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Pharma outsourcing mkt to touch $53bn by '10
(Ecomonic Times, The (India) (KRT) Via Thomson Dialog NewsEdge) Apr. 7--With a slowdown in patented drugs sales and drying R&D pipelines, global pharma companies are increasingly exploring low-cost options to outsource research and manufacturing. According to industry sources, the global pharmaceutical outsourcing market, which currently stands at $24-bn, could reach $53-bn by '10.
Low-cost manpower and a large base of FDA-approved plants positions India high on the outsourcing list. Suven Lifesciences, GVK Biosciences, Jubilant Organosys, Nicholas Piramal and Shasun Chemicals & Drugs count among the leading Indian players in this segment.
Custom manufacturing for innovator companies stands out as the most attractive outsourcing opportunity for pharma companies.
According to a recent SSKI India report, this market could cross the $25bn-mark in '10 from an estimated $16-bn today. With the largest number of FDA-approved plants after the US, India could potentially capture 10 percent of this opportunity.
In fact, custom manufacturing is already a major contributor to the overall business model of some Indian pharma companies such as Jubilant Organosys, Nicholas Piramal, Dishman Pharma, and Shasun Chemicals & Drugs.
Nicholas Piramal's custom manufacturing business recorded revenues of around Rs 300 crore in '05-06, Nicholas Piramal's spokesperson told ET.
Jubilant Organosys recently added to its order book, annual contracts with various global life sciences companies worth $68-m for calendar years '06 and '07.
Furthermore, these companies are rapidly ramping up their manufacturing capacities, mainly through inorganic growth strategies.
With the acquisition of Roche's API business in Mexico, a few months ago , Dr. Reddy's Laboratories expects its custom manufacturing business to grow from its current base of Rs 45- 450 crore in the next 14 months.
Interestingly, Indian companies are looking out to buy distressed contract manufacturing organisations to create a global footprint.
Recent acquisitions of UK's Avecia Pharma by Nicholas Piramal and French Rhodia Pharma Solutions by Shasun Chemicals & Drugs are examples of this new trend.
"With this new acquisition, Shasun's contract manufacturing business expects to witness a 20 percent growth in revenues in '06-07, and a 40-45 percent revenue growth in '07-08," said S Vimal Kumar, joint managing director, Shasun Chemical & Drugs.
The company's contract manufacturing business revenues stood at Rs 38 crore in '05-06, representing a 52 percent increase compared to last year.
Finally, while clinical trials are being conducted in India for over five years now, discovery research outsourcing is just starting to gain momentum. GVK-Biosciences' recent deal with Wyeth and Jubilant's contract with Eli Lilly are strong indicators of growth in this segment.
According to SSKI India's report, R&D outsourcing is expected to become a $600-m market in India by '10. Suven Lifesiences and Biocon are among the major players in that field.
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