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March 04, 2007

State of Indian Life Sciences industry

Business Today has a special feature on the Indian Life Sciences industry including the generics, contract research, original drug development and biotech sectors.
Mid-January, Mumbai-based Nicholas Piramal announced a deal with giant Eli Lilly to develop a patented molecule. The $100-million deal requires Nicholas Piramal to take the molecule (meant to treat metabolic disorders better) through clinical development phases I to II. In return, the Indian partner will get milestone-linked payments (which, hopefully, will total to $100 million), besides the right to market the drug in India and some other parts of South East Asia.

Why is Lilly, which has better labs and vastly bigger R&D budgets, turning to a small Indian company to develop drugs for it? The answer has to do with what's happening in the global pharmaceutical industry. Finding blockbuster drugs has got a lot harder, even as costs of R&D and compliance have steadily climbed. Various estimates put the cost of developing a drug in the US at between $800 million and $1 billion. The Piramal deal, if it bears fruit, will be a steal for Lilly. Actually, it's just the sort of win-win arrangement that's fuelling the growth of an entire industry-that of outsourced contract research and manufacturing (cram). "Timeline, affordability and confidentiality are some of the factors working in favour of companies like ours," says S.P. Vasireddi, Chairman & Managing Director, Vimta Labs, one of India's leading clinical research organisations (CROs).

In 2005, the cram market was estimated, by ASSOCHAM, at $532.10 million, of which manufacturing accounted for 84 per cent and research the rest. The outsourced clinical trials piece, in comparison, was worth $100 million. If McKinsey's numbers are anything to go by, then the market is set to explode. The consulting firm expects revenues from outsourced clinical trials to touch $1 billion and cram to zoom to $900 million. "With an increasing number of cram agreements, the target is likely to be hit," says Anil K. Agarwal, ASSOCHAM's outgoing President. Agrees J.R. Vyas, Founder and CEO, Dishman Pharmaceuticals & Chemicals: "My company is looking at a 40 per cent growth in 2006-07."

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.