Funding in drug development


The trend of minimizing risk involved in research and development through joint ventures is catching on in the Indian pharmaceutical industry. Sharing clinical and operational risks and reducing the impact of R&D expenditure on the balance sheet are the strong reasons for any Indian pharma company to make such tie ups because R&D is an expensive proposition. The companies without upgrading or innovations in their products cannot survive for long that too when their counterparts in other countries and competitors within the country are striving fo constant improvements in medicines.

The collaboration is not only for just financing or reducing expenditure but also conducting systematic and methodical clinical trials which can be approved by Drug Administration of various countries.

Let us look at one practical tie up which has recently taken place that is of Glenmark Pharmaceuticals. They signed an agreement with US based Paul Capital Partners’ Royalty Fund to finance the development of 16 generic dermatological products on Monday. The US based fund will invest up to $27 million in product development. This is the second deal of this kind in the country, after Dr. Reddy’s joined hands with ICICI Venture.

Generic product development is an expensive affair in the dermatology segment compared to other therapeutic areas, as testing of drugs on skin requires more time. On an average, expenditure on clinical trails for a generic drug is $400,000 , whereas it is as high as $1.7-$2.4 million for generic drugs in the dermatology segment. It also takes around a year for approvals, compared to three months for generics products.

Sharing clinical and operational risks and reducing the impact of R&D expenditure on the balance sheet is the key reason why we have entered into this deal, said MD of Glenmark Pharmaceuticals. Under the agreement, Glenmark will develop and manufacture drugs in India, while its US subsidiary, Glenmark Pharmaceutical Inc (GPI), will be responsible for filing drugs approvals and marketing the products in US. Paul Royalty will finance product development through milestone payments to GPI over the next two years. In return, the fund will receive a royalty on net sales for the pro-ducts with the percentage varying by product and performance.

Glenmark is the first Indian company trying to tap the potential of dermatology segment in the US market. Even within the US, there are very few players in this segment and we expect to capture around 30% of the one billion dollar market.

Clinical trails for two products have already started and GPI will start filing applications to US Food and Drug Administration (USFDA) from 2006. Glenmark expects to launch all the 16 products over five years, with the first product launch in 2007.

Glenmark is also marketing six generic products in the US and is expected to launch eight more in the next six months. The company is also trying to establish its presence in Europe and is looking at acquisitions in the region.

International cooperation is the only way the companies can survive. Even competitors can cooperate in a third country and make it a successful joint venture. This way the resources can be pooled and foxed expenditures can be lowered and desired results achieved. Countries like India are forming the base or platform for such joint ventures. This is not alone for pharmaceuticals but can be for all other fields of Industry. Industrial and business cooperation is going to be there worldwide.