Indian pharma firms increase R&D budgets significantly
As they try to enter the complex therapy segment such as injectables, inhalers, dermatology and biosimilars
Over the past few years, Indian pharma companies have increased their R&D budgets significantly, in view of their growing focus on both regulated markets and complex molecules. Aggregate R&D expenditure of the top few companies in the domestic sector in India has increased from 6% of sales in 2011 to more than 9% in 2016, a report by rating agency ICRA says.
The agency has noted that this growth will continue, as most leading companies try to expand their presence in the complex therapy segment such as injectables, inhalers, dermatology, controlled-release substances and biosimilars.
Many of these segments entail higher R&D costs during the development stage owing to product complexities and the need for clinical trials.
Sun Pharma's R&D spending rose 23% to 9.1% of sales in the March quarter, year-on-year. In FY2017, the company is expected to spend around 9% on research. Lupin's R&D spending will be 12–15% of sales in FY2017, up from 12% in 2016, as the company increases the number of product filings.
Cipla too has indicated that it would spend more on research. 'We are also targeting some speciality portfolio products for development. This will drive our R&D spend to 8%,' said Umang Vohra, Global Chief Operating Officer. In FY2016, its R&D spending was 6.5% of sales.
We are also targeting some speciality portfolio products for development
In FY2015, most of the leading pharma players spent between Rs5–17bn on R&D, which represented an increase both in absolute terms as well as in proportion to net revenues (8–12% of sales).
While R&D spending would continue to vary across companies, the agency has said a significant rise in R&D budgets is on the horizon, especially for companies that are developing biosimilars, for the regulated markets, or have a portfolio of NCEs (new chemical entities) under development.
As these entities get closer to conducting clinical trials, they are likely to pursue joint ventures or alliances with multinationals with the objective to share investments and secure technological capabilities.
Apart from acquisitions, which have so far been the preferred route for consolidating position in India, companies have also been targeting growth opportunities through in-licensing deals with domestic generic players, both for domestic as well other emerging markets. Such alliances primarily aim at leveraging on the lower R&D cost and manufacturing capabilities of the local generic companies on the one hand, and the extensive marketing and distribution footprint of multinationals in other markets on the other.
