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March 14, 2009

New Drug Discovery Cos. Making a Mark

Businessworld has an article on a new crop of drug discovery companies - most of whom are Private Equity-backed - that are promising to represent the version 2.0 of the Indian pharma story.
Today, NovaLead is at the doorstep of a destiny that India’s pharmaceutical Goliaths — Ranbaxy Laboratories, Dr. Reddy’s Laboratories and Glenmark Pharmaceuticals, among others — wandered into and faltered despite a decade of research: discovering a new drug. Deshpande has 11 molecules in the pipeline, for conditions varying from cancer to acne, and claims his first drug, a diabetic wound treatment, could hit the market in the next two years.

As the great Indian generic drug success story loses steam, Deshpande and some other pure-play drug researchers could well become the next generation of Indian pharma companies to make their mark globally. Apart from Deshpande, this list includes Sundeep Dugar, who started Sphaera Pharma in Haryana last year; Sunil Bhaskaran, who set up Indus Biotech in Pune in 1997; and Swaroop Kumar, Glenmark Pharmaceuticals’ former R&D chief, who set up his own research firm, Incozen Therapeutics, in Hyderabad last year.

“The great Indian generic drug story is over. Several companies are already on their death bed,” says Nitin Deshmukh, head of the Kotak Private Equity Group (KPEG), the private equity arm of Kotak Mahindra Bank, which has already invested in NovaLead and Indus Biotech. “The next big opportunity is in new drug research.”

The risks involved are enormous. New drug development is costly, success rates are low and investments take a long time to pay off. But a single new drug could generate annual revenues on a par with that of the total sales of an average mid-cap pharma company in India.

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. Email the author at