Intellectual Thoughts by Sanjay Panda !!!!!: Is it end of dream??? or still there is a light????


Sunday, June 8, 2008

Is it end of dream??? or still there is a light????

What looked like a turning point in the history of Indian pharmaceutical research has come a cropper. Dr. Reddy’s Laboratories’ iconic deal with two of India’s most prominent investors — ICICI Venture and Citigroup Venture Capital (CVC) International — in September 2005 to form Perlecan Pharma, a new company dedicated to new drug development, has fallen apart. After three failed molecules, ICICI Venture and CVC have exited Perlecan, selling their stake to Dr. Reddy’s for a combined sum of $18 million.

This represents a major setback for the Hyderabad-based company, which will now need to find a new partner to support its research efforts. The Perlecan failure has also cast a shadow over many other deals it spawned — Sun Pharmaceuticals (Sun Pharmaceutical Advanced Research Company or Sparc), Nicholas Piramal India (Piramal Life Sciences) and Ranbaxy Laboratories (Ranbaxy Life Science Research).

But Dr. Reddy’s had pioneered the concept of spinning off research in a bid to de-risk its core business of generics. This was touted as a novel way to separate the more predictable revenues of mainstay generic drugs, from the uncertainties of new drug research, and subsequently raise further funds for research. Soon after, Sun Pharma spun-off its entire discovery research programme into SPARC, which was listed in July 2007, and Nicholas Piramal, Ranbaxy and Wockhardt followed suit. While Piramal Life Sciences and Ranbaxy Life Science Research will be listed shortly, Wockhardt’s new research company should be listed on 1 January 2009.

Nicholas Piramal and Ranbaxy were reportedly in talks late last year with private equity firms to pick up a stake in their respective research companies. “Chances are that private equity funds won’t want to touch discovery research companies again for some time. Private equity firms in India still have a trading mentality and little appetite for risk.

While the exact reasons behind the ICICI-CVC pullout aren’t entirely clear, their withdrawal is being linked to slow progress in the molecules’ development. Perlecan is believed to have recently abandoned the development of two more molecules codenamed DRF 10945 and RUS 3108 targeted at metabolic and cardiovascular diseases, respectively.
This leaves Perlecan Pharma, which had started with four molecules from Dr. Reddy’s stable, with just one molecule, an anti-diabetic drug codenamed DRL 16536, still in pre-clinical development.

Analysts feel the company could have assessed that the molecules’ commercial value was too low. DRF 10945, Perlecan’s most promising molecule, belongs to the same drug category as GlaxoSmithKline’s Avandia, which has been in the news after studies showed that it increased risk of heart attacks. Any drug belonging to the PPAR category will go under intense scrutiny by the US Food and Drug Administration,
More importantly, Perlecan never got focused attention. “The absence of a dedicated separate management team for standalone research entities like Perlecan may also be partly to blame. Perlecan remained a paper entity with neither a dedicated management, nor its own office. These are lessons that its followers may not want to repeat.

When it was founded, Perlecan had received equity commitments of $52.5 million. While Dr. Reddy’s was to contribute $7.5 million towards the new company, ICICI Venture and CVC International committed $22.5 million each. Perlecan immediately received the first tranche of $26 million — but the second never came. According to a person close to the development, ICICI Venture and CVC contributed a combined sum of $22 million to the first tranche.

The current crisis is not specific to Dr. Reddy’s but may be symptom of larger ills plaguing Indian pharma R&D. Industry insiders point to a whole range of issues affecting the industry such as limited resources — financial and human — and a certain lack of direction in R&D programmes and coordination between scientists and managers.

Right from the beginning of a new drug’s development, one should know which pharma companies would be likely to in-license it and make the drug attractive. “Good science is not enough.”

Moreover, the number of drugs approved every year in the US, the world’s largest pharmaceutical market, has gone down drastically over the past few years. “The US FDA has raised the bar for approval of new drugs. There has been a lot of hype around new drug discovery research in India, which has led to unrealistic expectations. Today Big Pharma is focused more on defending their existing patents, rather than on new drug discovery. This leaves a lot of space for other companies to explore.” But a new drug out of Indian labs still seems a distant dream.

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