The growth trajectory of global pharma industry will benefit from several technological advances transforming healthcare as we know it. Undeniably, cell and gene therapy are becoming more tangible as breakthrough therapy options with continued big pharma thrust on this frontier field. Ever since Novartis’s Kymriah gained FDA nod in August 2017, the industry has been bursting with activity in advancing own therapies through regulatory approvals as well as actively seeking inorganic growth through niche small players. There is also an continued focus on rare diseases as high value business opportunities for both small molecules as well as biologics. Characterized by high risk as well as higher rewards, market access concerns and price rationalization will continue to weigh heavily on success. While we expect global pharma majors to continue their pursuit in this space,are expected them to exercise greater selectivity and caution intaking calculated risks in nature of assets pursued.
This is just the beginning of a new era in global medicine, and we anticipate that engagement across the ecosystem (research institutions, young venture and large pharma companies) will significantly step up in next generation transformational therapies.
Indian Pharma – Looking Beyond Generics and Leapfrogging to Next Leg of Growth
The Indian pharma industry has traditionally been entrenched in small molecule generics, and continues to enjoy strong global dominance in the mature market. While generics business is still expected to remain the primarynear-term revenue generator for Indian majors, it is clearly marked with global challenges. Plunging profitability in regulated markets because of perpetuating price erosion is a crucial challenge propelling companies to seek alternate growth avenues. Several companies are now pursuing their next big growth avenue, and have strategically seeded different areas of innovation-led growth. Risk appetite for growth investments, financial bandwidth allocated in the near to mid-term horizon and enthusiasmfor technology and market partnerships have been some factors in shaping choice of next-gen focus areas. Such choices are also expected to shape the M&A outlook for the industry in the near future. We foresee big ticket M&A activity being limited and opportunistic, and deal landscapeshaped by portfolio expansion dovetailing growth strategies.
a. Strengthening Portfolio in Complex Generics and Specialty Pharma, with budding engagement in Novel Drugs
With generics business getting toucher, pharma companies will primarily concentrate on complex formulations across therapeutic areas and modes of delivery. While several companies have already embarked on this focus since the last few years, we expect further strengthening of in-house R&D as well asgreater aggression in pursuit of acquisitions/partnerships.
Beyond generics, several leading players have started navigating the specialty pharma pathway and this trend will continue to gain momentum. We expect substantially higher appetite for licensing and acquisitions across prioritized therapeutic areas, ophthalmology, oncology, dermatology, CNS et al with primary focus on the US market. Given the need to establish financial viability of this strategy in the near to mid-term horizon, assets across medium to high risk will be pursued. While there is currently greater favour for 505(b)(2) reformulated and repurposed assets, realization of true potential of the specialty pharma strategy will hinge on companies developing greater risk appetite and pursuing NCE acquisition and partnership opportunities. If executed with tenacity, time sensitivity and sufficient capital allocation, the special pharma pivot can prove to be the next transformation for the Indian pharma industry.
b. Growth in Biosimilars business engagement
Biosimilars landscape in India is rife with activity, as it is one of the earliest markets to open with respect to regulatory acceptance. With over 70 approved biosimilars in the domestic market, it is time to step up the game to access high value global markets. While some companies such as Biocon and Intas are in active pursuit of regulated markets, upcoming years are expected to see more companies upgrading their biosimilar programs to match global rigor. On the flip side, the path to global markets is studded with several financial as well as market access concerns that could threaten business rationale for some companies. Thus, we foresee a mixed landscape of certain companies expanding investments to gain a global foothold and certain others scaling back due to business reprioritization driven by sunk costs and lower returns realized.
c. Business rationalization in ROW Markets
Semi-regulatory markets with a regulatory rigor similar to that of India has so far been the next logically accessible geography for most Indian companies. While companies have so far spread their wings wide in ROW markets, going after tens of countries, we expect some business rationalization decisions on this front as companies channel their time and resources towards consolidating presence in fewer markets. With the new trade policies in China and plans to accelerate regulatory approvals for Indian made pharmaceutical products, we also foresee Indian companies entering and expanding presence in the Chinese market.
d.Digital Advancements Targeted at Manufacturing Efficiency and Risk Aversion
Manufacturing competence is the cornerstone of Indian pharma success, be it in any industry sub-segment. Thus, other than above mentioned portfolio-driven advancements, it is imperative that companies stay abreast of global developments in improving manufacturing efficiency and embrace digital technologiesto optimize process flow and cost of operations. Risk mitigation through serialization and ‘track and trace’ is another industry buzzword in light of counterfeit products having perilous consequences. As Indian companies step up their game in regulated markets, more companies are expected to embrace such technologies to match evolving global standards.
First Published in: BioSpectrum January Issue