Indian Pharma companies increase spending on R&D
November 22, 2016: Indian pharma companies in the recent times have increased spending on R&D specifically in specialty drugs and complex generics. This trend has been prominent in top drug makers of the likes of Sun Pharma, Dr Reddy’s, Lupin, as these drugs are expensive to develop. These specialty drugs are used to treat complex conditions like cancer, multiple sclerosis, rheumatoid artiritis. Ideally these drugs entail investments of US$ 5 million as against US$ 1-2 million for developing simpler dosage forms.Investments are just however, only one part, with commercialisation being the other key component. Therefore acquisitions have been the natural choice for companies. Pharma companies have been making acquisitions in US, Europe, Japan to cut time to bring these specialised products to market.
Business in the US maket has suffered for most of the pharma companies due to pricing pressure and currency fluctuations, with the shift towards increased spending on R&D being natural.For the duration of the past six years, the R&D spending by top Indian pharma companies grew by 3-6 times in comparison to sales which rose by 2-4 times. For the financial year 2016-17, R&D investments is expected to be higher than the previous financial year. Sun Pharma will approximately have an R&D expenditure of 9 per cent of sales, while Lupin is likely to incur expenditure to the tune of 13-14 per cent of sales on R&D. Cipla’s R&D is expected to spend 6-8 per cent of sales, Dr Reddy’s expected spending would be to the tune of about 12 per cent of sales on R&D whereas Aurobindo Pharma will be spending around R&D spending at 4-4.5 per cent of its sales in 2016.
Companies are also increasing expenditure on increasing manufacturing capacities with Alembic spending on manufacturing facilities for injectables and tablets and also increasing its Active Pharmaceutical Ingredient capabilities, Divi’s Laboratories is making an investment of INR 500 crore at its plant in Kakinada in Andhra Pradesh, Dr Reddy’s would be incurring capital expenditure of INR 1200 crore in FY17, with majority of the spending used for biologics and developing information technology and automating processes.
This trend towards development and marketing specialty drugs would be the next step for Indian companies to move ahead in the value chain and sustain the growth momentum, with good returns. Almost half of investments in US have been in the areas of specialty therapies, particularly oncology, multiple sclerosis, auto-immune and haemophilia with higher number of product launches in specialty therapies rather than traditional therapies.