory environment, infrastructure, support of academia for research, capacity building and strong incentive for innovation. We also need enforcement for the protection of innovation. Innovation cannot exist in isolation, it can only breed in a comprehensive ecosystem. Our aim is to develop India as a drug innovation and pharmaceutical discovery hub, capturing 15-20% percent of the world’s R&D pipeline by 2020.” 

Tyagi added: “Affordability is an important issue, which should be addressed by all actors of the healthcare systems. The pharmaceutical industry wishes to be a part of the solution in making medicines more accessible and healthcare more sustainable, by working together with healthcare decision-makers. We share a common goal to provide Indian patients with the latest, most effective and life-saving treatments, while securing the development of future medications.”

Over the next few years, the Indian government’s Pharma Vision 2020 aims to make the nation a global leader in end-to-end drug manufacturing.