Indian pharma industry continues to attract foreign investment
Predicted to be the next major R&D destination
With ever increasing returns, lowering risks and anticipated multifold growth, investors are more interested in the Indian pharmaceutical industry as one of the most attractive investment destinations in the world, according to a report by Bhavik Narsana, Partner, and Arijeet Mukherjee, Associate at legal and audit research firm Khaitan and Co.
The authors predict that India will be the next research and development destination; more than 870 multinational companies have set up their R&D operations in India since 1985.
The main reason why R&D in India is viewed as beneficial is its cost effectiveness. The cost of setting up world class R&D facilities in India is a fraction of what it would be in the developed economies. The overall R&D costs are about one eighth and clinical trial expenses around one tenth of western markets, the authors said.
Furthermore, a large pool of English-speaking, technical talent is available at a relatively low cost with highly developed R&D-orientated skill sets. Established state-of-the-art R&D centres offer logistic convenience and cost effectiveness, they added.
India is one of the fastest growing markets in the world, and carrying out R&D in India allows companies to gain a foothold in this new market. The rise in household incomes and the growing middle class makes India an attractive market for drugs. With increasing disposable incomes, the market for non essential drugs is set to grow rapidly, the authors added.
The Indian pharma industry has become a mature industry. Previously known for manufacturing generic drugs, the industry dynamics have now undergone a sea change. The Indian pharma industry ranks fourth in terms of volume and 13th in terms of value globally. It is estimated that around 40% of the generic drugs in the US come from India, and this figure is set to rise further.
The spending pattern of an erstwhile manufacturing orientated industry has also changed with the industry spending around 18% of revenue on R&D activities.
