Indian CRAM market to clock $ 7.6 billion by 2012

Jyothi Datta Mumbai | Updated on June 09, 2011 Published on June 09, 2011

The Indian custom research and manufacturing segment is expected to reach a market size of $ 7.6 billion by 2012, with custom manufacturing leading the pack, says rating agency ICRA.

The growth will be supported by, among other things, the high number of plants approved by the United States regulatory authority – the Food and Drug Administration; skilled manpower and the inherent cost advantages that enable India to capture a significant chunk of the current $ 67 billion global pharma outsourcing market, the note said.

The global outsourcing market is expected to grow at a compounded annual growth rate 12.6 percent during FY10-12 to reach a market size of $ 85 billion by FY12. In the same period, the Indian CRAM (custom research and manufacturing segment) is growing at about 41 percent, the note said.

The growth of the outsourcing opportunity is being propelled by the loss of patent protection to the tune of $ 97 billion over 2011-2015; steady erosion in new product launches in relation to research spend and new launches not matching up to the earlier block-busters drugs (or medicines that gross sales of over $ 1 billion).

This coupled with the increasing role of generics and pricing pressure played out in the developed nations have forced big pharma players to look for cost-containment measures to protect their bottomline, the note said.

According to industry estimates, outsourcing of activities such as manufacturing and research work to India leads to cost-arbitrage of more than 50 percent when compared to developed countries. As a fall out of that non-core activities such as manufacturing of active pharmaceutical ingredients, dosage development and packaging have been out-sourced to low cost destinations such as India and China.

Off-late, global pharma companies have partnered Indian companies for drug discovery and development of new chemical entities with focus on biological skills to take advantage of skilled manpower and scientific talent pool. However, ICRA points out, the outsourcing of such service requires building up entrenched relationships with innovator companies over a period of time; initially with smaller projects and gradually moving on to mission critical high value add projects.

Further, the agency says, the Indian CRAMS business has benefitted from large domestic branded generics players who outsource manufacturing activities to such players.

Key Indian companies operating in this space include Piramal Healthcare, Biocon Limited, Jubilant LifeSciences and Divi’s lab, who have displayed strong growth over the last few years, though concerns on economic slowdown has led to inventory rationalisation by global pharma majors - thus leading to slowdown in growth during FY10 and H1 FY11, the note said.

Notwithstanding the short term impact which has been partly reversed during H2 FY11, the long term prospects of the Indian CRAMS business appears healthy - supported by outsourced manufacturing for APIs and increasing presence in high-end contract research business.

In the long run, companies which provide integrated drug development, research, clinical trials and manufacturing outsourcing services will prove to be one stop shop for all the needs for innovator pharma companies resulting in long term partnership and better customer franchise, the note added.

Published on June 09, 2011
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