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Focus turns to NCE research in drugs

By Harichandan A. A.

BANGALORE NOV. 8. By 2007, $42 billion of pharmaceutical drugs are to go off patent in the U.S. alone. Globally, including Japan and the EU, the estimates touch $50 billion.

What will happen after this market winds down, driven by competition, release of similar drugs with incremental improvements and so on? As the 2000s haven't seen any so called blockbuster new chemical entities (NCEs) yet, companies with businesses built around soon-to-go-off-patent drugs, would have to do something else to make money.

Led by Ranbaxy and Dr. Reddy's Laboratories, a handful of Indian companies are sinking money into hardcore medicinal chemistry research. It includes Sun Pharma, Torrent, Wockhardt, Orchid, Ajanta, Hickal and Biocon, say industry sources.

Can they do it? One head of a research facility here, said, "Indian pharmaceutical industry always ignored medicinal chemistry. On that, we can't match the MNCs in the West. What we have is superior-to-world-class process knowledge, in synthesis".

Companies recognise that that may have to change. Ranbaxy wants up to 30 per cent of its income from its own NCE, post-2007. The company is targeting an income of $1 billion by 2004, and $5 billion by 2012. Last month, the company announced a drug discovery tie-up with multinational drug maker GSK.

In quest of at least one NCE, the company is to invest up to 10 per cent of its income on basic research. That doesn't mean research will be in-house. Those with the resources may acquire small hi-end research labs in Europe and the U.S.

These include Wokhardt looking for an acquisition in Italy, and Ranbaxy's plans for a lab in Boston, apart from expansion plans in Western Europe. Biocon will raise up to $100 million for expanding business.

Some of that will go into NCE research, company sources say. DRL has also invested in a Bangalore based lab of a company called Aurigene. Finding the money Ranbaxy's 10 per cent may look impressive. But, the competition it faces is put in perspective by Pfizer's year 2003 R & D budget of $7 billion.

The plan seems to be to both go after off-patent drugs and challenge patents.

Over 50 per cent of Ranbaxy's revenues come from the U.S., on the back of cheaper generics. Last year it released a generic version of ceftin, an anti-infective made by GSK. DRL did it in 2001 with Prozac, Eli Lilly's anti-depressant.

This year, Ranbaxy's challenge on lipitor, Pfizer's anti-cholesterol molecule made ripples. In August, after an analysts' report that the challenge wasn't to be taken lightly, Pfizer's valuation plunged 3 per cent.

Contract manufacturing is another way to earn sure revenues. Biocon for example, makes statins, anti-cholesterol drugs, in bulk for export.

If Indian scientists make the transition from synthesis to thinking originally about medicine and biology and back it up with research successes, the MNCs might themselves think of doing research here, said one scientist.

That could change the game entirely, in India's favour. Swedish company Astra Zeneca already has a captive research facility here. The facility is said to have the single mandate of coming up with a `lead compound' to fight tuberculosis, by 2005. Astra Zeneca has made a `significant investment' in anti-TB drug discovery research, say industry sources.

Exactly how much is unclear but the research facility had an annual working expense of $2.5 million, sources said.

The research facility would also have a total of 120 scientists in a year's time, up from 70 now.

Captive or acquired, NCE research seems to hold the key to long-term success in the drug market, and a few Indian companies are taking the plunge.

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