Indian pharmaceutical industry?s bold efforts to foray into the high profile yet highly risky drug discovery arena seem to have suffered a miscarriage. Industry is learning the perils of drug discovery the hard way.
Recently, Glenmark Pharmaceuticals suffered a severe beating on the bourses following the failure of its drug for the treatment of chronic obstructive pulmonary disease (COPD), an acute form of smoking induced lung disease and asthma. The failure took place during mid-stage of the clinical trials being conducted by the US-based Forest Laboratories, a partner of Glenmark Pharmaceuticals in the drug development process.
Soon after the drug failure, a visibly disappointed Glenmark managing director and CEO Glen Saldanha said, ?We need to re-evaluate whether the trial was designed appropriately and what were the shortcomings.? Yet, the harsh reality is that the Indian company has lost a multi-billion dollar market opportunity. If healthcare analysts are to be believed, Pfizer?s Spiriva offers the treatment for COPD; the drug is well on its way to become a $4.85 billion-a-year product by 2015.
The scene at Dr Reddy?s isn?t much better either. The company?s R&D facility at Atlanta in the US has shutdown. The Hyderabad-based pharmaceutical major is yet to recover from the setback of its misadventure when investors ICICI Venture and Citigroup Venture Capital abandoned Dr Reddy?s much-touted drug research entity, Perlecan Pharma, which failed to successfully undertake the journey from discovery to development phase on four drug molecules, leaving the investors shaky and jittery.
However, in a recent effort to provide a fillip to its R&D operations, Dr Reddy?s has moved all its drug research and development operations to its independent subsidiary, Aurigene. ?We have restructured our discovery organisation with integration of our facilities in Hyderabad with Aurigene Discovery Technologies. This would lead to greater productivity of R&D spend,? says Dr Reddy?s vice-chairman and chief executive, GV Prasad. The company has commenced clinical trials of three drug candidates that target conditions such as dyslipidemia, a disruption in the amount of lipids in the blood, and cardio pulmonary obstructive diseases. The drug discovery-related work will now be carried out by Aurigene.
Despite 55-60 drug molecules under development, there isn?t much exciting news emerging from the laboratories of other pharmaceutical majors too, such as Ranbaxy Laboratories, Sun Pharmaceuticals, Piramal Healthcare, Zydus Cadila and Lupin. The drug-related discovery work of these companies is focused on medicines for the treatment of cancer, cardiac disorders, diabetes infectious, respiratory and inflammatory diseases.
Indian pharmaceutical companies are using two strategies to mitigate risk and reduce costs in this area? finding a new drug within an existing family that has been discovered and out-licensing the drug candidate to multinationals after its pre-clinical stage. Yet, the scorecard for an ?entirely discovered and developed in India? drug still reads zero.
To add to the industry?s woes, there have been a series of drug recalls in recent times, thereby casting a doubt on Indian drug companies? development capabilities. Recently, the country?s drug regulator, the Drug Controller General of India (DCGI) literally forced Hyderabad-based Natco Pharma to withdraw its breast cancer drug called Albupax from the market, after tests showed that the drug could cause severe damage to the liver. Ranbaxy Laboratories too issued a voluntary recall of its Sotret isotretinoin capsules for skin infection treatment from the US market.
Looking at these setbacks makes one wonder: Do Indian pharmaceutical companies have the required skill-sets to take the drug from the discovery phase right up to the development phase? From a business point of view too, isn?t it a safe bet for Indian companies to simply focus their efforts in their area of expertise, that is, generics, instead of dabbling in the far riskier area of drug R&D? The foremost question is: when will the homegrown drug companies taste success with a ?Made in India? drug?
?Drug development around the globe is an expensive, painstaking and long process. It is therefore not easy to predict when exactly a ?Discovered in India? drug will hit the market. However, it is imminent and we will see innovative drugs from India in the early part of the next decade,? says Ramesh Adige, president, Ranbaxy Laboratories.
The entry of Indian pharmaceutical industry into new chemical entity (NCE) research is comparatively recent and it is in the early phase of growth. Industry began investing in research and development (R&D) for drug discovery-related work in the late 1990s. R&D activity has seen a significant impetus in the last seven years, resulting in the total R&D spend increase by almost 12 times over this period. Last year, the top 10 companies (by sales in value) had cumulative sales of $5.1 billion and invested a cumulative sum of $387 million in R&D, which accounts for 7.5% of their total sales, estimates a Ernst & Young study.
Yet, high risks and higher costs associated with drug discovery and development have deterred Indian pharmaceutical companies from being very forthcoming and aggressive in terms of innovation R&D. ?At an estimated cost of $1 billion each molecule, spread across an average timescale of 15-17 years, discovery programmes demand huge investments with a long gestation period. With very few Indian pharma companies having the appetite to fund these long drawn projects and limited external funding, the ability to sustain such huge investments has been a challenge,? reveals Ajit Mahadevan, partner, health sciences advisory services, Ernst & Young. He adds: ?Though one needs to bear in mind, the high risk of failure associated with it and hence how many of these would really be commercialised, is anyone?s guess.?
However, the main deterrent is financial resources. New drug development, particularly late stage development, is a very expensive process requiring deep pockets. This is amplified given the intrinsic high failure rate in new drug discovery with one among 10 molecules under development finally reaching the market.
?Failures are acknowledged as an integral part of NCE research/development around the world. Although this has some impact on investor psyche, experienced investors are well aware of the risks involved,? opines Adige. He is right in the sense that an increasing number of drug discovery projects are being terminated at the phase III stage.
While it is the failure of a life-saving drug Torcetrapib from the world?s largest drug company Pfizer in late 2006, which highlighted the real risks of drug R&D?around $1 billion worth of investment made by Pfizer on the experimental drug simply went down the drain?pharmaceuticals majors like Astra Zeneca, AEterna Zentaris, Infinity Pharmaceuticals, Oxford BioMedica and Israel?s Teva have seen their drugs under development fail during mid-stage of clinical trials.
A prostate drug called cetrorelix pamoate from Canada-based AEterna Zentaris failed in a late-stage clinical trial. US-based Infinity Pharmaceuticals? lead cancer drug, dubbed IPI-504 crashed and burned in a late-stage clinical trial for treating relapsed forms of malignant stomach tumours, after results showed that more patients were dying when taking the drug than those who weren?t on the drug. And Astra Zeneca decided to discontinue development of NXY-059 in acute ischemic stroke based on negative results from its phase III trial.
Although the R&D spend has more than doubled from $53 billion in 2000 to $129 billion in 2008, the number of NCE approvals have shown a largely declining trend with a historic low of only 18 in 2007 before correcting to 25 last year. The decrease in R&D productivity has been due to the fact that an increasing number of projects are being terminated at the phase III stage.
In addition, six therapy areas, oncology, central nervous system (CNS), respiratory, endocrinology, cardiovascular and infectious diseases, account for 68% of all clinical trials protocols, thereby resulting in longer trials with higher complexity which in turn result in increased costs.
With only one in 1,00,000 molecules making it to a commercialised drug, failure is an integral aspect of discovery research. Overall the R&D productivity globally has been low, coupled with high generic penetration, stringent regulations and difficult economic scenario which has impacted investments across the board.
?Failures tend to prompt investors to take a more cautious approach and perhaps diversify their portfolio of investments, by entering at various stages of development,? insists Mahadevan. As opposed to other sectors, investments in pharma sector have a long incubation time and relatively high risk/ high return scenario, which investors necessarily bear in mind and accordingly take calculated risks.
?For innovation-led growth, huge infrastructure is to be created to upgrade educational system to train scientists, new world-class research incubators and for patenting needs along with fiscal benefits to the industry. If implemented, the $2 billion special fund will be a boon to the Indian pharmaceutical industry,? says Venkat Jasti, managing director, Suven Life Sciences.
For Indian companies, the model of strategic partnership with a financially sound MNC is also a good way to approach NCE development. Indian companies have entered into risk/reward sharing contracts and licensing deals to drive innovative R&D programmes. Such models have already found favour with a few Indian companies and R&D synergies are unleashed in a shared risk-reward arrangement.
India has produced some of the best researchers in the world, qualified at world renowned universities. Indeed, quite a few of them have held significant R&D positions at big pharmaceutical companies and have come back to join Indian pharmaceutical companies. ?Though traditionally, we have had some of the finest chemists from India, it may be apt to say that skill sets in biology are still not as developed,? admits Mahadevan.
To really become a serious discovery player, India needs to develop high level animal biology and pharmacology skills which are still at a nascent stage.
On its part, the government is embarking on a major $2 billion initiative with 50% public funding through public-private partnership to catapult India into one of the top five pharmaceutical innovation hubs by 2020 with one out of every 5-10 drugs discovered worldwide by 2020 coming from India. For the time being though, it seems a daunting task.
