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Industry Insight - CRAMS (Contract Research And Manufacturing Services) in India
Cygnus Research, November 2010, Pages: 101
CRAMS (Contract Research And Manufacturing Services) is one of the fastest growing segments in the pharmaceutical and biotechnology industry. It pertains to outsourcing research services/ manufacturing products to low-cost providers with world class standards, in line with international regulatory norms like the USFDA, Australian-TGA, UKMCA, and EMEA. Pharmaceutical multinationals have traditionally been outsourcing manufacture of intermediates, API's and formulations. Since late 1990s, CRAMS has gained more importance, as MNCs have been coming under intense pressure to cut costs to maintain their profitability.
The global market for pharmaceutical outsourcing was worth US$58 billion in 2009. It is expected to grow at a CAGR of over 14% (2007–2012) to reach US$85 billion by 2012. Out of the total market, contract research was US$21 billion in 2009 and is expected to touch US$32 billion, in 2012, with an annual growth of 15%. The contract manufacturing segment of global pharmaceutical outsourcing market was at US$37 billion in 2009 accounting for the major share (approximately 63.8%) of the total market.
India, with more than 175 US FDA-approved manufacturing facilities, is one of the most preferred locations for outsourcing manufacturing services in India by the multinationals and global pharmaceutical companies. The Indian CRAMS market was valued at US$2.5 billion in 2009 and is expected to reach US$7.6 billion by 2012, growing at a CAGR of 47.2% (2007-2012). Out of the total CRAMS market, contract research stood at US$0.9 billion in 2009 and is expected to touch US$3.4 billion, reflecting a CAGR of 62.51% (2007–2012). The contract manufacturing segment of CRAMS market was at US$1.6 billion in 2009 accounting for the major share (approximately 64%) of the total Indian CRAMS market.
This report gains significance in view of the growing prospects of CRAMS and the increasing interest of Indian pharma companies in exploiting the current opportunities. Containing 10 chapters, the report starts with the Introduction that outlines the broad overview of the concept of CRAMS, followed by Market Overview, which covers Indian market, its size, growth, characteristics with a brief global reference to outsourcing. Growth Drivers, Issues and Challenges, Critical Success Factors, Regulations and Future Outlook provide a directional view of the industry. This report would be useful to pharma companies, banks and financial services organisations, foreign investors, industry analysts, researchers and students.
1.1 Contract Research (CR)
1.1 Contract Research (CR)
1.2 Contract Manufacturing (CM)
1.2.2 Patented drugs
1.2.3 Intermediates for NCEs
1.3 Industry specific Applications
1.3.3 Health care
1.4.1 Cost saving
1.4.2 Improved skills to face international competition
1.4.3 Already existing strong manufacturing base
1.4.4 Strong marketing and distribution network
1.4.5 Rich biodiversity
1.5.1 Threat to human life
1.5.2 Increased raw material consumption and wastage
1.5.3 Handling hazardous chemicals
2. MARKET OVERVIEW
2.1 Characteristics of the CRAMS companies of India
2.2 Government support critical to CRAMS companies
2.3 R&D strategies of companies in CRAMS
2.4 Research on local disease conditions
2.5 Emerging Business Strategies
2.6 FDA-approved manufacturing plants in India
2.7 TRIPS compliance and impact on companies
2.8 Emerging business model
2.9 Service providers in contract manufacturing
2.10 Current market
2.10.1 Pharmaceutical industry: A major player
2.10.2 Market Status
2.10.3 Contract Research
2.10.4 Contract Manufacturing
2.10.5 Contract Research through Clinical Trials
2.11 Historical development
2.12 Market players
2.13 Planning outsourcing process
2.14 India-China emerging players
2.15 R&D spin-off
3. INDUSTRIAL APPLICATIONS
3.3 Data Management
4. CRAMS OUTSOURCING
4.2 Market Status
4.3 Outsourcing in Clinical Research
4.4 Reasons for outsourcing to CROs
4.5 Some important outsourcing activities
5. GROWTH DRIVERS
5.1 Arising need in pharma value chain
5.2 Demand for NCEs and INDs
5.3 Need for Speedy and low cost R&D
5.4 Patenting requirements
5.5 Manpower development
5.6 MNCs, leveraging on their Indian subsidiaries for global support
6. ISSUES AND CHALLENGES
6.1 Non-Availability of Skilled Manpower
6.2 Growing global competition
6.3 MNCs opening Captive CROs
6.4 Manufacturing units
6.6 Competition from China
7. MAJOR PLAYERS
7.2 Indian Companies
7.3 Multinational Companies
7.4 Major players foraying areas
7.5 Major players and their CRAMS revenues (INR bn)
7.6 M&A in CRAMS
7.7 Some alliances in CRAMS
8. REGULATORY ISSUES
8.1 Government Regulations
8.2 Patent Regime
8.2.1 Changes in India's patent regime and access to medicine
8.3 Customs Duty
8.5 Unsafe Drugs
8.6 Industry's Growing Influence over Research
8.7 Academia and Industry – Eroding boundaries
8.8 Regulatory System in India: Government policies
8.8.1 Exemption of Customs Duty
8.8.2 Tax benefit
8.8.3 Role of IACUC
8.9 Regulation of Ethical Issues
8.9.1 Animal-to-Human Transplants: Ethics of Xeno-transplantation
8.9.2 Human Tissue: Ethical and Legal Issues
8.9.3 Clinical Trials without Ethical Review
8.10 Indian Government’s Stand
8.11 Research and Development Regulations
8.12 Government policies
8.12.1 Infrastructural support
8.12.3 Single window clearance
9. CRITICAL SUCCESS FACTORS
9.1.1 Supply Chain Management
9.1.2 New Product development
9.1.3 Application of E-sourcing
9.2.2 Research design
9.2.3 Professionally Trained Manpower
9.2.4 Government Procedures/Sanctions
9.2.5 Data Management
10. FUTURE OUTLOOK
10.1 High expectations, lot of promises
10.2 Manufacturing and Licensing Opportunities
10.3 Mergers and Acquisitions
10.4 Licensed Production
10.5 Marketing Tie-ups
10.6 Budding Research base
10.7 Increasing R&D investment of global pharma companies
AVRA Laboratories Pvt. Ltd.
Chembiotek Research International
Dishman Pharmaceuticals and Chemicals Ltd.
Ind-Swift Laboratories Ltd.
Ipca Laboratories Limited
JB Chemicals and Pharmaceuticals Ltd.
Jubilant Organosys Ltd.
Matrix Laboratories Ltd.
Reliance Research and Development Services
Sai Life Sciences Ltd.
Shashun Chemicals & Drugs Ltd.
Suven Life Sciences Ltd.
Vimta Labs Limited
List of Tables
Table 1: Major Business Motives to Outsource
Table 2: CRAMS Areas of Operation
Table 3: Drawbacks in TRIPS compliance
Table 4: Contract Manufacturing deals in India
Table 5: A comparison between India and China
Table 6: R&D spending for Top companies
Table 7: Outsourcing industry partnership analysis
Table 8: Patent expiry dates of some major molecules
Table 9: List of drugs withdrawn from commercial activities
Table 10: Suggestive operational model
List of Figures
Figure 1: Dynamics of Pharmaceutical industry
Figure 2: New molecular entities (NMEs) and biologic license applications approved
Figure 3: Trends in Pharma Industry
Figure 4: Need for CRAMS in Pharma industry
Figure 5: Sourcing opportunity evaluation by pharma companies
Figure 6: Post-2005 R&D strategies of Indian CRAM companies
Figure 7: Research on local disease conditions
Figure 8: Business strategies of Indian companies in CRAM
Figure 9: Number of FDA approved manufacturing units
Figure 10: Emerging business model
Figure 11: Some of the service providers in India in contract manufacturing
Figure 12: Global Pharmaceutical Outsourcing Industry
Figure 13: Indian Pharmaceutical Outsourcing Market
Figure 14: Segment of Indian Pharma outsourcing market
Figure 15: Indian CRO market
Figure 16: Indian CMO market segment
Figure 17: Big pharma partnering with Indian pharma
Figure 18: Reasons for outsourcing
Figure 19: Different aspects of patenting requirements
Figure 20: Country-wise DMF's Fillings
Figure 21: Future Market Outlook
The next four years will be crucial for global Pharmaceutical companies, as many of the top selling drugs go off patent and the pharmaceutical industry frantically looks for new molecules. There is an ever increasing demand for New Chemical Entities (NCEs) and Investigational New Drugs (INDs). This is acting as a growth driver for the contract research organizations. Factors like a vast expanse of specialty hospitals with state-of-the-art facilities, large English speaking population and rich talent pool; diverse population and diverse gene pool; increasing number of chronic diseases and increasing R&D costs coupled with low R&D productivity, major pharmaceutical companies worldwide are finding it difficult to maintain their bottom lines. They have taken recourse to outsourcing part of their research and manufacturing activities to lower cost countries, thereby saving costs and time, in the process. This has led to the evolution of Contract Research and Manufacturing Services (CRAMS) as a fast emerging business opportunity for Indian companies, particularly for mid sized companies, who have been facing the heat of implementation of WTO guidelines since early 2005.
The global pharmaceutical outsourcing market was worth US$58 billion in 2009. It is expected to reach US$67 billion by 2010, at a CAGR of 15% for 2007–2010 period. CRAMS can be split into two major business segments—Contract Research and Contract Manufacturing. Activities in contract research predominantly consist of drug discovery, preclinical and clinical research. As per an estimate by Express Pharma, out of the global pharma R&D spend of US$50 billion for the year 2009, only around US$21 billion was outsourced. The global market for contract research is expected to grow at a CAGR 15.0% from 2007 to 2012. It is a promising segment with the clinical research outsourcing accounting for more than 50%. Contract manufacturing, on the other hand, consists of activities like manufacturing of intermediates for New Chemical Entities (NCEs) or manufacturing of Active Pharmaceutical Ingredients (APIs). In 2009, CMO activity accounted for the major share i.e. 64% (approximately US$37 billion) of the total global pharmaceutical outsourcing market.
The growth of the global custom manufacturing services industry is driven by rationalisation of plants due to low capacity utilisation, new operating models of companies (emerging biopharma/biotech companies do not have an internal capacity for manufacture and outsource the same, while retaining only the marketing rights) and emergence of biologics, where the cost of investing in a new manufacturing facility is high.
The top 10-12 global players account for roughly 60% of the market size (US$17 billion) of world CRO market, whereas the overall market growth has been contributed by the existence of new players especially in emerging nations like India.
India, as a country, offers certain competitive advantages over countries like China and East European countries. It has skilled and English speaking human power, a strong manufacturing base with the track-record of producing quality products, rich biodiversity and a structured legal and regulatory system. India has over 175 FDA-approved manufacturing facilities and is estimated to grow at the rate of 30% annually. This would make India the only country having the largest number of such plants outside the US. India has almost three times the number of FDA-approved plants than China. This is one of the most vital factors for outsourcing manufacturing services to India by the multinationals and global pharmaceutical companies.
India currently accounts for 8% of the global pharma production, making it the world’s fourth largest pharma producer. India is the fastest growing custom manufacturing outsourcing (CMO) destination with a growth rate of 43%, which is thrice the global market rate. This is driven by its ability to create a differentiating cost value proposition powered by its lower manufacturing costs, skilled manpower and strong technical capabilities.
The Indian CRAMS market stood at US$2.5 billion in 2009 and is estimated to reach US$3.8 billion by 2010. The CMO market stood at US$1.6 billion in 2009 and is expected to have a CAGR of 43% to reach US$2.3 billion by 2010. Chemical synthesis constituted 60% of the total outsourcing market by CMOs in India, followed by formulation and packaging, which constituted about 40%. The market size of contract research in India in 2009 was US$0.9 billion.
In drug discovery and development services, India is emerging as a hot spot, growing at approximately 65% i.e. more than three and half times the global growth rate driven by strong chemistry capabilities, skilled manpower and cost value proposition. Players in the Indian CRO market in the year 2005 were 20 and increased to 100 in the year 2008 and are expected to be in the range of 150-200 in the year 2012.
Almost all Indian pharma companies have an active presence in CMO and Contract Research and Manufacturing Services (CRAMS) segments. Companies like Ranbaxy, Cipla, Piramal Healthcare, Sun Pharma, Zydus Cadila, Indoco Remedies, Dr Reddy's Laboratories, Alkem, Lupin, Aristo, Alembic, Torrent Pharma, Divi's Laboratories, Dishman, Shasun Chemicals, Jubilant Organosys etc – almost all the top 100-200 players in the industry have been very active in contract manufacturing and related activities.
Major MNCs are searching for better options to lessen the risks involved in research through outsourcing, and many of the domestic players are gradually entering into CRAMS business to enhance their bottomline. In India, the contract manufacturing service chain consists of the following:
- Contract manufacturing for patented drugs, custom synthesis and scale-ups
- Contract manufacturing for specialized generics
- Contract manufacturing for old generics and old molecules
Some of the companies like Dishman Pharma, Divis Labs and Matrix Labs have been undertaking contract jobs for MNCs in the US and Europe. Even Shasun Chemicals, Strides Arcolabs, Jubilant Organosys, Orchid Pharmaceuticals and many other large Indian companies started undertaking contract manufacturing of APIs as part of their additional revenue stream. Top MNCs like Pfizer, Merck, GSK, Sanofi Aventis, Novartis, Teva etc. are largely depending on Indian companies for many of their APIs and intermediates. The outsourcing trend has taken a new shift among big pharma companies so as to focus on few core strengths and look for competent partners for other activities. Impending patent expirations on a large-scale and lack of sufficient new products are providing impetus to step up outsourcing initiatives. The strategic moves by MNCs like Eli Lilly and AstraZeneca currently reflect the trend. AstraZeneca has indicated its intent to outsource all manufacturing activities over the next ten years to India/China, whereas Eli Lilly has been proactively forged into R&D alliances with Indian companies like Nicholas Piramal, Jubilant Organosys and Suven Life Sciences.
The Indian contract research industry has grown tremendously over the past few years with more than 70 clinical research organisations and central labs. Local CROs providing the full spectrum of services are Vimta Labs, which is India’s largest provider, Asian Clinical Trials (ACT) and ClinInvent Research, headquartered in Mumbai. Clinigene International in Bangalore is a Biocon subsidiary and specialises in clinical trial, regulatory and accredited central reference laboratory services. Siro Clinpharm, Mumbai offers clinical services, data management, clinical quality assurance and regulatory consultation. Healthcare companies are foraying into the contract research and site management space to leverage the synergies that emanate from having a hospital chain. Fortis Healthcare has become the latest entrant in contract research with its Fortis Clinical Research Services. Apollo Hospitals’ site management organization – Apollo Spectra Research Foundation – has been managing clinical trials for some years now and the Max group, owner of Max chain of hospitals, has a contract research organization called Neeman Medical International.
Key growth drivers for the business of CRAMS in India are increasing demand for NCEs and INDs, need for speedy and low cost R&D, patenting requirements and manpower developments. While industry is growing there are some major issues and challenges pegging the current companies. Non-availability of skilled manpower, growing global competition, MNCs setting up captive CROs and manufacturing units in the country, manufacturing norms in Indian system of Medicines are worth to be noted. Global MNCs are enhancing the scope of outsourcing their operations in research and manufacturing to their Indian subsidiaries. Companies make use of their local medical departments or subsidiaries for monitoring clinical studies. Aventis, Eli Lilly, Novo Nordisk and Wyeth are using their affiliate medical departments for conducting global clinical studies
Overall regulatory environment in India has seen changes and a lot more is expected with the changing global business climate. Recent regulatory revisions such as adoption of Good Clinical Practices (GCP) guidelines under Schedule M of the Drugs and Cosmetics Act, removal of import duty on clinical trial samples, elimination of restrictions on concurrent trials and anticipated patent law changes show that India is keen on becoming a hub of global clinical trials.
Making APIs and oral solid formulations (tablets and capsules) will continue to be the major source of revenue for India’s contract manufacturing industry in coming years. India, with its inherent competitive advantages, stands as one of the most preferred outsourcing destinations for a range of activities and is now becoming a critical part of manufacturing and drug development value chain of various global innovator pharma It is estimated that 40-50% of the global clinical trials market will be outsourced to developing countries like India by 2010. Consequently, India’s contribution to the global pharmaceutical outsourcing market is expected to increase from 2.5% in 2007 to 5.7% in 2010. With over 175 FDA-approved plants, which make it the only country outside the US to have highest FDA-certified manufacturing facilities, India certainly can match up the future expectation of about US$7.6 billion in the coming year 2012.
- AVRA Laboratories Pvt. Ltd.
- Cadila Healthcare
- Chembiotek Research International
- Dishman Pharmaceuticals and Chemicals Ltd.
- Divis Lab
- Ind-Swift Laboratories Ltd.
- Ipca Laboratories Limited
- JB Chemicals and Pharmaceuticals Ltd.
- Jubilant Organosys Ltd.
- Matrix Laboratories Ltd.
- Nicholas Piramal
- Orchid Pharmaceuticals
- Reliance Research and Development Services
- Sai Life Sciences Ltd.
- Shashun Chemicals & Drugs Ltd.
- Suven Life Sciences Ltd.
- Vimta Labs Limited
- Wockhardt Ltd
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