His chase to tap a multi-billion dollar opportunity as blockbuster drugs lose patents is bearing fruit, as Glenmark has lined up four drugs, each of which can be exclusively sold from anywhere between six months and two years in the US.
A presence in 60 countries with 20 offices worldwide will take his companys products further into Africa, Russia, Brazil and the West Asia. Despite a few failures, new drug molecules being developed across its three R&D centres worldwide have already brought in over $200 million after Glenmark licensed them out to multinationals.
Our goal is to try and be the first Indian transnational corporation in the pharma space, Saldanha, chairman and managing director, told FE at his new molecules research centre in Navi Mumbai. You have to be at the cutting edge of research to be there. Glenmark spends 4% of its sales on R&D.
Consultants say such ambitions have their own challenges. To get into such a big league requires a lot of capital, a consultant with a foreign consultancy firm said. Israels Teva had managed to do it. Glens aspirations are good, but its too early to tell. He cannot be quoted on specific companies.
Saldanha, who joined when Glenmark had revenues of just $30 million (R1,500 crore now), sensed the challenge early enough. Having worked with pharma giant Eli Lilly and consulting firm PricewaterhouseCoopers, he recognised the need to drive the business with science and innovation as pillars, but funding research by selling me-too drugs.
We wanted to be innovative , but did not have the revenue to pull that off, Saldanha said. The company then built an outlicensing model, where drug molecules would be licensed out to MNCs, who themselves were starved of robust drug pipelines. In return, the Indian company received milestone payments as the drug completed various stages of development.
R&D will have challenges of funding, Hitesh Sharma, partner and national life sciences leader, Ernst & Young India, said. Generics will remain a core activity for Indian pharma companies, so that part of what is generated there can be pumped into R&D.
If generics supported innovation in the initial phase, innovation supported Glenmarks efforts to grow generics later. But innovation is fraught with risks. Three molecules outlicensed to MNCs had to be discontinued, raising investor concern. Playing the innovation game is difficult, and failure is a given, said Saldanha, who is a pharmacy graduate from Mumbai University and holds a business degree from the Leonard Stern School of Business, New York University. The company now has seven molecules in development, two of which were outlicensed to Sanofi last year.
Crofelemer, a drug to treat diarrhea in HIV positive patients, is expected to be launched in the first half of 2013 despite a dispute with partners Napo Pharma. So far, it has earned $202 million (over R1,000 crore) from outlicensing.
Consultants say such payments are tricky. Most of these cash projections are headline numbers and the actual milestones can be small, the consultant quoted above said. Moreover, foreign companies can pull the plug on development.
Glenmark can continue to generate outlicensing income of $20 million a year, similar to the average annual outlicensing and milestone income in the last eight years, Saion Mukherjee and Aditya Khemka of Nomura Equity Research said in a note on January 16.
In the US, which turned in revenues of $181.95 million in 2010-11 fiscal, the company will look out for niche therapeutic segments like dermatology or skin disease, oral contraceptives and pain management. It is challenging to gain revenues, scale and margins from vanilla generics business, said Saldanha, whose company filed the highest number of new drug applications in the US in 2010-11 fiscal, even more than what Teva filed. The idea is to be in products where entry barriers are high. It files about 12-15 products a year and launches 9-12.
Drugs worth $50-60 billion in annual sales are expected to go off-patent over the next three years. But the turf is getting highly competitive. Companies sometimes will have to come to the bare bones in pricing, a consultant said.
Glenmark has challenged 14 patents (para IV, in industry parlance), eyeing an opportunity to launch drugs exclusively for 180 days after the patent expiry and settling litigations with MNCs to launch generics authorised by them. Our strategy has been to focus on niche para IVs where we will be the sole first-to-file player, Saldanha said. The idea is to settle and not get into litigation.
But that has its own challenges. Para IV will become less and less attractive in the future. The real big blockbusters, like Lipitor, are all gone, a consultant said.
Today, the line of demarcation between generics and innovative drugs in gone, Saldanha said. The world is moving to an integrated model, where everyone is doing everything.