Pharmaceutical Outsourcing to India

1
Pharmaceutical Outsourcing to India

• Dr. Vilas H Dahanukar
• Dr.Reddys Laboratories Limited
• vilasd_at_drreddys.com

2
Outline of Strategy Presentation

• Business Space
• Size of the Global Outsourcing Business
• Factors leading to changing face of the business
  / Competition Profile
• Key Elements for success

3
Evolution of the Indian Pharma Industry
Prior to 1970
70s thru 90s
90s onwards

• Growth of Bulk Actives and Finished Dosages
• Bulk Actives to US Europe
• Reverse engineering of molecules
• Leveraged excellent Chemistry skills
• Research only in Government institutions
• Import substitution

• Dominated by MNC players (gt70)
• Prices comparable to International prices
• Government started IDPL and HAB with Soviet
  support
• Only process patents

• Export Led growth
• Global generics opportunity US and EU as key
  markets
• Globalization of key players
• Emerging Discovery research in Indian Pharma
  companies
• Transition to Product patent regime (2005)

Reverse engineering is a thing of the past,
Indian Pharma has to find new and novel ways to
grow in the global arena
4
Outsourcing Business Space
Pipeline molecules
Range of Services
From Clinical quantities to Commercial scale
5
Business Space
Discovery Chemistry
Process R D
Pipeline Intermediates
Matured Intermediates
BIG PHARMA
Pipeline APIs
Matured APIs
Dosage Development
Commercial Drug Product
Discovery Chemistry
Process R D
EMERGING PHARMA
Pipeline Intermediates
Matured Intermediates
Pipeline APIs
Dosage Development
FINE CHEMICAL COMPANIES
Pipeline Matured Intermediates
6
Global Pharmaceutical Outsourcing Opportunity
Estimated Potential Market
Packaging/ Assembly
Dosage Form Produc- tion
Dosage Form Develop- ment
Drug Substance Produc- tion
Process Develop- ment
Clinical Develop- ment
Pre- clinical Develop- ment
Discovery Research
Pharmaceutical RD
Drug Substance Supply
Formulated Drug Supply
30-35
50
60-80
(in bn)
Current share of outsourcing in defined Contract
RD/Manufacturing space is around 35 bn
Source Dow Report, AD Little, Cardinal Health
7
Changing Face of Industry

• Declining RD output high costs continue to
  pose challenges to profitability
• Blockbuster drug launches expected to drop from
  14 in 03 to 4 in 08
• Drug Product Withdrawls (Vioxx) and safety
  concerns (Crestor)
• By 08 patent expirations will account for 72
  bn in current sales

Leading to
Global Outsourcing

• DRIVERS
• Cost
• Increase Productivity
• Speed up New product
• Development
• D. Expand skills capabilities

Source AT Kearney Report
8
Changing Face of Industry

• Declining RD output high costs continue to
  pose challenges to profitability
• Blockbuster drug launches expected to drop from
  14 in 03 to 4 in 08
• Drug Product Withdrawls (Vioxx) and safety
  concerns (Crestor)
• By 08 patent expirations will account for 72
  bn in current sales

Leading to
Global Outsourcing

• DRIVERS
• Cost
• Increase Productivity
• Speed up New product
• Development
• D. Expand skills capabilities

Source AT Kearney Report
9
Facts Figures - INDIA

• Highest number of FDA approved plants outside USA
• Largely English speaking workforce
• IT capital of the world
• Democracy of 1 billion
• TRIP compliant
• UK based legal system
• Structured and reasonably transparent financial
  markets banking system
• Dependent on oil for energy
• Well entrenched entrepreneurial culture
  developed private sector
• Superior education level
• Infra-structure in need of development
• Largest market-share in generic API production
• Export Western oriented
• Economic growth in terms of GDP just slightly
  behind China

10
Changed IP Scenario in India

• Global standards followed on IPM
• CDAs, MoUs, Non-Use Agreements, etc routinely
  implemented
• Work ethics Need-to-know work practices
• Employee Contracts Employee retention
  mechanisms
• Legal provisions remedies available

Cheap Source of intermediates
Qualified API source And Efficient Process RD
Resource
India is now being looked at as a reliable
source across the value chain in pharmaceutical
industry
11
India Advantage / Disadvantage
Advantages
Cost
Flexibility
Speed

• Language
• Chemistry, Engineering, Regulatory QA
  experience, Dosage expertise
• Manufacturing Infrastructure

Disadvantages

• Capability in Niche Segments (Ex. Controlled
  Substances)
• Communication
• Emotional blocks (Ex. Compliance, Generic
  Challenges etc)

12
Operational Issues Focus

• Track record
• Expertise
• QESH Compliance
• Capacity
• Commercial scale

• Scope for scale-up
• Analytical
• Sourcing
• Lead times
• Stick to timing
• cGMP

• IP Security
• Skill
• Technologies
• Communication

13
Causes for negative experiences
Provider specific issues

• Environmental issues license to operate
• Asset reliability
• Quality issues

• Yes means, I will do whatever I can, No is
  culturally impolite
• Communication Issues

14
Key Elements for Pharma Business
PRODUCT INDUSTRY
SERVICE INDUSTRY

• DIFFERENTIATORS
• Innovation First to Market
• Cost
• Quality
• Geographical Reach

• DIFFERENTIATORS
• Speed
• Delivery Quality
• Cost
• Frequency
• Communication Transparency
• Quality
• Trustworthiness
• Flexibility
• Customer Delight

.. Favor India as destination
15
Choosing the Right Partner in India a Selection
Model
QUALIFIERS
DIFFERENTIATORS

• Global Interests
• Ownership pattern
• Regulatory Compliance
• Financial Stability
• Understanding IP
• Reporting compliant
• Capability Infrastructure

• Speed
• Costs
• Communication
• Project Management
• Track Record
• Understanding the
• West
• Staff Quality

Final Partner
16
Changing Paradigm
Range of Services
From Clinical quantities to Commercial scale
Outsourcing services In License the product
for Indian Asian Markets
Indian Companies are positioning themselves as
partners to Innovator companies
17
Indias Conclusion of Strengths
Speed
Competitive Pricing
Full cGMP
combining the best of both worlds