The Outlook for the Indian Pharmaceutical Industry

Heightened by the coronavirus pandemic, public focus on the pharmaceutical industry never has been greater. One important part of the global pharmaceutical ecosystem are India’s contract development and manufacturing organizations (CDMOs) and contract research organizations (CROs). To find out about the current state of those companies and where they are headed, GLG recently met with Manoj Nerurkar, founder of Steps Biosciences and, earlier, Chief Operating Officer at Syngene International. He has more than two decades of experience in pharmaceutical development, and was responsible for setting up the Novartus Drug Development R&D Center in India. Edited excerpts of the discussion follow.

Let’s start with some basics, namely what are actually talking about when we discuss CDMOs and CROs?

A CRO is typically used for drug discovery and early development. CDMOs are mainly responsible for late development and CMC (chemistry, manufacturing, and control). Unfortunately, the term CRO is also used for clinical research organizations, which creates a lot of confusion. Clinical research organizations are those that are responsible for conducting clinical study.

At the risk of oversimplifying, drug discovery involves chemists, biologists, toxicologists, and pharmacologists working to find a molecule that addresses the issue at hand. Once a candidate molecule is selected, it enters a two-pronged development process that involves several clinical phases and, if successful, a commercial phase. In parallel, there is a CMC phase, which is also called pharmaceutical development. That’s the phase in which clinical supplies are made and new formulations are developed. Once this is all done, a new drug application, or NDA, is filed.

Currently, CROs get involved in discovery and the early phases of development. CDMOs supply materials for the final phase of development and for commercial development. Clinical research organizations are the ones that conduct the clinical trials on behalf of the pharma company.

Where do the Indian CDMOs and CROs fit in the global pharmaceutical industry?

CROs and CDMOs are based almost everywhere. The largest and most meaningful CROs are based in India and China; the ones in the U.S. and Europe are boutique firms. Where the U.S. has the big presence is in the CDMO space, where commercial and phase-three quantities of drugs are made. That’s because the pharma companies want the final product to come out of their own country or another Western CDMO.

Why do Western pharmaceutical companies outsource to China and India and will this trend continue?

It’s about cost. Over the past decade or so, the R&D budgets of the large pharmaceutical companies have been either flat or shrinking while opportunities to attack different targets have grown. One way to solve the problem — as well as the uneven flow of R&D projects, which might require 500 scientists one year and 100 the next — is to build outside capacity, especially in cost effective geographies, like India and China. That’s why pharma companies come to CROs and CDMOs. And it’s not going away. Big pharma companies have become reliant on CROs and CDMOs to get the work done and they have developed the systems to manage these relationships.

Can you go into the economics in a bit more depth?

Let’s look at the annual full-time equivalent price for scientists. In the U.S., it’s about $250,000 to $270,000 per scientist per year. In Europe it’s between $180,000 and $190,000, and in China it’s between $90,000 and $100,000. In India it’s between $60,000 and $75,000. So you can see how much delta there is between U.S. CROs and Indian CROs. Even with the great cost difference, though, the primary reason U.S. companies come to India is because of size and our ability to scale up. If someone wants 200 or more scientists within a period of three to four months, where in the world do you go? In the U.S., even if they want to, companies just can’t recruit that kind of a number. Only India and China are able to do it.

Do pharma firms prefer India-based CROs versus China-based CROs, or are capability and capacity all that matter?

Many companies use CROs in both countries, of course. And it’s important to note that once a CRO is selected, the relationship tends to become sticky, largely because the vetting process is so detailed and the hurdles so high. I think China will have an edge in attracting business for a number of reasons. The first is government support for the business. We even hear that some companies receive government funds, but I don’t know that for a fact. Indian companies, by contrast, use their own capital. China also made a policy decision that it wants R&D done in the country. So despite the higher cost of doing R&D in China compared to India, lot of large pharma companies had to establish collaborations there in order to enter the market. The Indian government does not have that kind of policy. And finally, China has been extremely successful in inducing many expatriate and student scientists to return from the U.S. and Europe. They bring with them their network of Western contacts that helps the country attract business to China. Still, Indian CROs should soon see growth of about 20% to 25% year-on-year while Chinese CROs should grow at a rate maybe five percentage points greater.

About Manoj Nerurkar

Manoj Nerurkar is currently the founder of Steps Biosciences Inc. Previously, he was Chief Operating Officer, while working at Syngene International Limited. He has more than 20 years of experience in pharmaceutical development from Phase I to commercialization. He has been instrumental in terms of both strategic leadership and operational management in underpinning Syngene’s growth and evolution over past several years. During his tenure at Bristol-Myers Squibb, he worked on the development of various dosage forms of small and large molecules and led multidisciplinary teams responsible for CMC development. Prior to joining Syngene, Manoj worked for Novartis and was responsible for setting up their Drug Development R&D Center in India.

This pharmaceutical industry article is adapted from the November 18, 2020, Remote Roundtable “Future Trends in the CDMO Space – Advantage India?” If you would like access to the transcript for this event or would like to speak with pharmaceutical industry expert Manoj Nerurkar, or any of our more than 900,000 industry experts, contact us.