Daiichi Sankyo stumps industry with move to pull the plug on Indian Research and development arm
E Kumar Sharma January 18, 2017
On January 10th, in a 100 word press release, Japanese pharma major Daiichi Sankyo announced that the company had decided to "to close its research subsidiary, Daiichi Sankyo India Pharma Private Limited."
The research subsidiary is located at Gurgaon, near Delhi and the move was meant "to increase R&D productivity." This left many in the pharma industry, particularly those among the pharma scientific community baffled, as they are still trying to read how the company could enhance its R&D productivity by moving out of a geography, which was meant to have strategic importance.
In fact, just little over six months ago, Yoshio Uchida, the Vice President & Head, Operations & Management for Daiichi Sankyo India Pharma Private Limited, as the entity was called in India, had told Business Today, that the research Centre in India is the global centre for Infectious disease area. The centre in India was mainly focused on infectious diseases (research in antibiotics) and on inflammation. These areas are not new to Daiichi.
In fact, it has had blockbusters in the antibiotics several years ago. Uchida had also said: "With change in circumstance and necessity to focus on limited therapeutic area, Daiichi Sankyo decided to downsize research activity for infectious disease in Japan and to shift these activity to the research centre in India." This research centre at Gurgaon was the last remnant, in terms of a direct physical presence, of the Japanese pharma major in India.
Its misadventure in India had began in June 2008 with the acquisition of Ranbaxy in an over $4-billion deal (around Rs 20,000 crore then) with the promise of utilising Ranbaxy's resources to become a 'global pharma innovator'. What, however, followed were a series of run-ins with the US drug regulatory, the US Food and Drug Administration (USFDA), over drug quality. Daiichi finally divested Ranbaxy to Sun Pharmaceuticals in April 2014 but it retained the R&D part.
Apparently, while officials at Daiichi would not say much, Business Today learned that while the Indian market per se was not of much significance to Daiichi, the research centre made sense, since it seemed to have provided talent capability plus the benefit of a region that was beginning to cope with the serious problem of antibiotic resistance. So, the bacterial population required for the company's study is higher here and perhaps there are some cost advantages, too.
Daiichi Sankyo has had a long history of innovation in infectious disease and would have known better. But now, the company says, it is reviewing its global R&D system with the aim of decreasing R&D operations costs and redistributing resources to the further development of its R&D pipeline. The Indian entity, it says, employed approximately 170 people, mainly engaged in conducting drug discovery research targeting infectious diseases and inflammation. It further added that following its closure, the R&D pipeline here will be transferred to Daiichi Sankyo's R&D Division.
"It is sad because there is hardly any MNC research happening in antibiotics out of India and this was a good case of R&D being done by an MNC in India," says Bugworks CEO Anand Anandkumar. Bugworks is a Bangalore based 18-member company that is working on drug-resistant and hospital-acquired infections since January 2014.
He also feels the argument on R&D productivity is hard to fathom because the two have nothing to do with each other and this move cannot be seen as one that would in any way raise the productivity. He says, as far as R&D productivity is concerned, it has been low overall globally and big pharma has been struggling with this. "The only silver lining," he says, from a Bugworks' perspective, "is that if bigger boys vacate the space, it only means innovation will need to happen out of smaller companies."
Others also speculate that the move has perhaps something to do with the fact that the it has been quite a while since the company has had a new blockbuster in anti-infective space and the field is getting challenging constantly with more bug resistance building. Therefore getting the right antidote has become a moving target. Others in the industry also see the move as a possible reflection of the company trying to cope with cost pressures with its major blood pressure medication getting off patent in the US.