At the end of the day, pharmaceuticals is an innovation-driven industry

Since last October when Sun began its ‘due diligence’ on the vaccine candidate, managing director Dilip Shanghvi himself visited ICGEB to hold talks. (Central to such decisions is his adviser Altaf Lal, an American national of Indian origin who has worked at various organizations in the US and was a health attaché at the American Embassy in Delhi.)

Of course, it helped that Sun already had an alliance with ICGEB to co-develop a dengue drug. It was initiated by Ranbaxy but when Sun discovered it during its merger with Ranbaxy, it revived the deal in May. Since it is a botanical product, Sun is likely to manufacture it with assistance from a new botanical drug facility at the Indian Institute of Integrative Medicine in Jammu.

Sun recognizes that medical science is shifting from chemistry to biology. No one would disclose the size of the dengue vaccine deal but it’s fair to assume it’s gilt-edged for Sun. It is, after all, Indian intellectual property. At ICGEB, Khanna spent Rs 15 crore in external funding on his research which included grants from the Indian government and the world’s largest medical charity Wellcome Trust. (Khanna already has a dengue testing technology in the market—India’s first rapid test kit licensed to J Mitra.)

Enhancement of the attraction

“A vaccine company from Hyderabad was interested in licensing it but we found the Sun offer more attractive. You have to understand that our mandate at ICGEB is also to bring out drugs for developing countries,” says director Dinakar Salunke.

The entire linchpin of the generic business model so far was to exploit chemistry and make copycats. It was cheaper, faster and plenty of innovators’ drugs were around to copy. Not anymore; too many cooks are spoiling the party.

Let’s talk about the second whitespace – a company that makes branded generics – Eris Life Sciences.

When I first spoke with its founder Amit Bakshi four years ago, he was coy about speaking with a journalist for the first time but was pretty confident about changing the game or at least make a mark, in specialty pharma. He had said, “What ICICI did to banking—treat customers like customers, charge a few basis points higher than the public sector banks and provide quality service—Eris will do to specialty pharma.”

In 2016, Ahmedabad-based Eris has Rs 800 crore in revenue with slightly over Rs 200 crore in net profit.

And zero export income.

Eris wants to raise Rs 2000 crore in an IPO which it believes will value it at Rs 10,000 crore.

In its nine years of existence, Eris has looked for ‘gaps’ in doctor’s prescriptions and tried to fill it, focusing on chronic lifestyle ailments.

Now, some large Indian companies will do this too. Which is why Biocon’s Limaye is “not surprised” that big Indian pharma is adding to its field force.

Executing the plans

“India needs top class execution, more than any other market. It is all about branded generics and how well you can execute in doctor’s chambers. The market is shifting to chronic lifestyle diseases so I think there’s a lot of untapped potential,” says Limaye.

Since India is already a dog eat dog market, it can’t get any more competitive than this. Prices are rock bottom, lower than even the markets in the least developed countries. Successive governments have refused to understand the logic that capped prices do not ‘make’ health care. They continue to add drugs to the National List of Essential Medicines – it has 464 drugs today, up from 376 a year ago.

Speaking from Spain last week, Hamied, 80-year-old Cipla patriarch, still sounded sore. “If we have to invest in India, we should have defined policies. Do we have a drug policy? Or even a pricing policy. Everything is so ad-hoc,” he said. Then added, “Cipla is doing both, [investing in India and overseas].”

On Friday, in a case where Cipla had challenged the ‘ad hoc’ price control, the Supreme Court upheld the government’s stance. Price control is the new reality pharma companies have to live with, even worldwide. It’s the new on-demand thing after the license raj was the thing.

Still, there’s room to grow. “We have not reached every patient in the country, though we all know access is not a function of pricing,” says Limaye.


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