OR WAIT null SECS
In a nation of more than 1 billion people, the importance of vaccines goes beyond healthcare-it is a matter of national security. Armed with this belief and a philanthropic vision that most Indians could be protected against hepatitis, DT–Polio, and other afflictions, Dr. Varaprasad Reddy entered the nascent Indian biotechnology sector in 1992 and has since managed to threaten the monopoly of large laboratories. That year, the Hepatitis B vaccine cost $33 per shot, and yet some families were subsisting on less than $1 a day. Meanwhile, India was importing only 180,000 doses per year.
Focusing on Much-Needed Vaccines
Profile: Shantha Biotechnics
In a nation of more than 1 billion people, the importance of vaccines goes beyond healthcare—it is a matter of national security. Armed with this belief and a philanthropic vision that most Indians could be protected against hepatitis, DT–Polio, and other afflictions, Dr. Varaprasad Reddy entered the nascent Indian biotechnology sector in 1992 and has since managed to threaten the monopoly of large laboratories. That year, the Hepatitis B vaccine cost $33 per shot, and yet some families were subsisting on less than $1 a day. Meanwhile, India was importing only 180,000 doses per year.
"I wanted to do something about this, but I received harsh responses from companies when I mentioned producing here," says Reddy, managing director of Shantha Biotechnics Ltd. (Hyderabad). "We therefore decided to do it ourselves, and with the help of a financial partner from Oman, we revamped a full lab. I also wrote to 70 Indian scientists that were working abroad and asked them to join the project. Three of them came, and we started our team from there."
(PHOTO COURTESY OF DR. REDDY'S)
Thus began a movement in India that can be credited for the birth and rise of most of what is today India's biotechnology sector. "In October 1995, we could open our first facility, by which time we had cloned, fermented, and purified the antigen and were ready for scale-up. The country went from 180,000 doses in 1992 to today's 90 million doses, out of which 50 to 55 million doses are produced by Shantha." The move also triggered an influx of new entrants, which unexpectedly eroded prices and put the relatively young sector in difficulties. From $1 a dose, prices fell rapidly to the price of 4 rupees, slightly less than a single US cent.
Companies like Reddy's had to move to new markets to survive: Following successful prequalification by the World Health Organization, the first granted to an Indian company in 2002, Shantha struck a deal with UNICEF, the United Nations Children's Fund, and today supplies 52% of the UN agency's hepatitis vaccine for global use.
Dr. Varaprasad Reddy
Global demand diversified and combined vaccines such as DT–polio, and newer products such as erythropoietin (EPO) or interferon were rapidly added to the company's products list.
Despite being a global company and a seasoned biotechnology player, Shantha has a turnover that ranges from one tenth to one hundredth of most direct western competitors. "Equivalent hepatitis products to ours are sold for $70 in the US, $40 in Europe, and we are selling our vaccine at 23 cents. The same thing happens for our EPO." In these conditions, the results posted aren't that impressive, but Reddy is confident that they will triple within a few years.
Shantha captured the attention of French vaccine powerhouse BioMerieux, and by the end of 2006, the Lyon-based company acquired a 60% majority stake in Shantha. With this incorporation in BioMerieux's global network, Shantha is expected to become a major research and development center for the French company and a global hub for vaccine development.
"Indian companies will look forward to find western sponsors for contract development and contract manufacturing," said Reddy. "We cannot have our own intellecutal property, because of lack of resources, but our innovation in India will be useful for western companies."
Leading the Pack
Lessons learned from the top
Profile: Dr. Reddy's Laboratories
Life isn't so relaxing at the top. Ranking first among Indian pharmaceutical companies, Dr. Reddy's Laboratories (Hyderabad) is in itself a model that a lot of companies in the Indian industry have either drawn inspiration from or at best imitated. Since 1986, when the company started as an active pharmaceutical ingredient (API) producer, until today as a $1 billion-plus fully integrated company, Dr. Reddy's is one of India's true multinationals.
(PHOTO COURTESY OF DR. REDDY'S)
Like most of the country's life-science powerhouses, the company has expanded its know-how from APIs to formulations but has also put the emphasis on two elements that make the company a genuine leader: global approach and innovation. A year after inception, the firm was already selling APIs to Europe and rapidly establishing manufacturing bases in Russia and the Middle East. In 1994, Dr. Reddy's entered the US generic market and set up a manufacturing facility there. Meanwhile, strong efforts were made to increase research and development, with the notable creation of a state-of-the-art laboratory in Atlanta, Georgia. In 1997, the company filed its first abbreviated new drug application (ANDA) and from then on, experienced a number of successes. Dr. Reddy's was the first Indian company listed on the New York Stock Exchange and the first to launch the generic drug fluoxetine (a generic version of Eli Lilly's Prozac). The company expanded by acquiring distribution players in the United Kingdom, API producers in India, and Germany's fourth largest generic manufacturer, Betapharm (Augsburg). It established Auriegene Discovery Technologies (Bangalore), a contract research company, in 2002, a move that was intended to help Dr. Reddy's learn more about drug discovery through contract research.
In time, the company became a one-stop shop for the global industry and put together its Custom Pharmaceutical Services (CPS). As explained by G.V. Prasad, the company's vice-chairman and CEO, "CPS is focused on innovators to get their innovations to market much faster. We have a large experience in sensitive organic chemistry, formulation development, and GMP manufacturing, and we use these skills to help biotechs as well as large pharmas to quickly take their innovation to registration stage and then follow on with manufacturing.... We started four years ago and should generate over $130 million out of it for this year."
Within the industry, innovation is the real goal, and being the first Indian player to register a new chemical entity (NCE) is the end game. "We have the highest research budget in India and we have done a lot in the discovery area, process area, and formulation area," said Prasad. "We have a strong discovery pipeline, so I would believe we are a research organization.... Dr. Reddy's has always done things ahead of the curve. If a company is to succeed, it should not imitate but truly innovate."
With a successful foray into the international market (Dr. Reddy's sales in the US alone reached $548 million in 2006), it might be time for the company to focus on India's growing potential. The company is going to have to fight hard to maintain its top position. A quick review of the country's talents and endeavors shows a number of companies catching up to Dr. Reddy's, demonstrating that it's not always comfortable being number one.
Machining Explosive Growth
Making the most of trends
Profile: Ambica Pharma Machines
Like many companies involved in the Indian life sciences, machiney makers are grinning broadly these days. Their client bases are growing steadily as competitive pressure pushes manufacturers evermore into global markets with stringent regulations and the need to upgrade their facilities and acquire faster, cleaner, and safer machines for production. This trend marks the days of the best machinery makers, while those less capable are being left behind. Yet, for those who have invested the time, the future is bright.
Ambica Pharma Machines (Ahmedabad) is one of them. A small player by any western standard, the company has been posting incredible growth rates, as much as 150% in the past couple of years, mainly because of foreign sales. Specialized in filling, capping, and washing machines, the company has noticed a new interest from the US market, in particular for its filling machines.
The company's chairman and managing director Ashok Mistry explains that Ambica has reacted accordingly: "We have totally renovated our own factory, installed two computer–numerically–controlled machines from the US (one milling machine, one turning center), obtained ISO 9001 certification, and taken steps to improve the quality and revamping of our production tool. The market has reacted very favorably, and we have the feeling that we did the quality improvement exercise right in time, both for local and global market."
As is the case for so many products, the Chinese competitive threat looms large, but Mistry is confident that the machines' quality and the postsales services aren't there quite yet. "Chinese machines might look quite okay at first, but actually cannot sustain comparison with our products. The metallurgy in particular is of substandard quality. Meanwhile, our machines are today able to compete with western products."
Multicard and polytalented
The future innovators of India
Profile: Cadila Pharmaceuticals Ltd.
Cadila Pharmaceuticals Ltd. (Ahmedabad) is long established in India and could make global headlines in the near future. Established in 1951, the company has transformed into a vertically-integrated, multi-disciplinary player with a strong emphasis on research and development (R&D)—the field that makes India such a promising territory for the future of the global life-sciences industry. From active pharmaceutical ingredients (APIs) to machinery, finished dosages, and vaccines, Cadila has developed an intuitive approach to what is required from the industry today. It is therefore unsurprising that contract research and manufacturing (CRAM) activities have been added to its list of capabilities.
Indravadan A. Modi
Indravadan A. Modi, the company's chairman, explains that Cadila's "CRAM activity is nascent. We have three small ongoing projects, all involving foreign partners. We have also just entered an agreement with one of the multinationals to develop two new generic products." This illustrates once again the rapid rise in interest on the part of multinationals to the cost and time-saving opportunities held in India. Cadila is a good example of a company that has successfully managed the transition into the post-2005 patent regime. It opens the doors of its formulation units to foreign companies and is making a point of respecting intellectual property, said Dr. Bakulesh Khamar, Cadila's executive director for research.
Although Cadila's profile is largely in generics, it is investing heavily in R&D to develop a hybrid profile and to bring new chemical entities to the market, in particular in the field of adjuvants. The company is also working on drug-delivery systems. Recognizing the dual nature of his organization, Khamar adds, "We support the large generic companies as far as APIs are concerned and work in partnership with them, but today we also have a platform to work with the innovating companies on a partnership model. "
Made-in-India Excellence: Dabur
Cadila is representative of various players that may soon bring additional value to the industry, both locally and globally. Modi, who has been at the forefront of the sector as president of the Indian Drug Manufacturers' Association (IDMA) and chairman of the Basic Chemicals, Pharmaceuticals, and Cosmetics Export Promotion Council (CHEMEXCIL), has been credited many times over for his belief in the strength of the public-private partnership and the positive impact of the 1970 Indian Patents Act on the industry. Today, he aims to provide a clear international approach to his organization and is proud to point out his company's five abbreviated new drug applications with the US Food and Drug Administration. The applications will be followed by two to three more this year, and as many as six in 2008.
Meanwhile, on the API front, Cadila, under the leadership of Rajiv Varma, president of the company's API business, has 15 drug master files and will be submitting 10 to 12 per year going forward. It seems clear, therefore, that Cadila's dynamism isn't about to wane—rather, Cadila is a company to watch.
Serving the World
Profile: Dishman Pharmaceuticals and Chemicals Limited
Contract research and manufacturing services (CRAMS) is a favored model among many Indian pharmaceutical companies. Some have added these activities to their core business alongside development, realizing its potential for outsourcing to the West. Others established their companies with CRAMS from the onset. Take Dishman Pharmaceuticals and Chemicals Limited (Ahmedabad), one of India's largest companies. Since its establishment in 1989, the company's managing director, J.R. Vyas, has taken a unique approach compared with other local manufacturers. "Most of the companies here went after generic APIs [active pharmaceutical ingredients], then generic formulations," he explains. "The awareness for CRAMS has risen later, in particular for mid-sized companies. But opportunities lay for this size of companies: The model will become stronger and stronger in the years to come as Big Pharma companies who can also do it have already put their priorities somewhere else, like in formulations, creating their own field forces in Europe and the US and geting better value from their formulated products."
With a strong base in specialty chemicals and a solid research and development backbone established following a $100 million investment, Dishman can help formulators develop compounds on scales from grams to tons. But the unusual aspect of the company's model is its strong noncompetitive dimension—the company is not a generic player. "We are a pioneer in the CRAMS profile and have to create our own structured models," explains Vyas. "We are not into generic APIs although we are producing intermediates and have the capabilities to develop generic products when required. So we have a technology-transfer division where we develop technologies for our customers, license them for a small fee, but offer to our clients the possibility to enter a supply agreement for the intermediates. This is both an innovative and contract manufacturing agreement model."
Dishman expanded to the global market by acquiring in 2006 Carbogen-Amcis, a Swiss research company with three production facilities in Switzerland. The acquisition boosted Dishman's contract manufacturing business, allowing it to become the only contract manufacturing organization in India with high-potency manufacturing capability. "The model we are now offering is interesting as there would be one project manager, and absolute seamless development," says Vyas. "If it is a large tonnage product, we also offer our USFDA facilities in India, and can provide the customers with tailor-made development solutions. When an innovator works with someone like Carbogen, up to preclinical Phase I, they will want someone willing to do a very fast job for a few grams. After Phase I, when the biovalidity and the dosage is known, and the customer is deciding the target price for the API, that's when they start looking for the company who can improve upon the process. This is where we come into the picture. In Phase II, cost optimization becomes essential. India is the best location for that, as cost structure is optimal. You can therefore commit many chemists to be able to work this optimization at best. You need hundreds of experiments to find the best routes for your production, and the cost structure here makes it possible under the best conditions."
While looking for additional opportunities in the United States and Europe, Dishman is also venturing into API production in Saudi Arabia and considering options in Africa. Dishman has established a sales presence in Japan as well. "Today, 90% of our business is generated around the world with 10% in the US, but with our acquisition of Carbogen-Amcis, we expect deeper changes," said Vyas.
Local Success Story Turned Global
How Indian companies can become cornerstones in global growth plans
Profile: Matrix Laboratories Limited
Many companies' stories illustrate how the Indian pharmaceutical sector is becoming a key ingredient for global success. Take Matrix Laboratories Limited (Hyderabad), a business venture started in 2001 by a young Hyderabad entrepreneur. In 2006, Matrix was acquired by US generics company Mylan Laboratories Inc. (Canonsburg, PA). The acquisition was a landmark deal for the Indian pharma sector in terms of size ($736 million) and the profiles of both purchased and purchaser. Mylan, one of the five largest generic finished-dosage forms players in the world, was established in 1961, strongly US-focused and had hardly ventured abroad with the exception of manufacturing facilities in Puerto Rico. Matrix, a much younger company, was established with global markets in mind, and quickly managed to sell its high-quality active pharmaceutical ingredients (APIs) around the world.
Since inception, Matrix has posted spectacular growth rates in the Indian pharma industry. It is therefore unsurprising that it recently signed a much-noticed agreement with the Clinton HIV/AIDS Initiative to supply second-line antiretroviral drugs as well as a new, once-a-day pill for AIDS patients. The 2006 acquisition of Matrix has equipped Mylan with a strong vertically-integrated profile, while strengthening Matrix's efforts in the production of finished-dosage forms. As Matrix CEO Rajiv Malik explains, "This was a highly complementary move as we have established our strengths in the API space, whereas Mylan is a strong player in the finished-dosage business and has the lion's share in the US market for more than 50% of their products being marketed to date."
The acquisition seems to have given wings to Mylan, which following the success of the Matrix purchase, bought Merck's (Germany) generic business last May. The combined group will have a much stronger global exposure.
Product Mix Can Be a Plus: Jupiter
According to Malik, "Mylan was a local company, with a good critical mass, excellent supply chain, service to the customers, and great facilities with 20 billion units capabilities per year. They had efficiency of scale but they also realized that they had limitations, as the US as a sole market is in itself a limitation factor. Mylan therefore needed to balance geographies.... The only thing they need to achieve is the scale in geographies, and this will be brought together by the joined efforts of the Mylan and Matrix teams."
The merger highlights how India can be a stepping stone for any global strategy. From backward integration to research and development facilities (Matrix is also posting encouraging results from its contract research and manufacturing activities), from international sales networks to FDA-approved manufacturing units, India's offerings seem unending. A number of local companies can provide the pharmaceutical industry with tailor-made solutions for global growth.
As Malik concludes, "We really feel proud of what has been achieved at Matrix in a short span. We started from scratch and created the kind of shareholder value that got them the award of 'Fastest Wealth Creator' twice in the last six years."
One-Stop Shop Service
The irresistible ascension of a service provider
Profile: Jubilant Organosys
Taking advantage of the pricing pressure that started weighing on the global pharmaceutical shoulders a decade ago, Jubilant Organosys (Uttar Pradesh) has become one of India's most noticeable and promising vertically-integrated leaders and has successfully established its presence at the heart of western markets. Anticipating well the growth in demand, Shyam Bhartia, the company's chairman and managing director, steered Jubilant into a string of acquisitions that have made the company a well-anchored global player, with the aim of becoming a billion-dollar company within the next three years.
From moving into active pharmaceutical ingredient (API) production in 2002, to purchasing PSI N.V. (Belgium) in order to learn more about the European market, to acquiring in 2005 US laboratory and generic manufacturer Trinity/Trigen (Maryland), to purchasing in 2007 Hollister-Stier Laboratories LLC (Spokane, WA), Jubilant has been busy expanding its reach across the globe, and across the spectrum of pharmaceutical activities.
Today, Jubilant's focus is the development of its profile as a leading custom research and manufacturing services provider. The company's acquisition of Hollister-Stier will provide it with a direct entry into injectables contract manufacturing while bringing in a high-quality allergy extracts and products business.
Explaining the rationale behind these foreign purchases, Bhartia explains that "the ideal acquisition is one where we can get a certain technology platform, one that is adding to our technology expertise and to our customer base when the customer profile is good. If the management of the company can take the benefit of Indian research and manufacturing and leverage it to increase the business, we see opportunities for acquisition." Indeed, although it might require some changes in mentality in some parts of the western world, this is what is truly at stake. And to further show where the real synergies lie, he adds: "We don't acquire for top and bottom line growth. This was our policy in the US, too when we acquired Trigen/Trinity. The strength was that we were developing products in India and manufacturing them in the US. Abbreviated new drug applications (ANDAs) were developed in India at much lower costs than in the states, filed in the US, manufactured there and then sold to the US industry. This is proper leveraging of the strengths of both sides."
Despite the ambitions of the company in the custom research and manufacturing services area, Jubilant also remains an API and finished-dosage-forms generic player and isn't intending to drop either activity. According to Bhartia, "Price erosion on the generic market has been very strong: sometimes 98–99% in the US market, all of this within a very severe competitive environment. Our strategy has therefore been two-fold. On one hand, entering the market with only few blockbusters and more drug-delivery based products. We have developed, for instance, technology platforms for multidissolving, slow-release tablets and for other novel drug delivery systems. We therefore add value to our generics and can concentrate on niche product areas, where competition is less important. On the other hand, [we are] developing our outsourcing services to the large pharmaceutical companies."
The model allows the company to maintain revenue-generating activities while strengthening its position as a contract research and manufacturing services player. It also provides a full-package solution to global companies willing to outsource their development phases, scale-ups, and manufacturing. "Today we offer a one-stop shop to these companies, from drug-discovery services, drug-development services, to intermediates, APIs, and dosage forms in tablets, capsules, and injectables."
Jubilant's model is built on an ever-rising demand for a faster and cheaper development phase, allowing quicker cost-recouping exercises and more launches. "We can help the pharmaceutical industry to develop their pipeline," says Bhartia. "For the same expenditure they would put together to develop a drug in the West, they can develop three or four.... In the next few years, there will be billions of dollars worth of patent expiries. So, as outsourcing partners, we believe there is a golden era ahead of us. We are moving with the market."