Pharma: New drug wonders! - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Pharma: New drug wonders!

Sep 21, 2005

Until January 2005, since India had recognized process patents, it resulted in domestic pharma companies becoming an expert in 'reverse engineering' of products. However, a major development took place in the Indian pharmaceutical market, when the product patent law was introduced with effect from January 1, 2005. This means that domestic majors will have to focus on new drug discovery research in the long term if they want to benchmark themselves against the global pharma majors. In this article, we take a look at what Indian companies are doing on the drug discovery front.

What does new drug discovery involve?
On the discovery of a molecule, the US FDA grants a patent for the molecule for a period of 20 years. New drug discovery involves various steps, which starts with the building up of a new molecule. This is followed by synthesis of the molecule and the conduct of pre-clinical testing (laboratory and animal). After this, the molecule enters the clinical trials stage, which comprises of 3 phases - I, II and III. In Phase I, studies are conducted on around 20 to 80 healthy volunteers to determine safety and dosage. In Phase II and III, a larger patient population is enrolled for the purpose of determining efficacy and side effects and also to monitor the adverse reactions of long-term use. After successful conduct of these trials, a pharma company applies for US FDA approval followed by additional post-marketing testing.

This entire process takes around 10 to 12 years of the patented life of the molecule. Which means that the remaining 8 to 10 years of the patented drug is called the 'commercial life' of the drug. Investment in launching a new product could be anywhere between US$ 400 m to US$ 800 m.

Global perspective
In the global pharmaceutical market, pharma behemoths such as Pfizer, GlaxoSmithKline, Sanofi-aventis etc. have been the pioneers in new product launches, which has resulted in them being labeled as 'innovators'. It must be noted that patented products enjoy a significant premium in terms of pricing, which more than makes up for the costs involved in drug discovery. Blockbuster drugs for instance generate revenues to the tune of US$ 1 bn annually. This translates into US$ 10 bn for the 10 years of its commercial life during which it enjoys a patent, compared to around US$ 800 m that is incurred on research!

As far as the top 10 products in the global pharmaceutical market are concerned, Pfizer, the largest pharma company in the world, leads the pack with 2 blockbuster drugs 'Lipitor' (US$ 12 bn in revenues in CY04) and 'Norvasc' (US$ 4.8 bn in revenues in CY04) under its belt. Other products in the top 10 include Merck's 'Zocor' (US$ 5.9 bn in revenues in CY04), Sanofi-aventis' 'Plavix' (US$ 5 bn in revenues in CY04), Eli Lilly's 'Zyprexa' (US$ 4.8 bn in revenues in CY04) amongst others.

Indian scenario
Domestic pharma majors such as Ranbaxy and Dr.Reddy's have been the forerunners as far as drug discovery research in India is concerned. Currently, Dr.Reddy' has 5 molecules undergoing Phase I and Phase II clinical trials. These are in the areas of oncology (anti-cancer) and metabolic disorders. Ranbaxy meanwhile has 2 molecules in Phase II clinical trials - its bronchial asthma molecule RBx 7796 and its Urology-BPH molecule RBx 2258.

Wockhardt has also identified new drug discovery as one of its growth drivers going forward. The company currently has 5 molecules in the pipeline in the anti-infectives segment, including its molecule WCK 771 undergoing Phase II clinical trials. Nicholas Piramal's anti-cancer molecule recently entered Phase I clinical trials. All these initiatives could translate into potential revenue generators in the long term.

Looking ahead…
Despite the initiatives taken by the domestic pharma industry on the drug discovery front, it is early days yet. A new patented drug from a domestic pharma company's stable will probably not see the light of day for the next 4 to 5 years or so. Also, a domestic pharma company may not have the resources to conduct the clinical trials all the way through, keeping in mind the cost involved. This means that they will have to rely on out-licensing the molecule to a global pharma major. However, despite hiccups, domestic companies have to be acknowledged for taking major strides in the area of new drug discovery. Though not in the medium term, efforts by these companies could turn into global opportunities in the long term.

Equitymaster requests your view! Post a comment on "Pharma: New drug wonders!". Click here!


More Views on News

THYROCARE TECHNOLOGIES Share Price Up by 6%; BSE HEALTHCARE Index Down 0.5% (Market Updates)

Jun 16, 2021 | Updated on Jun 16, 2021

THYROCARE TECHNOLOGIES share price is trading up by 6% and its current market price is Rs 1,328. The BSE HEALTHCARE is down by 0.5%. The top gainers in the BSE HEALTHCARE Index is THYROCARE TECHNOLOGIES (up 6.1%). The top losers are LUPIN (down 0.2%) and PFIZER (down 0.3%).

FDC Share Price Down by 5%; BSE HEALTHCARE Index Down 0.4% (Market Updates)

Jun 16, 2021 | Updated on Jun 16, 2021

FDC share price is trading down by 5% and its current market price is Rs 382. The BSE HEALTHCARE is down by 0.4%. The top gainers in the BSE HEALTHCARE Index are ERIS LIFESCIENCES (up 0.8%) and SANOFI INDIA (up 0.5%). The top losers is FDC (down 5.1%).

Why Did Shares of Divi's Lab Rally Today? (Views On News)

Jun 10, 2021

The stock jumped 3.6% in intraday trade to hit its 52-week high.

Points to Keep in Mind Before Subscribing to Krishna Institute of Medical Sciences' IPO (Views On News)

Jun 15, 2021

All you need to know about the IPO of Krishna Institute of Medical Sciences.

Laurus Labs Hits New Life High. Up 500%+ in One Year (Views On News)

Jun 8, 2021

Laurus Labs trades higher for the eight straight day, soars 73% in 3 months.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 16, 2021 (Close)