Even though Novartis's field-force reduction has no connection to India, according to Vice-Chairman Ranjit Shahani, there
is an overriding concern about cost and the pressure to outsource will only increase. GSK's India chief, Hasit Joshipura,
said a clear picture would emerge only some months down the line. "It is not clear yet whether more research jobs will come
to India or whether the credit squeeze would in fact reduce jobs being outsourced," he added.
One company that may be signaling the road ahead is MSD Pharmaceuticals (Gurgaon, Haryana), a subsidiary of US-based Merck
& Co. "We will be doubling our staff strength in India as part of our plans to consolidate our marketing network in the country,"
said MSD Managing Director Naveen A. Rao.
Still, analyst reports suggest that Western drug manufacturers are ramping up their outsourcing of clinical research to India.
Many companies, including Roche Holding (Basel), GSK, Sanofi-Aventis (Paris), Pfizer, and Eli Lilly (Indianapolis), have been
subcontracting work to Indian businesses.
Now, Johnson & Johnson (New Brunswick, NJ) is contracting discovery chemistry, discovery biology, chemical and analytical
development services to Indian and Chinese research organizations. In October, Eli Lilly launched a joint venture with Jubilant
to outsource more early-stage R&D processes to India. And in February, Danish biotech Novo Nordisk (Bagsvaerd) revealed plans
to shift nearly a one-third of its global R&D activities to India within a three-year timeframe.
According to Bain & Company's Ashish Singh, a Boston-based partner in the consulting firm's healthcare practice, notwithstanding
the credit crunch, research and clinical development spending outsourced to India is expected to expand to $2 billion by 2010.
But not all drug companies have weathered the storm with the same finesse. Some have lost millions of dollars in unwise investments.
Hyderabad-based Dr. Reddy's Laboratories, for example, was forced to freeze all innovative R&D at its subsidiary Perlecan
Pharma in October 2008. Perlecan was spunoff of Dr. Reddy's in 2005 to pursue the development of compounds. ICICI Venture
Funds and Citigroup Venture Capital, which held a combined stake of 86% in the firm, backed the spinoff. By mid-2008, however,
development on one of Perlecan's four main clinical compounds was discontinued. Both venture capitalists decided the company
was too risky an investment and sold its stake back to Dr. Reddy's in July.
Undoubtedly, the credit crisis and its aftershocks will continue for some time, but many Indian pharmaceutical companies seem
to be in a position to withstand the pressure. While traditional and conservative pharmaceutical companies are hunkering down
for the long haul, those with large cash reserves will be able to form strategic alliances with smaller firms, adding new
compounds to their pipelines for less money than would have been the case a year ago.
A. Nair is a freelance writer based in Mumbai.
See A. Nair's recent blog post about the terror attacks in Mumbai.