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| Friday, September 03, 2010 | ||
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Outsourcing trends in formulationsThursday, September 29, 2005 08:00 IST The dynamics of the value chain of pharmaceutical Industry in India is changing with many Indian companies using their manufacturing facilities which cater to both, captive market demand as well as demand for European, American, SAARC & APAC markets. A look at the revenue generated through pharmaceutical exports which is to the tune of 40% of the revenue generated by the Indian pharmaceutical market ($8 bn), boasts of the capabilities of the USFDA approved plants of Indian players. This single attribute has gained the confidence of MNC players looking at India as a partner of choice in manufacturing. A large percentage of export opportunities arise out of formulation development, which accounts for 55% of the export. It is no wonder that contract manufacturing deals for suppliers of formulated products is becoming more of a strategic business partners rather than an extra pair of hands. Capabilities are growing. India has the maximum number of US FDA approved plants outside US. Indian Drug Manufacturers' Association (IDMA) estimates that there are nearly 20,000-manufacturing units operating in the country. Of these, 80% of the companies are into contract manufacturing of some kind or the other. There is a clear trend in terms of nature of formulation exports; developed countries are the destination for generic formulations whereas, companies like Cipla, Wockhardt have profound presence in developing countries like CIS, South East Asia, Africa, and Latin America Focus shift: API/Intermediate supply partnering to Formulation development Until 3-4 years back, collaborations between MNCs & the Indian pharma companies were in the area of supply of active pharmaceutical ingredients & intermediates. Classically MNCs seek partners in preformulation (primary stage) as well as the final formulation stage (secondary stage, which is scale-up step), leading to alliances with companies that offer one stop solutions to companies launching new chemical entities(NCEs). There are few Indian companies who have partnered at both stages, but this will be the future model of formulation outsourcing. It is worth noting that one of the biggest drivers for such an alliance apart from cost concern, is the quest to protect intellectual property rights for launching of NCEs. The game of partnering for formulation development evolves out of risk-sharing. A pharmaceutical company may give its compound to a niche contract manufacturer or specialized service company to solve a specific formulation problem. In this case the compound is handed over to the contract manufactures and returned after the work is completed. Thus the pharmaceutical company assumes all the risk in its development. With biopharmaceutical drugs gaining importance, big pharma companies partner with small companies for sharing of drug delivery technologies. In this sceanrio one partner develops the molecule and another would share its unique delivery technique. The molecule innovator company share the risks and ultimately the rewards through a licensing agreement, partnership, or other contractual relationship Specialized-technology companies may perform specific formulation like that of coating molecues for better efficacy. This is how product life cyles of drugs are being renewed in the filed of oncology, for example, lipid-coated doxorubicin is entering the market with a fresh selling point of low toxicity.This drug will gain credence in the treatment of cancer where in the pursuit is to balance efficacy and quality of life during the course of treatment. Torrent is one of the Indian companies who has been successful in establishing the most practiced model wherein its manufacturing facility serves the captive demand for human insulin market in partnership with Novo Nordisk. Novo Nordisk's (66% market share in insulin) deal will prove to be a cornerstone in the effort of making cheaper products available to Indian consumers. Other joint-ventures worth a mention are ; Wockhardt - Ivax for manufacturing nizatidine (anti-ulcerant) ; Nicholas Piramal - Advanced Medical Optics for eye-products; Dishman Pharmaceuticals -Solvay Pharmaceuticals for eposartan mesylate. As compared to other areas of outsourcing in India, this market is relatively maturing and is expected to see a high degree of fragmentation. More and more specialized segmentation take root and service offerings become specific with regards to chemistries, dosage forms, and drug delivery technologies. Rena Shukla is research analyst- Healthcare Practice, Frost & Sullivan. The author can be reached through: sdedhia@frost.com
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