CEO, Aurigene Discovery Technologies
Mr CSN Murthy is a chemical engineer from IIT, Madras, and an MBA from
IIM, Bangalore. He started his career with ICICI Ventures and has
worked for over 12 years in the pharma industry. He has, since 2005,
been the CEO of Aurigene Discovery Technologies, which is a subsidiary
of Dr Reddy’s Laboratories.
The pharmaceutical industry has, for long, depended on external sources
of innovation, and, by some measures, about 40 percent of the overall
portfolio of drug candidates are generated by biotechnology companies
and licensed by pharma companies.
This gives rise to a large market for innovation with pharma companies
on the lookout for new medicines, and young biotech companies, which do
not have the resources or the experience to take new drugs all the way
to the market on their own, reaching out to market their early-stage
drug candidates to suitable development partners.
However, as in case with all innovation, and more so in the case of the
pharma industry, the financial and scientific risks of drug development
are very high. Thus, commercialization of drug discovery and
development needs a lot of planning and strategic execution, together
with strategies in place for risk-mitigation.
Asia has unique advantages in terms of availability of a large patient
pool availability, cost-efficient means to drive drug discovery and
development, and availability of a large and talented work force that
is just beginning to enter this area of science.
Drug discovery industry in India
Many companies in India have entered the pharmaceutical industry
through the generics route. Known and approved drugs have been
manufactured in cost-effective ways, and the generics industry has not
only benefited the Indian consumer, but has also contributed
significantly to the global generics needs. The next few years will
also provide big opportunities for growth in the US and European
markets, with innovator companies poised at the edge of the so-called
patent cliff between now and 2015.
In the face of such large opportunities in the generics’ space, pharma
companies in India have naturally focused in this space for their
growth. Concurrently, the domestic pharma market has provided
significant opportunities for growth too.
However, the margins in the generics space do not match with the
margins that typically integrated innovator pharma companies generate.
As a consequence of these circumstances, less-than-optimal investments
have been made in drug discovery by pharma companies in India. Even
companies that have invested in this space have typically committed no
more than one-to-two percent of their revenues in drug discovery and
development as compared to an average of 15 percent or more, which
typical innovator companies invest in R&D in the US or Europe.
Consequently, successes of companies that have out-licensed their
compounds, such as Glenmark, are exceptions rather than the norm. As
investors looked at the biotech space, not surprisingly in the land
that has traditions of IT services and BPO companies demonstrating huge
growth and promise, many investments went into providing “services” to
Thus, we have a landscape defined by generic companies with occasional
and apologetic investments in drug discovery and development on the one
side, and a few services companies that have not scaled enough to be
considered large or world-class by standards that are generally applied
in this space.
In this landscape, juxtapose the few stragglers who have attempted
innovation and are looking to create opportunities for their drugs
under development, and we will begin to see where the marketing
challenges appear before biotech companies.
The marketing challenges
Most innovator companies, when they think of India, see the prospect of
an alluring and growing market for their products, with their own
domestic markets in Europe and the US either being static or shrinking.
A few companies also look towards India, primarily as a source of
low-cost services due to given India’s strong track record in chemistry
and manufacturing. Seldom have innovator companies looked to India as a
source of innovative drugs.
Thus, a typical biotech company from India has to overcome the tag of a
“CRO” (a synonym for a low-cost provider of services) first, before
addressing other endemic challenges of lack of an ecosystem for
innovation in drug discovery, a small (though growing) pool of
scientific talent and experience, and a regulatory environment that is
certainly not a role model to even the most generous critic.
Biotech companies certainly need to invent in India in forms that make
them relevant and attractive to pharma companies seeking innovation in
Consistency in terms of communicating their focus as a biotech (as
opposed to a cost-arbitrage business), sustained visibility in the
appropriate forums where pharma companies look to source innovation,
publishing data from their innovation at appropriate and opportune
moments, and consistently collaborating with scientific leaders in
their areas of innovation could together result in providing the
appropriate positioning for biotech companies.
Emphasis on the value proposition that the location in India provides,
not necessarily in terms of low costs (a potent weapon in the hands of
the buyer, not the seller of innovation), but also from other
perspectives, could bring the visibility needed in a competitive
Use the ‘India advantage’
Biotech companies face steep challenges in setting up and positioning
their intellectual property in a market that is known more for
providing cost arbitrage opportunities than for delivering high-quality
innovation. However, examples of companies that have successfully
navigated the marketplace in India should provide biotechs in India
clues on positioning themselves to stay relevant and generate value
that only innovation can bring.
This needs biotechs to clearly use the “India advantage” appropriately
in their positioning in the marketplace, while moving consciously away
from the stereotype of the low-cost CROs.
A conscious communication strategy, backed by relevant linkages with
experts, high-quality publications and marketplaces for innovation,
will see some of the emerging biotech companies excelling and prompting
more investments into this space in the time to come.