The initial hype over Indian drug makers venturing into new drug discovery more than a decade ago seems to have made way for a sober realisation that it is indeed an uphill task considering their less-than-global-average spending on research, rising costs and the poor success rate in the high-risk business of drug discovery.

According to government estimates, 25 leading drug makers in India now spend about 6-7% of their total sales in R&D compared with the world average of 12-15%. In other words, Indian companies spend less than 1% of the $130 billion spent annually by the global pharma industry on research. Besides, a large chunk of Indian companies? research cost accounts for their cost of litigation involved in entering the US market with generic copies of patented drugs, although with limited success.

Moreover, the success rate has not been very high in new drug research and there is no guarantee of a return on investment. Asked about the success rate of its new chemical entities (NCEs), Mumbai-based Sun Pharmaceuticals said it was ?too early to say?. Ranbaxy Laboratories even avoided listing out its NCEs under development in response to a detailed questionnaire from FE and just flagged the launch of anti-malarial Synriam to give credence to its R&D focus, while despite repeated attempts by FE, Dr Reddy?s Laboratories (DRL) did not give any details on its R&D efforts.

In 1997 and 1998, when DRL entered into two separate agreements with global pharma major Novo Nordisk to license molecules for further development, the industry felt a sense of pride. At a time when Indian drug makers were seen as copycats and were berated for being good only at reverse-engineering foreign drugs that would be sold at low prices in India and in other developing countries, DRL?s move was a big leap. The product patent regime was then in the horizon and focus on R&D was touted as a must.

Soon after DRL, another major home-grown brand, Ranbaxy, also licensed its technology for an innovative drug delivery system for ciprofloxacin, named Cipro-OD, to Germany?s Bayer, which owned the patent to the drug. (OD stands for once a day, which was Ranbaxy?s innovation.)

Unfortunately for DRL, however, Novo Nordisk decided to discontinue work on both molecules licensed from DRL some years later. While this did not deter DRL or other industry players from continuing research on new molecules on their own and in collaboration with others, Indian drug makers have realised that developing a new drug from scratch is easier said than done. Increased regulator scrutiny and high cost of clinical trials (even as India is widely considered a relatively less expensive destination for clinical trials) are among the issues to be tackled.

Ranbaxy said it has launched ?India?s first new drug, SynriamTM, for the treatment of malaria, in adults? on April 25, 2012. The company added that it is working to make this new treatment available in African, Asian and South American markets where malaria is rampant. ?Synriam trials are ongoing for Plasmodium vivax malaria and a paediatric formulation,? said the drug maker. However, malaria drugs, like other anti-infectives, are not money spinners in developed markets like the US or EU and are specific to the ?third world?.

Even India?s government-funded R&D institutes like the Central Drug Research Institute, Lucknow, have developed anti-infective compounds.

Glenmark?s NCE pipeline consists of three drugs for neuropathic pain, inflammatory pain and asthma indications. ?There does not seem to be any big blockbuster drug in the pipeline for any Indian pharma company,? said an industry expert.

There is another concern with India?s emerging drug pipeline. In an article ?India Perseveres as Drug Discoverer? (Chemical & Engineering News, October 31, 2011), Amruthanand Nair shows a table listing the drug candidates in advanced development from several major Indian firms, including DRL, Glenmark, Piramal Life Sciences and Sun Pharma. Of the 10 compounds listed, many are mechanistically related to agents that are already on the market or they are in classes where previous compounds have had little or no success.

Since internal resources of domestic drug makers may not be adequate to finance the long-term and expensive clinical studies needed to differentiate these drugs from current therapies, they may look at partnering deals with Big Pharma.

Glenmark, for instance, has completed seven out-licensing deals since 2004, with a cumulative payment of $206 million received in terms of upfront and milestone payments. The company has licensed two other molecules to Sanofi that are currently in phase II clinical trials. ?Assuming they are successful, we would continue to get further milestones. Besides, we have also recently entered into an option agreement with Forest Laboratories for the development of novel mPGES-1 inhibitors to treat chronic inflammatory conditions, including pain,? the company said.

While the upsides of partnering are many, it would be difficult to forget that at any stage the global company could reconsider such partnerships, considering that globally 10 of the top 12 firms have seen a decline in returns from R&D, resulting in an overall drop to 8.4% from 11.8% last year (Deloitte report). The number of late-stage drugs in development also dropped to 18 from 23, on average, per company, the report added.

In early 2012, Eli Lilly, the $23-billion US pharma giant, called off a deal with Indian company Zydus Cadila to collaborate on novel drugs to treat cardiometabolic disorders as ?rising costs of research force a reconsideration of ambitious projects?.

Industry estimates state that taking a drug from discovery to development stage could take at least 12-14 years and cost anywhere from $800 million to $1 billion. These are big numbers even for companies like DRL, Alembic Pharma, Piramal Enterprises, Glenmark and Orchid Chemicals, which were the top five spenders on R&D in 2011-12, based on percentage of sales.

Apart from drug discovery, a major chunk of R&D investments goes into development of generics, filing of applications and even litigation, staff salaries and consultancy charges. These efforts are being complemented by some focus on peripheral R&D areas like combined dosages, bio-pharmaceuticals and novel drug delivery systems, even as the industry faces challenges of price control and budget constraints.