Drug firms high on joint R&D

At a time when the costs of R&D in pharmaceuticals are accelerating and the firms' marginal productivity are diminishing, Indian companies are trying out new collaborative and risk hedging business models. The pharma sector is bracing up to the challenges of drug discovery research like never before.

A recent deal between Wyeth and Hyderabad-based GVK Biosciences on providing research services for drug discovery has closely followed a similar deal between Eli Lilly and Jubilant Organosys.

Two years ago, Ranbaxy and GSK had signed a collaborative R&D pact signalling the onset of a new trend in the industry while Dr Reddy's has provided a path-breaking model in minimising risk by forming its Perlecan Pharma.

"The collaboration between small companies with good R&D abilities and large firms with superior infrastructure is essential," said Rajiv Gulati, chairman, Eli Lilly (India) Pvt Ltd. About 50 per cent of the drugs that the company plans to bring to India will be products of collaborations.

With Perlecan, Dr Reddy's has sought venture funding for its drug discovery programme where both risk and reward generated from the intellectual property will be shared. "This has reduced the risk that was earlier making the investors wary of the stock", said an analyst.

At present, Ranbaxy has two joint research programmes with GSK. The intellectual property rights as well as the commercialisation rights will be shared by the two, unlike the Lilly-Jubilant and Wyeth-GVK alliances which are fee-based research services.

Here, the Indian counterparts will work on leads provided to them till the preclinical stage. This model ensures fixed returns, no intellectual property rights and is independent of "milestone payments", making Jubilant and GVK free from any risk.

"When the main domestic and international income is from the generics market, spending generously on research can create a severe funds constraint. Thus, finding a partner in R&D is imperative", said DS Brar, chairman, GVK Biosciences on the need for even bigger companies to collaborate.

But these lessons in risk hedging and "risk spreading" have not come without some teething troubles. There were early setbacks when Ranbaxy faced the suspension of clinical trials of its outlicensed molecule to Schwartz Pharma in 2004. In 2002 and 2003, Dr Reddy's outlicensing deals with Novo Nordisk (for ragaglitazar) and with Novartis (for an insulin sensitiser) fell apart.

But experts say such setbacks are commonplace occurances in these projects. And looks like Indian pharma sector is willing to brave all odds to back it's newfound mantra of success.

NEW CURES

Two years ago, Ranbaxy and GSK had signed a collaborative R&D pact signalling the onset of a new trend. At present, Ranbaxy has two joint research programmes with GSK

Recently, Wyeth and Hyderabad-based GVK Biosciences tied up to provide research services for drug discovery

About 50 per cent of the drugs Eli Lilly (India) plans to bring to India will be products of collaborations