Manpreet Romana/AFP/Getty Images
In the late 1990s, scores of U.S. multinationals were catching on to the cost-cutting benefits of sending work to Asia. Not Big Pharma. The industry was bulging with profits and confidence. Whatever money could be saved by shifting drug development work to India or China would have seemed inconsequential compared with the billions of dollars at stake in a potential new blockbuster.
What a difference a decade can make. Each month, it seems, a big Western pharmaceutical company announces a strategic tie-up with a company or research institute in China or India. In May, for example, Merck (MRK) signed a drug-discovery alliance with New Delhi-based Ranbaxy Laboratories that would pay the Indian company hefty royalties if the program leads to a commercial drug. Merck has struck similar co-discovery deals with India's Advinus and Piramal Life Sciences. Eli Lilly (ELI), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Forest Laboratories (FRX), Wyeth (WYE), and Bristol Myers Squibb (BMY) also have recruited Indian partners to help develop new treatments for cancer, respiratory diseases, and heart conditions. In most cases, the multinationals are sharing technologies and biological insights that would have remained under lock and key a decade ago.
Outsourcing to China is taking off as well. Virtually every big pharmaceutical company is hiring contractors such as Wuxi PharmaTech (WX), Shanghai ChemPartners, and ShanghaiBio to do everything from synthesizing and analyzing new compounds to testing drugs on tissue samples and animals. And full-fledged discovery collaborations such as those in India are starting to appear. Eli Lilly, for example, signed on with Shanghai-based Hutchison MediPharma. Other partnerships have been formed but have not been publicly announced.
The offshoring of drug R&D will continue to grow. In a new study funded by the Ewing Marion Kauffman Foundation, a team of Duke and Harvard researchers found that outsourced research in India and China is becoming more strategically important to multinationals, and that drug patents by inventors based in the two nations have grown dramatically over the past decade. The team interviewed executives at 16 pharmaceutical firms in India and China and found most are planning for rapid growth.
When will a new blockbuster come out of India or China? It is far too early to say. It typically takes more than a decade to develop a newly discovered compound into a commercial drug that can win approval from the Food & Drug Administration, and most of the current strategic development deals are less than three years old.
But Asia has made impressive progress. In a number of cases, Indian companies have achieved key research milestones months ahead of schedule on potential treatments for cancer, respiratory ailments, and metabolic disorders. India's Glenmark Pharmaceuticals, which does its own R&D, already has licensed drug candidates to Eli Lilly and Merck. Ranbaxy, which agreed to sell a majority stake to Japanese pharmaceutical company Daiichi Sankyo, is in Phase II clinical testing for what may be the next important antimalaria drug. Several India-developed compounds are entering clinical testing on patients in the West.
Indian outsourcing companies, meanwhile, are performing increasingly sensitive and complex work. Advinus, Piramal, Dr. Reddy's Laboratories affiliate Aurigene, and others are getting involved at the earliest stages of drug development. They are starting with "targets," enzymes or proteins in the human body that are believed to cause diseases, and helping design new compounds that can hit those targets. The Asian partners then supervise the development of promising compounds all the way into the early stages of human testing. Essentially, the Asian partners are sharing the financial risk as well as the potential rewards of drug discovery.
Advertising | Special Sections | MarketPlace | Knowledge Centers | Terms of Use | Disclaimer | Privacy Notice | Ethics Code | Contact Us | Careers
Copyright 2000-2008 by The McGraw-Hill Companies Inc. All rights reserved.
