Clinical research firms get into sell-off mode

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Mumbai, Jun 22: The Daiichi Sankyo-Ranbaxy deal may have set the tone for a large scale consolidation in the Indian pharmaceutical industry, but yet another crucial segment within life sciences is in for a shake-up, too. The Indian clinical research segment, which conducts contract research for development of new medicines, clinical trials of medicines in human beings, pre-clinical studies and animal testing, is all set to witness consolidation, with a few clinical research organisations (CROs) keen to sell out.

According to sources, two CROs based in Mumbai and two in Hyderabad, are already on the block, and more are in the pipeline. Even some bigger CROs are looking at merging with larger partners to gain critical mass, sources said.

The shake-up is largely the result of an indiscriminate mushrooming of CROs in the country over the last three to four years, owing to a global interest in testing medicines on a very diverse Indian population at low costs. “It’s necessary for clinical research firms to have a critical mass,” says Dhananjay Bakhle, senior VP and general manager-India, Reliance Clinical Research Services.

“Too many players are now battling for a small pie, which is growing slower than expected,” he adds. Large players in the segment, apart from Reliance Clinical, include Quintiles Spectral, Clinigene, SIRO Clinpharm, and Lambda Therapeutics, among others.

The CROs that are on the block are small, with revenues ranging between $1 to $2 million in an industry that is nascent and pegged at around $250 million.

However, the sell out of these players, which have been set up in the last three years and comprise facilities of around 50-60 beds, 50-100 employees and a few critical equipment for testing, is seen by experts as the start of a major consolidation phase, which is bound to improve the sagging standards in some parts of the segment.

Says Apurva Shaha, group managing director, Veeda Clinical Research, “Regulations are getting tighter, both in India and abroad. Also, size matters. Some players, who have miscalculated the full extent of the business, will sell off. Also, among the top companies, consolidation for value creation will come into play.”