Till last year, auto components were the fastest growing segment of the manufacturing universe. But the slowdown and the liquidity crisis have taken the sheen off auto components, with the focus now shifting to another segment: contract research and manufacturing services, popularly known as Crams.
Most Indian pharmaceutical and life sciences companies have entered this sector which typically implies outsourcing of manufacturing by global pharma majors to Indian companies, and is expected to become a $2.46 billion industry by 2010, from its current size of $869 million, according to a KPMG-CII study.
Swati Piramal, vice-chairperson of Piramal Lifesciences, the R&D arm of Piramal Healthcare, says Crams would account for 30-35% of Piramal Healthcare’s revenue in the next fiscal year. “Large pharma companies create value from R&D and marketing and not manufacturing. Manufacturing is not core to them, and considering that historically the sector has been conservative in outsourcing, the sector will have good growth in the medium to long term,” says Ms Piramal.
Within the US, approximately 33% of the $40-45 billion that is spent annually on R&D has been outsourced, and is projected to increase to 41% or to $24 billion this year, a recent Yes Bank report said. “Over the next 20 years the Crams market will go on increasing year-on-year,” said Janmejay Vyas, founder & MD of Dishman Pharma. Mr Vyas’s study for industry association CII, also finds India ahead of China in the manufacturing, both in terms of the number of US FDA-approved plants, as well as the number of drug master file filings.
The global Crams sector is projected to touch $64 billion by 2010, with India, already a leading manufacturer of active pharmaceutical ingredients (API) and intermediates. Indian companies can aim for a larger chunk of the market, prompting countries like China to join the bandwagon, say persons familiar with the trend.
J M Khanna, executive director at Jubilant Organosys, a firm that is also into Crams, recently said that although China is currently lagging behind India, “it (China) is working hard and can supersede India. We may face tough competition from China in the next 10 years.” Lupin, another major player, also sees growth in the Crams space.
The company’s Crams business, Novodigm, exports over 90% of its products to global pharmaceuticals and speciality chemical companies in European Union, North America and Japan. This core focus on custom synthesis and process research capabilities has helped Lupin double its sales in the past nine months.