India – a biopharmaceutical manufacturing hub

India – a biopharmaceutical manufacturing hub

India continues to remain an important producer of small-molecule APIs, particularly in the generics sector. Moreover, India's CMO market is growing at over three times the rate of global contract market. Now, as the biopharmaceutical sector continues to grow, many wonder if India can take a similar role in the biologics arena. However, recent high-profile problems with India's small-molecule manufacturing, such as the FDA's September 2008 ban on imports from two Ranbaxy sites (due to lack of cGMP compliance), heighten concerns about quality. Biologics are expected to drive the pharmaceutical market in coming years and in India, this sector is expected to account for a significant portion of all approved drugs by 2011/12.

More recently, many Western companies have started to collaborate with Indian companies to take the cost-advantage of offshoring. For instance, Lonza, a Swiss based CMO has plans to invest in two major projects in Genome Valley outside Hyderabad, India's first state-of-the-art biotech complex for life science research, training and manufacturing. Lonza's investment, which is expected to begin in 2011, will occur in two phases. Each phase will include expanding manufacturing capabilities and biologics R&D.

Despite the success of several international collaborations, the Indian CMO sector has not seen a significant number of foreign biologics manufacturing contracts. This is mainly due to regulatory and intellectual property (IP) concerns.

Regulatory and IP issues

Compliance with cGMP guidelines is a major concern in India. Although IP protection legislation in India has been significantly strengthened, inadequate protection continues to be a major threat for many Western manufacturers. Moreover, apart from corruption and bureaucratic challenges in India, the production of counterfeit drugs account for one-third of the total counterfeit drug production in the world (WHO sources). However, the Indian government has made some significant changes to improve the situation. One such example includes the introduction of a new drug approval authority – the Centralized Drug Authority, a single centralized agency that will be responsible for all regulatory oversight in the country in coming years. In addition, the Indian government is also providing financial incentives favoring collaboration with foreign innovator companies and domestic innovation.

Key contract manufacturing/research deals in India

The following table illustrates about the key deals in the area of contract manufacturing and research in India.

Table 1: Key contract manufacturing or research deals in India, 2007–10
Innovator company	Indian CMO	Product/Category	Year
Pfizer	Strides Arcolab	Generic cancer drugs/sterile injectables	2010
Optimer	Biocon	Manufacturing fidaxomicin API	2010
Codexis	Dishman	Building blocks, intermediates and APIs	2010
Endo Pharmaceuticals	Biocon	Drug discovery partnership for biological therapeutic molecules against cancer	2010
Pfizer	Piramal Healthcare	Renewal of Morpeth site for formulation development	2009
Endo Pharmaceuticals	Jubilant Organosys	Developing preclinical oncology candidates	2009
AstraZeneca	Jubilant Organosys	Developing new pre-clinical compounds	2009
BioLeap	Jubilant Organosys	Drug discovery partnership	2009
Mylan	Biocon	Collaboration for development , manufacture and supply of biosimilars in cancer and auto-immune disorders	2009
Eli Lilly	Jubilant Organosys	Clinical research support in India	2008
Pfizer	Hikal	Supply of APIs	2008
Eli Lilly, GSK, Reliant Pharma	Shasun	Supply of APIs	2007/08
GSK, Merck, Abbot	Divis	Custom chemical synthesis	2007/08
Gilead	Shasun	Manufacture of Viread	2007
Alpharma	Hikal	Veterinary APIs	2007
Note: Updated as on September 2010.

Source: Company reports, Business Insights research

Future outlook of the global CRAMS industry and opportunities for India

Although the US and European CRAMS industries have traditionally been the key market for global pharma outsourcing business, they are not as cost-effective as Indian or Chinese players. Thus, India and China (which together account for about 5–8% of global pharma outsourcing business), having emerged as low cost contract research and manufacturing destinations, will account for a large fraction of pharma outsourcing market growth.

CMOs can manufacture products at a variety of scales, hence big pharmaceutical and biotech firms, which may lack their own in-house manufacturing facilities, stand to gain from investing in CMOs. However, choosing the right CMO partner may be difficult task for any company, particularly inexperienced start-up biotech players. Thus, they need to specialize in different types of production technologies such as mammalian cell culture, microbial fermentation and viral production. Vaccine production is also a key development.

India, riding on its cost-value proposition comprising low-cost skilled manpower and technical capabilities is excellently poised to capture a significant portion of this growing market. CRAMS organizations will continue to provide high growth opportunity and companies which offer reliable services with a significant value proposition in terms of costs and technology will succeed in the long run.

One opportunity for Indian CMOs lies in working with innovator companies in the custom synthesis segment for manufacturing APIs and intermediates at various stages of R&D. India has already emerged as one of the leading cost-competitive and quality manufacturing hubs for many global players including big pharma companies. Moreover, the current economic crisis along with the continuous pricing pressure and pro-generic agenda are driving the global pharma companies to leverage the strengths of Indian pharma manufacturers. Indian CMO majors such as Jubilant Organosys, Divis Laboratories, Piramal Healthcare, Dishman, are already exploiting the huge pharma outsourcing opportunities all over the world. While manufacturing of commercial scale API and intermediates is increasingly shifting to India, biopharmaceuticals are largely produced in North America and Europe.

In India, the annual per capita consumption of pharmaceuticals is among the lowest in the world – according to IMS Health, Indian pharmaceutical industry recorded a y-o-y growth of 6.3% to reach $8.3bn in 2009. This growing pharmaceutical market will be a major revenue driver for CMOs as they can gain trust to effectively win contracts.