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Indian Pharma's Big Leap

Indian Pharma's Big Leap

Drug companies are moving up the value chain, transforming into complex generic manufacturers with high end R&D facilities.

Nagpur-based Zim Laboratories is a non-descript drug company with turnover in excess of Rs 250 crore. In the past two decades, Zim has been silently working on developing innovative and differentiated pharmaceutical products or specialty generic complex drugs. Recently, it developed a new product, Orally Disintegrating Strip (ODS) formulations up to 100 milligram, based on a patented oral thin film technology. These films, when placed on the tongue, adhere to the tongue mucosa and disintegrate almost instantaneously. There are only some 10 companies across the globe with this technology, but they are not able to grab a big share of the market due to prohibitive manufacturing costs. "With our technology, we can offer thin films at a price near to that of an oral tablet," says Anwar S. Daud, Managing Director of Zim Laboratories.

Zim is in advanced stages of further researching the product to launch thin films with fixed dose combinations and liquid drugs, 3D printed tablets for personalised medicines and nano-fibre-based thin films. If Zim is a small player doing such cutting-edge research and development (R&D), most of the Indian drug majors are now doing the same on a large scale. In March, the US Food and Drug Administration (USFDA), approved the first two generic versions of cinacalcet hydrochloride (Sensipar) tablets for the thyroid treatment of dialysis patients. Both those companies were from India - Cipla and Aurobindo. Amgen's Sensipar generated $1.72 billion in revenue for it in 2017 and comprises 7.5 per cent of its total annual earnings. Now consider the example of India's leading drug company Sun Pharma. The company's shares rose 6.4 per cent on December 27, touching a five-month high, after the USFDA accepted its new drug application for a complex product OTX-101 (cyclosporine A, an ophthalmic product).

Such examples show the direction Indian pharma is taking - from simple chemistry skills to complex ones and high-end R&D. India allowed a process patent regime in early 1970s, helping Indian drug companies to reverse engineer any drug and make cheap copycat versions. It spawned the success story of Indian generic companies. The likes of Dr. Reddy's, Ranbaxy, Lupin, Sun Pharma, among others, emerged as the champions of generic drugs and exported to almost all nations across the globe. India became the destination for low-cost simple 'generics'. Almost one out of four drugs sold anywhere in the world is manufactured in India. Now, India is the third-largest manufacturer of generic drugs in the world, but in terms of value it stands only at the 13th position. And that will soon change as Indian companies are now concentrating on developing high value specialty generics and biosimilars (generic versions of biotech drugs) that are difficult and complex to make, require higher degree of expertise and increased investments. If the leading Indian drug companies were spending only 2-3 per cent of their revenue on R&D in the past, now most of them spend 8-12 per cent of their revenues on developing niche specialised products.

Complex R&D

A simple generic is a copy of a small molecule drug and is chemically identical to its branded counterpart. But a complex generic has a complex active ingredient, complex formulation, complex drug device combinations delivered through complex routes of administration, or all of the above. While classification differs across companies, development of a complex generic product requires deep understanding of the Reference Listed Drug (RLD) - an approved drug product to which new generic versions are compared to show that they are bioequivalent - its composition and delivery system, its manufacturing process, its action mechanism and its pharmaco-kinetic and pharmaco-dynamic behaviour in the human body. It needs more innovative thinking, meticulous planning with deep understanding of technology and higher levels of quality and regulatory requirements to bring such drugs to market.

"While the cost of developing complex generics varies from product to product, it can be on an average 5 to 20 times higher than standard generics", says Glenn Saldanha, Chairman and Managing Director, Glenmark. Such drugs are not easy to make and it involves a lot of risk in the development process. The development of complex generics is time-consuming and expensive. There are difficulties in demonstrating sameness in characteristics and performance attributes, and in demonstrating bioequivalence with the RLD product. Its manufacturing processes are also complex.

"Considering the complexity of the product, it is much more difficult to characterise and show the sameness and bioequivalence of a complex generic to its RLD. The overall development and regulatory approval process takes longer than standard generics," says Saldanha. Glenmark has been one of the few early entrants in the complex generics space in India - it was the first Indian company to launch generic dermatology and generic oral contraceptive products in the US.

Broadly, complex generics can be classified into four categories - Complex Active Ingredients (like peptides, complex mixtures and natural source products), complex formulations (liposomers and iron colloids drugs), complex route of delivery (like locally acting drugs) and complex drug-device combinations (like dry powder inhalers, metered-dose inhalers, medicated adhesive patches, etc.). Biosimilars are often confused with complex generics but their development process is completely different. Complex generics are chemistry-based compounds, while biosimilars are similar versions of large molecule biologic drugs.

Glenn Saldanha Chairman and Managing Director, Glenmark

A Difficult Opportunity

It's a huge opportunity as competition is very limited. Returns are very attractive. About $120 billion worth drug sales moved to generics due to patent expiration between 2009 to 2014 and more than $200-215 billion worth drugs will lose patent expiration between 2015-2020, according to various industry research reports. Many of these products fall in the category of difficult to make generics. The US generics market alone is valued at $70 billion with specialty generics having a significant share. Most of these are chronic therapy high-value drugs for diseases like cardiovascular disorders and cancers and are more or less insulated from high commoditisation and resultant price erosion.

Normally, when a drug goes off-patent, price erosion can happen by up to 80-90 per cent due to intense competition. In the US, wholesalers have consolidated to just three-four companies and their bargaining power is adding to the margin pressure on Indian companies. Meanwhile, the US FDA has reduced its approval-processing time from 60-90 days to 30-60 days, and has come out with clear-cut guidelines for complex generics. "There will be over 20 generic players competing for a simple molecule going off-patent, but in the case of complex specialty generics, the competition will be restricted to very few players," says Ramesh Swaminathan, Executive Director and CFO, Lupin.

Sun Pharma was one of the first Indian companies to focus on developing specialty generics. "Over the years, we have launched a variety of complex generics in the US and other geographies and some of our products in this segment are liposomal doxorubicin, azelastine nasal spray, sumatriptan autoinjector, etc.," says Prashant Kane, Head - R&D PMO, Sun Pharma.

According to a YES Bank study in May 2017, Indian companies have already developed a big pipeline of complex generics and filed marketing applications (ANDAs) in the US. The study says Lupin (30), Sun Pharma (27), Dr. Reddy's Laboratories (25), Zydus Cadila (15), Natco Pharma (13), Wockhardt (10) and Aurobindo Pharma (9) are some of the front runners in the complex generics pursuit. Aurobindo is investing in the area of peptides; Sun Pharma and Dr. Reddy's Lab are concentrating on liposomes complex generics; Sun, Lupin and Glenmark on locally acting drugs; Cipla and Lupin on dry power inhalers; Cipla, Lupin and Glenmark on Metered Dose Inhalers (MDIs); and Cadilla and Dr. Reddy's on transdermal systems, says the study.

"Our scientists have developed deep understanding of many complex technologies. Our product pipeline comprises a pragmatic mix of complex generics and normal generics," says Sun Pharma's Kane. Lupin's Ramesh Swaminathan notes that his company has been the top R&D spender among peer Indian companies and has developed a large pipeline of complex generics that will be monetised in the coming years. Some of these include anti-cholesterol drug Welchol, angina drug Ranexa, ulcerative colitis drug Lialda, etc. "Currently, we have six-eight complex generics either filed or under development for the US market, and one biosimilar under development for the US," says Glenmark's Saldanha.

Ramesh Swaminathan Executive Director & CFO, Lupin Ltd

In order to meet development costs, companies are also partnering with other companies. "We have partnered with several global companies to boost our complex generics pipeline, including the recent partnership with SCD Pharmaceuticals for ophthalmic products," says Saldanha. Lupin is developing a new biologic drug to treat rheumatoid arthritis drug by teaming up with a Japanese company Yoshindo. Dr. Reddy's got into a licensing agreement with Foamix, an Israel-based company, to develop a novel drug for psoriasis.

Acquisitions are also part of the complex generics development game. Lupin paid $880 million in 2016 to acquire GAVIS Pharmaceuticals and Novel Laboratories (GAVIS) in the US to access its $9 billion worth of pipeline, mainly in dermatology and controlled substances. Recently, Lupin also did a small acquisition in the US to access a pipeline for women's health products. Sun Pharma, which earlier acquired specialty company Israel-based Taro, acquired InSite Vison, USA for BromSite. In 2016, it also acquired Ocular Technologies to secure its rights for Seciera cyclosporine ophthalmic solution for treatment of dry eyes. Zydus Cadila entered the specialty pain management market in the US with the acquisition of Sentynl Therapeutics.

While Indian companies are facing regulatory hurdles abroad, the focus on complex specialty generics and biosimilars augurs well for the future of Indian drug companies.