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CCS Outsourcing to Grow in India
- Sarabjeet Singh Sharad, Senior Research Analyst Beroe Consulting (I) Pvt Ltd
India is well-established in Custom Chemical Synthesis (CSS) space; this article will focus on outsourcing of custom synthesis work to suppliers in India.

Over the years, increased development time, decline in the rate of new approvals and higher development costs have resulted to decline in R&D productivity of large pharma companies. This has resulted in Innovator pharmaceutical companies outsourcing large portion of their R&D to CROs including synthesis of molecules.

Indian Suppliers over the years have developed strong chemistry skills through their CRAMS (Contract Research and Manufacturing Services) model and are focusing on this apart from the contract manufacturing, which involves supply of material at gram or kilogram level where-in the profit margins are high when compared to contract manufacturing.

Large Pharmaceutical companies are looking to focus on their core activities in R&D therefore outsourcing major portion of non-core activities, which has led to increase in global pharmaceutical R&D outsourcing market, which was USD 74 billion in 2012 where Custom Chemical Synthesis (CCS) has shown 100 per cent growth in the last 5 years.1

With high-cost operations in USA and Europe, the focus is gradually shifting to India due to the following advantages:-
  • India has the highest number of USFDA approved facilities outside USA.
  • Indian suppliers account for almost 25-30 per cent of the total DMFs filed with the USFDA.
  • Lately with the implementation of the WTO TRIPS-mandated product patents (1 January 2005) has led to gaining more outsourcing from developed markets.
Industry View
Pharma Custom Synthesis industry is expected to have a turnover of USD 120 billion by 2015, where the outsourcing to contract players would contribute around USD 48 billion which is already increasing at rate of 16-18 per cent annually.2

Regional View
The CCS demand in Asia –pacific is expected to grow at 8 per cent where India is having good expertise in chemistry skills, compliance to strict international regulatory norms and scientific skills when compared to other Asian countries specially China.

Supplier View
CCS is one of the major outsourcing opportunities available to India, which will help the Indian suppliers attract huge volume of outsourcing from the large pharmaceutical companies, and become their strategic preferred partner in the future. CCS is part of the CRAMS (Contract Research and Manufacturing Services) value chain, which delivers high margins on low volumes ie, opposite from the traditional contract manufacturing model where the margin is very less for the suppliers, which is attracting Indian suppliers.

Custom Chemistry CROs are having in-house capabilities and are value driven to enhance their capabilities through these collaborations. Therefore subcontracting forms the major percentage of the total cost in India.

Indian CRO Research and Development Collaboration
  • Jubilant group subsidiary Jubilant Chemsys offers dedicated custom chemical synthesis (CCS) services.
  • Dr Reddy's group have two Technology Development Centers (TDC) in Hyderabad, R&D centre Chi Rotech in Cambridge which specialise in Chiral Chemistry, PEGs, and Prostaglandins.
  • Rockdale Enterprise Pvt Ltd has collaboration with Universities and educational institution like IICT, NCL Pune and IIT Mumbai.
  • Shasun Pharmaceuticals Ltd has tieups with several leading institution such as Harvard University.
TCG, Sai Advantium,Innogent (GVK), Syngene, Anthem ,Divis’s Labs, Piramal Healthcare, Jubilant Organosys, Shasun Chemicals and Dishman had invested significantly to build strategic relationship with the large pharmaceutical companies for these services in India. They have developed significant capabilities in this space and have been able to provide services to the top 10 global innovator companies over the last few years.

Source: Primary Research

Outsourcing these activities provides the innovator an opportunity to focus on discovery research. While the custom synthesis business cannot scale up to a large scale (supplies are generally in a few kilograms), it offers an opportunity to lock-in with the customer from early development stage and generally leads to large contract manufacturing orders once the drug is successfully commercialised.

References
  1. http://xa.yimg.com/kq/groups/15246641/1076818852/name/ Pharma+Sector+Scan+-+11th+March.pdf
  2. http://www.piindustries.com/sites/default/files/Investor%20Presenation_June%202012_new.pdf
  3. http://www.jubl.com/pdfs/q4fy12-investorpresentation.pdf
  4. https://ventura1.acesphere.com/Pdf/Equity/StockIdeas/Initiating
  • Primary – Supplier & Expert Interactions