No second chance?

No second chance?

In India, the phenomenon called ‘drug boutiques’ died an abrupt death and even today, it has few chances to thrive. Nandini Patwardhan writes

In 2003, Shasun Chemicals, Innovassynth Technologies and Suven Pharmaceuticals formed an alliance to create what is probably India’s first and only drug boutique. These three companies are experts in drug discovery services, clinical trials and contract manufacturing respectively. The objective of the alliance was to attract pharma MNCs and offer them all the services which they seek from India under one roof. It seemed logical to assume that an MNC would prefer to approach three companies at one go, rather than outsource to three different entities.

Though it was a unique idea, the target customers were not all that revved up with their all-in-one services. “One of the reasons is that people didn’t want to take up the services offered by the whole chain (all the three companies). They had come for one specific component. Unless they come for the whole chain, all the three companies will not gain,” explains Dr B Sahu, CEO and President, Innovassynth Technologies. And thanks to the lukewarm response, such initiatives were close to nil, since then.

The concept of setting up a one-stop-shop which offers end-to-end R&D solutions, is not new. What was novel is that three companies with different service offerings came together to pool their expertise and provide solutions along the entire value chain. Ideally, a drug boutique is a firm that offers a service bouquet ranging from medicinal chemistry, drug discovery services, formulation development to large scale commercial manufacturing.

As of now, companies offering these individual services are expanding their bandwidth. Some are taking this idea forward on the licensing front, and some are even seeking a share in the ownership of intellectual property. “Today, integrated companies already provide end-to-end solutions, hence the Shasun-Suven-Innovassynth alliance is not a new phenomenon. Companies like Nicholas Piramal, Dr Reddy’s Laboratories (through its CPS and Aurigene subsidiaries) are the front runners in end-to-end services. The field has expanded with the likes of Torrent, and Jubilant in the fray,” opines Utkarsh Palnitkar, Partner, Transaction Advisory Services, Leader-Business Advisory Services, Industry Leader-Health Sciences, Ernst & Young. Globally too, there are several companies that provide integrated services. “In other Asian countries, companies are focused in particular components of the value chain. As is the case of China, the focus in on manufacturing of early stage intermediates or APIs rather than development work,” he adds.

Cost cutting and reducing time to market are two of the most important reasons why pharmacos across the globe outsource research activities. It is here that they face the most daunting task—a choice of various options. There are contract research companies who provide process R&D but cannot scale-up to multiple kilograms for clinical trials or multiple tons for commercialisation. Then there are a host of chemical companies who do not understand the philosophy of regulatory compliance, a need basic to pharma manufacturing. And then there is a small segment of suppliers who can provide end-to-end services but at a high cost and lack the flexibility in accommodating small/medium sized opportunities.

Though the idea of a drug boutique was good, it unfortunately failed with the markets and has created no such interest among others players. This is because the investment required of a scientist-entrepreneur or promoters is way too high. Also, there is equally high risk of failure involved. As a result, though we have seen a trend of domestic big pharma establishing R&D centres, they play safe by going in for a lot of de-risking strategies. Domestic big pharma appear to be treading the drug boutique way cautiously, one step at a time from setting drug discovery centres, undertaking co-development activities and doing clinical trials.

Ideas fail for many reasons. Maybe the idea of setting up a drug boutique in India in 2003 did not succeed because it was ahead of its time. Would the scenario be different today? Not really, since the market has moved on in the past four years.

“We would not see more of these boutiques as integrated service providers spanning the entire value chain dominate the market with good track record. Our vision of the future is that companies with niche technologies would come in focus providing cutting edge solutions based on recent advances in genomics, proteomics and molecular biology rather than an all out model,” avers Palnitkar.