When the drug industry relocates


American giants are all rushing to Asia to work with Indian and Chinese companies, thus taking advantage of their intellectual resources and saving millions of dollars in research and the discovery of new treatments at the same time.

From his ostentatious offices just a few blocks from Mumbai’s worst slums, Swati Piramal launches into an elated patter about the ongoing revolution in drug discovery. Passages (in Sanskrit) from the Bhagavad Ghita, a sacred Hindu text which governs its conception of business, adorn the walls of the company called Piramal Life Science. The logo represents gyan mudra, a position of the fingers of the hand used in meditation during yoga sessions, similar to the Western sign meaning “OK”.

Depart for Bangalore. After pacing through the city’s legendary traffic jams and rattling our bones on roads mined with large craters that disappear with each rain, our four-wheel-drive vehicle stops in front of a glittering building in the shape of an ocean liner, the seat by Jubilant Byosis.

Its laboratories are world class. Even if in the event of a breakdown, repairs can take a week, the scientist Ajith Kamath shamefully explains to us.

Lunch will be ordered from Domino’s Pizza with toppings including corn, Indian paneer cheese and hot spices. We will learn later that Jubilant is co-owner of the Domino’s Pizza franchise in India.At first glance, companies such as Jubilant or Piramal do not seem mature enough, or perhaps too culturally distant, to compete with global pharmaceutical companies. But judging by all the transactions taking place in India, they could have a decisive role to play in the future of the sector.

In recent months, Western leaders have flocked to India’s hastily built science hubs, seeking allies in the endless quest for successful (commercial) treatments. Without fanfare, they have set in motion a process that could relocate pharmaceutical research to Asia on a large scale.

Five Western companies have entered into research partnerships with Jubilant, including Eli Lilly, Amgen and Forest Laboratories. Lilly is also in partnership with Piramal, as is Merck. Each month, agreements are concluded with Indian pharmaceutical companies. The goal is to seize promising compounds discovered by multinationals, to test to eliminate the least efficient candidates and to develop the others in order to obtain marketable drugs.
The Indian partners also hope to leave their mark on the scientific discoveries that would lead to the manufacture of new drugs to treat diseases such as Alzheimer’s, cancer or even diabetes. India, Western business leaders say they have forged a strong research partnership. However, the timing was no accident.

In addition to spending billions of dollars at home on technologies aimed at transforming genetic research into new cures, pharmaceutical companies are fighting to launch revolutionary products that will no longer bring them any income in five years. In desperation, the pharmaceutical giants are paying colossal commissions to absorb biotechnology companies, as evidenced by the $44 billion bid made by Roche Laboratories to acquire Genentech last July.

Now multinationals are looking to India for the same combination of intellectual resources and cost savings that has made India a leader in software and IT services. Some Western companies agree to share ownership of discoveries and even share dividends on profits made. “It’s a real transformation of research and development,” said Robert W. Armstrong, vice president of external research at Lilly. “We have to adopt a completely different way of thinking.”

The rush to the East, where you can have five chemists with PhDs for the cost of one Westerner, carries certain risks. At a time when Pfizer, AstraZeneca and others are drastically cutting thousands of R&D jobs in the United States, the intensification in Asia draws attention to the fact that America is sacrificing a key industry by a policy radical relocation. Only, if this strategy pays off, the pharmaceutical industry could save billions of dollars, lower the prices of new drugs and accelerate progress.

The impact of research offshoring will be all the greater as China, with a much larger pool of biochemists, is expanding. Lilly, Sanofi and many others have already entered into partnerships there. “China has extraordinary potential,” exclaims Eric J. Topol, former head of the cardiology department at Cleveland Hospital, consultant for HUYA Bioscience, a biotech company based in San Diego.
“China could produce a deluge of potentially important remedies. It’s just a matter of time”.

This East-West collaboration is very young and must prove itself. However, many Western leaders are amazed at the speed with which Indian industry is achieving the goals set by its partners. Just a few decades ago, India was considered a pariah of the pharmaceutical trade. In response to this outrage from Western companies, New Delhi in the 1970s decided to no longer respect their pharmaceutical patents. Thousands of generic drug makers sprang up like mushrooms, re-engineering Western remedies and distributing them in India and other developed countries. Indian entrepreneurs argued that they were providing a social service, by selling antibiotics for a fraction of the price Western patent holders would have charged. In the 1990s, Indian generic manufacturers Cipla and Ranbaxy Laboratories began selling anti-AIDS cocktails in India and Africa at the unbeatable price of one dollar a day.

Nevertheless, the Indian rulers themselves recognized that the trade in cheap drugs was not profitable. Virtually all Indian leaders admit to having the goal of eradicating disease in the Third World. This would require the creation of new drugs, not the manufacture of pirated generics. They also recognize that the only way for them to revive a modern industry is through partnership with Western laboratories. Thus, in 2003, New Delhi changed direction and decided to recognize foreign patents again.

The first collaborations consisted of relatively simple laboratory work, barely covering the running costs of the laboratories. The Indians asked for more responsibilities. But despite being full of chemists who can copy any drug, India is sorely lacking in biologists with enough knowledge and experience who can create new compounds.

When Sandeep Gupta, former director of research at Forest Labs, toured Indian pharmaceutical companies in 2006, he made their leaders understand the importance for them of acquiring new talent. “I explained to them that I couldn’t work with them unless they expanded their ability to work organically. he says. Soon after, local manufacturers began to hire thousands of Indian biologists who had studied and worked abroad and offered them senior management positions. So Jubilant appointed Kamath, a 14-year veteran at Pfizer, to lead its fledgling biology department and VN Balaji, who worked at Monsanto and Allergan as an executive. The company quickly grew its staff of 50 chemists and experts into an army of 700. “If someone had told me five years ago that all this would happen in India, I would have replied that it was impossible,” admits Kamath.

Over time, the partnerships evolved into co-development agreements. The starting point was the collaboration in 2003 between GlaxoSmithKline and Ranbaxy. Glaxo donated compounds with medicinal properties and offered its Indian partner to share both intellectual property rights and millions of royalties if it could help develop a marketable drug. Western labs have announced nearly $400 million in such partnerships to date, but their total value is likely higher.

Bristol Myers Squibb, for example, has developed a research partnership with Bangalore-based Biocon, a partnership that includes state-of-the-art facilities that will house 400 scientists, of course the price of all this has not been disclosed.

For Westerners, the primary goal is to lower their costs. In the United States, research contractors would charge laboratories at least $250,000 for the services of a single chemist with a PhD. With an Indian partner, the same work can be done for about a fifth of this price. But what Western firms want above all is to bail out their drug production. It can cost around $100 million from developing a drug idea to when that drug can be tested on people. After that, a drug has a one in eight chance of receiving approval from the US Food and Drugs Administration. By conducting so many experiments in a low-cost Asia, pharmaceutical companies are sure to be able to carry out more experiments while keeping R&D costs low. In other words, they get “more arrows to hit the target,” a phrase so overused it seems to come straight out of a sacred Indian text.

The other catchphrase that keeps coming back is “the faster the failure, the cheaper it costs”. When scientists study potential drugs in test tubes or on animals, they detect problems that ultimately prevent the drug from coming out, such as toxic side effects, or poor absorption by the body. Stopping the project at this stage is essential, because the majority of the cost of developing a drug, barely a few hundred million dollars, is located afterwards, that is to say during clinical trials on humans. Indeed, Western manufacturers want to face failures during the theoretical phase in India according to CSN Murthy, CEO of Bangalore-based company Aurigene. “Here, you can afford four failures for the price of one”.

At first, Western leaders viewed their Indian partners with suspicion given their past as price-busters. However, they were still very attracted. Mervyn Turner, vice president of research at Merck, says his first trip to India in November 2007 was “breathtaking”. He was impressed by the desire of Indian laboratories to set up world-class structures, as well as by their passionate and charismatic leaders. In Mumbai, he met Piramal, the daughter of a textile magnate and a Harvard graduate, who explained to him that she had chosen this field in order to find a cure for poliomyelitis. It is “a force of nature” he admits.

An inspection of the partnership between Aurigene and Forest Labs shows both the advantages of this new research model and the difficulties it faces. Forest provided Aurigene with valuable data on how new molecules can reverse metabolic diseases such as diabetes. Aurigene’s job is then to provide a catalog of therapeutic compounds and lead to a drug. Each company has assigned three senior members of its team to a “research council” as well as parallel teams of chemists and biologists constantly in contact by teleconference. According to Murthy, speed is their fuel. “While the big American laboratories struggle with a heavy bureaucracy, here, a scientist does his calculations in the morning and in the afternoon he gets all the data. He doesn’t need to call a meeting. He goes to see a colleague, who has him on his back until he gets what he needs”. Forest and Aurigene recently developed a drug and began animal testing in just three months, which is very fast by European and American standards.

Western laboratories come to give their Asian partners more responsibilities than they would have imagined. Suven Life Science, an Indian startup in Hyderabad, is co-developing brain disease drugs with Lilly. Besides that, Suven has the right to work on its own drugs against Alzheimer’s, obesity or even Parkinson’s disease, provided that they do not compete with drugs developed in common. Prior to this, Lilly sought to impose restrictions on Suven’s own research. “We had no flexibility,” says CEO Venkat Jasti. However, as the partnership evolved, Jasti persuaded his American partners to throw the close in the trash.
“Innovation is only possible with freedom”.

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