Indian CROs chant globalization mantra
A host of Indian CROs are going global to strengthen their network and expand their services while many MNCs are foraying into India to tap the India advantage.
Globalization has become the latest mantra for most Indian CROs. Having consolidated their position in the Rs 425-crore Indian CRO market that had registered a growth of 70 percent in 2007, Indian CRO companies are now looking for opportunities beyond Indian shores. Attribute this to the basket of advantages they have to offer to the global market in the form of skilled manpower and expertise, cost effectiveness, improving infrastructure with a simultaneous easing up of regulations. Globalization as the industry claims, has today become a 'business necessity'. "If we do not take the step now, then a number of global CROs will come to India and give the same India advantage to the world. This will lead to rising competition, which will ultimately eat into our margins," said Dr Anand Bidarkar, vice president, business development, SIRO Clinpharm. Considering the advantages India has and its offerings to the sponsors, McKinsey & Company has estimated that the size of the clinical research market in India will be close to $1.5 billion by 2010. Currently the market size is just $160 million.
On the other hand, global drivers like decline in R&D activity, increasing regulatory compliances in the world market coupled with strong enablers in the Indian market has been a major impetus for MNC CROs pitching their tents in India .A KPMG 2007 report broadly points out that given the conducive regulatory environment, strong chemistry innovation skills, large and diverse patient pool; and availability of players providing ancillary services such as bioinformatics, clinical data management and biostatistics; the contract research market in India is expected to grow at a CAGR of 30-35 percent during 2006-2011.
Apart from the usual regulated markets of Europe and the US, the emerging markets are proving to be hot spots for Indian companies setting shop. Out of the emerging markets, the Asia- pacific region which is now witnessing investments by some of the top pharmaceutical and biotech companies habors a world of opportunities for Indian CROs. "Asia is the biggest emerging market. We always run to the US or Europe which are now saturated. On the other hand, in Asia, there are no home-grown companies. In countries like China, India or even Singapore, it is mostly the multinational CROs that have taken the advantage. No local companies have taken centerstage. So now is the time for us to get into these emerging markets and reap the benefits in a span of five years once these markets open up," says Dr Shivprakash, managing director, Synchron Research Services.
Ahmedabad-based Synchron Research Services, which provides a broad range of phase I-IV clinical research services, including data management in compliance with GCP, GLP and ICH guidelines is now expanding to emerging markets of Thailand and Vietnam. Dr Shivprakash said, "We are targeting emerging nations in Asia because they are very few CROs there. Plus regulations are changing there and from across the globe the top pharmaceutical companies are pooling in a lot of investments into these countries. There is a requirement and we do have the capabilities to localize our activities in such growing countries." The company intends to set up a full-service facility-conducting phase 1-4 clinical trials. In fact, Synchron, whose projects are all greenfield, recently set up a full- fledged biological facility in Thailand with analytical capabilities in phase 2-4 clinical trials. It also has business plans of setting up a similar facility in the neighboring country of Vietnam, which they view as a potential market.
In Europe, Synchron Research Services prefers to tap the advanced western European countries due to the immense benefits that can be reaped. In March 2008, it announced the acquisition of the stand-alone bioanalytical and biomarker facility of Parexel in France. The lab is located in Poitiers, south of Paris. It has now become a part of Synchron's international network of laboratories. The lab with a manpower strength of 50 personnel will be known in France as Synexel Research International SAS. Parexel sold the Poitiers business to Synchron's Synexel Research International for approximately $6.7 million dollars. With this, subsequently Synchron intends to use Europe as a base to expand into the US. "Next year we may look at the US as part of our expansion plans. To go to the US you will have to travel via Europe and we have already made our presence there. As of now we have nothing on the cards as we took one year for this French acquisition. So it may take another few months for us to consolidate in Europe. We are not ruling out the option of tapping that market," Dr Shivprakash added.
The 12-year-old, Mumbai-based SIRO Clinpharm is also set to venture on a "go global mission". Growing a rate of 60-80 percent CAGR and having an employee strength of 400 personnel, the family-owned company today serves nine out of the top 10 biopharma MNCs, passed more than 140 audits in a span of three years dedicated to the entire process of clinical research right from study set-up to clinical data management to regulatory submission support. As a part of its business model, it is first setting up shop in Eastern Europe and other non-traditional countries--all of which provide the same advantages as India. Dr Anand Bidarkar, vice president, business development, SIRO Clinpharm, said, "With the US and Western Europe markets still being our biggest clients, we now want to differentiate ourselves from other CROs by penetrating into those geographies which are unexplored but which offer the same advantage as India. That is where we can emerge as a Indian MNC CRO." As the first step towards its expansion plans, SIRO Clinpharm recently acquired Omega Mediation Group, a mid-sized European CRO for an undisclosed amount. Omega Mediation, which started in 1992 as a trouble shooting CRO for pharma companies, has operational capabilities in Germany, Greece, Estonia, the Baltic States and Israel and has conducted 200 trials out of which 100 were full service trials. The European arm will be known as Omega Mediation –a SIRO Group company. SIRO had also established a presence in the US through its acquisition of its partner Global Client Partners (GCP) in October 2007 for an undisclosed amount. SIRO USA provides the necessary US-based project management, client liaison and other direct drug development support services for US-based clients. As of now plans are that SIRO USA would explore developing operational capabilities in the US in order to provide end-to-end solutions for US-based companies for their regulatory submissions.
Hyderabad-based GVK Biosciences is looking at acquisitions in the UK and other European countries. The CRO which in the past has partnered with Wyeth and INC Research, delivers integrated research services to global pharmaceutical and biotech companies. Currently the company has over 1,300 employees spread across facilities in Hyderabad, Chennai and Gurgaon. "We are not satisfied with organic growth. We are looking at acquisitions in the US and Europe to add pre-clinical toxicology and safety studies offering to our value chain," said Manni Kantipudi, president, GVK Bio. To go global, the company also intends to compete in the generics space.
Bangalore-based Manipal AcuNova Limited (MAL) also now known as ECRON Acunova, in November 2007 completed the acquisition of ECRON GmbH, a European expert CRO for clinical development of medicinal products for human use. ECRON has conducted trials for submission to European and the US authorities, with MAL's association with India' largest medical university. With research facilities in Bangalore, Mangalore and Manipal, MAL is a university-backed CRO with preferred access to Manipal Medical University's 19 teaching hospitals treating 1.5 million patients with more than 1,500 physicians. Manipal Acunova now offers faster enrolment with access to a large patient pool matching demographics of large markets.
Favorable market conditions
Most of the regions explored by Indian CROs makes strategic sense to their overall business model. Proximity to the bigwig pharma and biotech clients is one of the significant factors taken into consideration while choosing a region to invest.
Europe is a strategic region for most CROs owing to the presence of a large number of pharmaceutical and biotech companies in the continent. These opportunities coupled with the low cost and talent pool opportunities provided in the lucrative region of East Europe makes it the most conducive region for investments.
For SIRO Clinpharma setting up shop in Eastern Europe it is a simple case of demand and supply that comes into operation here. Presence in "high speed-optimal cost" geographies will allow SIRO to provide a compelling alternative option to pharmaceutical companies. "Proximity makes a huge difference. We are right at their door step providing clinical trials with the same high quality standards that would have been offered in India and plus at one-third the cost," added Dr Bidarkar. Expansion to Europe will also give SIRO access to a different set of gene pool. This also makes sense in the face of regulatory bodies getting stringent by the day. "When you have covered patients covering a vast range of races like the India, Mongoloid, South-Eastern race, you have covered diverse races which makes your case stronger while making your submission to the regulatory bodies," added Dr Bidarkar. The cost structure which is comparatively cheaper than its counterparts in Western Europe makes Eastern Europe a lucrative ground for SIRO. This region also boasts of a vast pool of experienced and skilled investigators despite the hindrance of less English–speaking people. This includes areas like biostatistics and key therapeutic areas. "Most people do not realize that there is vast sea of opportunities in biostatistics. Biostatistics is an important part of clinical trials if you are doing statistics and data management work for global trials. Such expertise is available only in Europe. So in a country like Germany where there are a lot of biostaticians, we get an opportunity to attract them," added Dr Bidarkar. The acquisition of Omega Mediation for instance, will give SIRO a 100 percent stake in Omega. The acquisition will give them access with the operational capabilities in five key European countries and Israel and also an access to Omega's clients which includes its European pharma and biotech clients.
On the other hand, Synchron believes that benefits can pour in by investing in the advanced countries of Europe. Its recent French acquisition is a case in point. "Europe is a growing generic market and by 2015 it is said that France would be the third largest generic country after the US and Japan. It is a big market for bioanalyticals. Being in France we need not go into any other European country because it is already in the European Union which is like one big nation. Unlike other CROs which target East European regions for their low-cost facilities, we are targeting the more advanced countries in Europe and leveraging the low-cost facilities from India," Dr Shivprakash stated. The French facility is characterized by high the bioanalyticals and biomakers facility. "This lab is also developed for analytical methods for new chemical entities which in India CROs are not capable of doing this. This European acquisition would put us in that segment in which have the face to face of drug discovery companies," Dr Shivprakash added.
For Bangalore-based Manipal AcuNova, tying up with ENCRON has been beneficial because ECRON has direct operations in Germany, Ukraine, Poland, Spain, the UK, Italy and Czech Republic and through partners in key European countries. The two leading CROs have combined the clinical research expertise of ECRON's 20 years experience.
The US which by far is the biggest market in the pharma and biotech space is another destination. SIRO's US office in Princeton, New Jersey, is aimed at supporting their growing number of strategic customers in North America. "Following a consistent high growth over the last few years, a US presence had become a necessity in providing rollout support and closer communication," added Dr Bidarkar. Synchron too is also not ruling out the option of investing in the US. GVK Bio also intends to venture into those markets through M&As.
For companies, setting up base in emerging countries is a stepping stone towards navigating their way to the rest of adjacent regions. A case in point is South East Asia. According to a Frost & Sullivan report, Southeast Asia (SEA) has a plethora of opportunities to capitalize upon, with a large patient pool, low cost and constant support from the government. This market is still in the early stages of development in this region as it is dominated by a few large multinational participants such as Quintiles, Covance, Pharmaceutical Product Development (PPD), and Apex. Synchron also takes its Vietnam investment as a step to spread out to other South-East Asian regions. "We have just finished the due diligence in Vietnam which is an emerging country. From there we can cover up the South East Asian countries," revealed Dr Shivprakash. Market conditions in Thailand are also conducive for the company. This includes regulations which are structured, establishment of at least 150 pharma companies who intend to come up with new products in the pipeline, availability of skilled manpower and a government willing to lend support to CROs wishing to invest there. "The government is happy to support us and they are open to Indian CROs," added Dr Shivprakash.
Business models and investments
No more is the scenario where CROs have focused on offering only phase 1-4 clinical service trials. Companies have now channelized their models to offer the whole range of services which addresses the entire spectrum of the drug development process. Indian companies now entering markets either as stand-alone companies, or entering into strategic alliances, partnerships and M&As with the local players. "A local partner is essential as that will help us interact with the client and help in smooth running of the business," said Dr Chetan Tamhankar, COO of SIRO Clinpharm, at a recent press conference.
According to a report published by Accelerator Group, LLC (An Investment Advisory firm with presence in Indian and Michigan, USA), as far as M&As are concerned, Indian CROs will aggressively head towards offshore acquisitions in order to expand their CRO services globally and to strengthen their network in the world market. The drivers of M&As will not only be the book of business but will also the acquisition of technical capabilities like voice-based data collection systems and web-based clinical trial platforms.
Trials in Thailand are at the incubation stage of development. The opportunity for conducting trials lies in infectious disease, cancer, and cerebrovascular disease. Till date, major studies have been conducted in the area of HIV. In January 2005, Oracle collaborated with the Thailand government's Thailand Center of Excellence for Life Sciences (TCELS) for a pharmacogenomics project. Oracle, the Thailand government, and private and public hospitals and universities in the country worked together in developing a large-scale database of unified electronic health records. The data generated can be used by biotechnology and pharmaceutical companies to identify patients for conducting trials.
Source: KPMG Report 2007
SIRO's model was to enter into strategic alliances rather than M&As. This includes alliances with Pfizer (for complete data management and biometric services for all of Pfizer's clinical trials) and with Fisher Clinical Services. In Europe it intends to grow inorganically rather than going the organic way. SIRO plans to first have the core in a western European country and then spread out in other supply countries like Eastern Europe from where there can be an inflow of both patients and investigators, trials can be done at a faster rate and at a low cost. "The strategy team at SIRO also did a costing exercise and realized that an inorganic growth made a lot of sense because of the synergies and benefits that would come about. Our aim is to start with an inorganic base and then grow organically. The synergies are faster because if we started an office in Germany and then Romania, it would have been a slow process and hence the growth would also be slow," added Dr Bidarkar. For this they are setting shop in European countries spanning Romania, Greece, Germany and the UK. "We just don't want to take up one unit or phase in one country but have a pretty spread out operation. Like for example in Europe, we cannot take advantage of the Eastern Europe until we are in Romania, in Greece while we might be headquartered in the UK or in Germany. Thus in our expansion plans to Europe it is not just in one country that we will be investing," said Dr Bidarkar.
However, its acquisition of the Omega Mediation is a sign that the company is looking at other business models. "Strategic alliances puts you at an arm's length with your partners but that does not take you to the next level. We wanted to go beyond India with a model which was more tight and compact and M&A was the only way," adds Dr Tamhankar. From this deal it aims to double its turnover by 2010 and the combined entity will be Rs 200 crore besides a synergy of operational facilities. As a part of its infrastructure investments, it recently announced its implementation of the IT framework comprising Oracle's Life Sciences Applications (OLSA). An investment of $3 million has been made for this initiative for the first phase, which will kick off in another 6-8 months. Other investments also include churning out quality human capital to expand its expanding business needs. It has also set up a clinical research training center called the SIRO Institute of Clinical Research (SICR).
GVK Bio, in its attempt to be a one–stop shop for top global pharma and biotech companies, is moving towards a collaborative/partnership discovery model. "We have all the components for drug discovery chain. These days companies are under reeling pressure and are getting into drug development to shorten the development cycle time," adds Kantipudi. For going global, the company is already restructuring the business model of the company. The organization is building on its strengths and has plans to acquire businesses to increase its competencies and an organizational wide cultural shift to take the company to the next level. "Though chemistry is our biggest division employing around 900 personnel, we have strengths which we will leverage across all divisions to emerge as a globally recognized leader in life sciences", added Kantipudi. Kantipudi also has plans to put special emphasis on IT in the business of GVK Bio. The company also intends to consolidate its operations by 2008. The infusion of $25 million by Sequoia Capital, a leading global private investment firm which has invested Rs100 crore ($ 25.21 million) in GVK Bio has made a huge difference. "Sequoia has tremendous experience in pharma outsourcing between the US and India. They are well networked in the industry and bring along with them the skill to hedge any currency fluctuations," added Kantipudi.
For Synchron, it is all about integrating the business strategies. Their basic business model is to leverage their different capabilities in the respective regions of investment. Like in the first place, they intend to use Europe as the base to leverage their low-cost capabilities coupled with their experience and expertise in bioanalytical capabilities. Similarly they intend to leverage their technological developments in India and then take them into growing markets of Thailand and Vietnam. After investing a whooping $6.7 million for the acquisition of the French facility, the company has already spent $2 million for their Thailand facility and will be investing another $2 million in Vietnam by the next year. "Ultimately we are trying to integrate our models in India, Thailand and Europe together -India is a market which can be a strong cost-effective outsourcing destination, then we have Thailand and Vietnam, which are the emerging markets offering a lot of opportunities and Europe, which is a fully grown matured market. So we have a strategy to use these three regions to strengthen our capabilities," added Dr Shivprakash. The company also does not rule out the possibility of joining hands with other CROs in and around Europe and expand their portfolios in biomarkers and biomedicals and phase 1-4 studies. At present there are 27 people operating in the Thailand facility and Dr Shivprakash believes that the company will not face any talent crunch. "There are a lot of pharmacy schools within universities in Thailand. We are tapping manpower from the countries itself and except for one or two Indians who are willing to relocate, most of the employees are Thai locals. At the moment we are training them bringing them to our facilities here in India and we are even sending our experts there, station them for a few weeks and then train the locals in all the procedures so that way we can fill the gap," Dr Shivprakash informed.
MNCs on Indian soil
The KPMG report of 2007 states that international CROs like Quintiles, SBFC International, ICON Clinical Research and iGATE Clinical Research International have forayed into the Indian market because it offers a huge patient base afflicted by both tropical diseases as well as lifestyle diseases. Patient recruitment in India is faster than other semi-regulated and regulated markets. The idea is also a synergy of capabilities from both ends –the expertise of global MNCs and the low cost infrastructure and talent pool available in India.
Leading CRO, Quintiles chose India due to a rapidly growing local pharmaceutical market with a well-established corporate infrastructure, government policies favoring R&D, growth in the health insurance sector, and tertiary care and teaching hospitals available for trials. Investigators in India speak English and often have the US or European training. India's highly literate population provides access to broad population groups with common and special disease profiles, allowing for rapid patient recruitment. Another reason for investment was that compared to the western countries, India offers less competition to recruit patients and a similar level of professional skills. With the population of over a billion in India, for the company, trial opportunities include cancers, cardiovascular diseases, neurological diseases, psychiatric illnesses, diabetes, infectious diseases and tropical diseases.
Quintiles India is the country's first global CRO and has been recognized by the Department of Scientific and Industrial Research (DSIR) as a commercial R&D company. Having conducted more than 175 clinical studies involving over 1,300 sites and nearly 35,000 patients, Quintiles India has developed expertise in various therapeutic areas.
iGATE Clinical Research International, which provides clinical trials management services both in the US and India, was formed by the combination of two clinical research companies, one in Pittsburgh, PA, and the other in Mumbai, India. The Pittsburgh-based company, Pittsburgh Clinical Research Network (PCRN), was a research site services provider established in 1997 and wholly owned by the University of Pittsburgh Medical Center. PCRN provided a business-friendly interface allowing biopharmaceutical companies to effectively utilize the resources of a complex academic medical center. Among the services offered were efficient investigator selection and training, clinical staffing, contracting, IRB and regulatory coordination, subject recruitment, and quality assurance. PCRN also developed and managed a network of community-based physician investigators. From 1998 to 2003, PCRN managed one or more clinical sites participating in approximately 150 phase I-IV clinical trials. In India, Mumbai-based DiagnoSearch began as a central laboratory, quickly expanding to become a full-service contract research organization focusing exclusively on ICH-GCP clinical trials. Founded in 1997 by Dr Vasudeo Ginde, former head of clinical research for Eli Lilly (India), it was one of the first Indian CROs to participate in global clinical trials. DiagnoSearch provided a full range of clinical trials management services - including clinical monitoring, clinical data management, and central laboratory services. In the period 1997 to 2003, the company conducted several clinical trials, several of which contributed to the US and European data submissions. In 2003 PCRN and DiagnoSearch were acquired by iGATE Corporation to anchor its life sciences division.
Kendle, which has 47 offices in 27 countries across six continents, with experience spanning 90 countries around the world, came to India with a strategy that it is an excellent ground for conducting clinical trials. Bharat Doshi, director, global clinical development – Asia Pacific, Kendle, said, "The benefits of doing business in India include high-quality data and world-class medical infrastructure and skills. Moreover, it offers a great deal of efficiency because of the huge patient populations, large number of sites, straightforward regulatory procedures and motivated investigators. All of these factors combine to make a very good case for conducting trials in India. India also offers rapidly improving support industries such as labs and hospitals, and a world-respected IT industry capable of picking up the expertise to support R&D and clinical trials." Doshi, who declined to reveal their business strategy in India, believes that customers are mostly interested in developing a partnership or strategic alliance with their CROs. "Customers are now involving us earlier on and across all phases of their clinical development programs," he stated. Kendle's immediate plans include investing in the Asia Pacific region and Africa. "We plan to build on our existing presence in Asia Pacific, including our offices in Singapore, India, Australia and a long-standing joint venture in China to continue to grow and provide a stronger base for trial delivery throughout the region," added Doshi. The company also is investing heavily in Enterprise Resource Planning (ERP) infrastructure to drive global connectivity The company which has an employee strength of 60 in India intends to expand it further to build their operations in Asia.
Opportunities in Europe
According to Frost & Sullivan, the European CRO market was estimated to be worth $4.3 billion in 2007 with a growth rate of 10.4 percent. One of the key trends in the European CRO market has been Eastern Europe's emergence as a key hub for handling low-cost clinical trials, where as Western Europe faces the subdued state of preclinical-clinical research. Eastern Europe is the sunshine region for the industry. Low costs and the ease of patient recruitment are the key drivers behind the region booming for American and Western European pharma companies.
Most leading CROs now have an established presence in Western as well as in Eastern European countries such as Hungary, Poland and the Czech Republic in addition to making forays into Bulgaria, Russia, and Croatia amongst others. The inclusion of 10 central and Eastern European countries to the European Union means a larger EU population. The well-developed populations of Romania and Poland become lucrative hubs for clinical trials.
On the regulatory front, some areas significantly impacting the industry include the EU Clinical Trials Directive and EDC (electronic data capture). For all CROs in the region, the key competitive factors are likely to be thoroughness, quality of research, project completion timelines, price, and knowledge of local regulatory environment, language as well as culture.
Clintec International which has been operational in India for the last five to six years, originally started as the first alliance globally and has since diversified and provided services to many companies, its main client including Dr Reddy's Laboratories. "Today we provide four to five different verticals, we are working towards the full service model. This year we are also integrating data management to our business. We have made forays into areas which other companies are reluctant to. "When it comes to India, opportunity exists for everybody to do well within the industry. India offers great opportunity and therefore we would want to be a part of it," added Bindhya Cariappa, director, India operations, Clintec International. For Clintec, MNCs are not the only rivals in the space. Dr Nuggehally Srinivas, executive vice president, global drug development, Clintec, said, "Things are changing all the time. We can tie up with a small CRO in India and can offer more services. MNCs do not always have to compete with MNCs. The Indian CROs are equally good and competitive."
Omnicare Clinical Research invested in India for three primary reasons. Dr Dale Evans, president and CEO, Omnicare Clinical Research, said, "First, off-shoring provided us with a skilled labor force at lower costs as compared to other regions. Additionally, India is a country offering a huge patient population of over one billion people, helping to facilitate rapid patient enrolment and study start-up. Finally, I think it is also important to note that the pharma sector has established a presence in India and invested heavily there, so it was a natural fit for us as well." Established in 2002, today it has grown to nearly 85 full-time employees providing services in project management, clinical monitoring, feasibility, data management, biometrics, clinical supplies management, medical and safety surveillance, business development and human resources. "Omnicare Clinical Research is already expanding into other key emerging market regions. For example, we have a presence in China through our offices in Shanghai and Beijing. Additionally, we were the first official CRO in Latin America and we continue to support our clients' drug development efforts through our locations in Argentina, Peru, Chile, Mexico and Brazil. The Eastern European countries are also a valuable investment for us as well. Our strategy in these other emerging markets has been fairly similar to that of India, with subtle differences, obviously, based on specific country requirements," added Evans.
With globalization plans coming in from both the Indian as well as MNC CROs, the CRO market is sure to go through a radical change in the next coming years.
Nayantara Som with inputs from
Shalini Gupta and Jahanara Parveen