On Friday, shares of Cipla touched a 52-week high of Rs 360.80 on the BSE following its management saying early this week that the company is in talks with ‘multiple global companies’ for a drug research and supply agreement. The company has neither confirmed nor denied that it is talking to Pfizer, the world’s largest drugmaker, for an alliance on this front.
This comes months after a licensing pact between the US company and Hyderabad-based Aurobindo to sell 70 generic drugs in emerging countries as well as in the US and Europe.
Collaborations with MNCs are not something new for Indian companies. For instance, Piramal Healthcare has a drug development agreement with US-based Eli Lilly since 2007, and Advinus Therapeutics, promoted by the Tatas, has a discovery and clinical development collaboration with Merck & Co.
However, there is a new buzz around India and other emerging markets as strategic destinations for global pharma companies. According to a McKinsey study, over the next five to six years, emerging markets will contribute nearly half the growth in the global pharmaceutical industry. Of these, five markets—Brazil, China, India, Russia and Turkey will account for as much as 70% of this growth.
Why is India an attractive destination for pharma MNCs?
Big Pharma is compelled to seek innovative approaches to R&D to reduce the cost of drug development and reduce lead times. Their profitability is under pressure owing to patent expiries, challenges in pricing and falling R&D productivity. While India has traditional advantages of competitive manufacturing, R&D cost structures and a high growth domestic market, experts say it is now time to leverage the latent innovation skills of the country and market it as a centre for experimentation in business model innovation. They say India has the potential to test, incubate and export business models in branded generics and medication for chronic diseases to other emerging markets.
But challenges remain, including worries on production quality, poor government funding in healthcare delivery infrastructure, and shortage of specialised skills in biology, clinical research and health delivery. Addressing these would be key to tapping the full potential of the ‘Indian advantage’ in the days to come