Last week, we had the good fortune of spending a week in India, along with our colleagues from Ventac Partners. Our trip took us through the cities of Mumbai, Pune, and Bangalore. Our main focus was a visit with a major client, a CDMO with multiple facilities across the country.
Here are a few of our observations from a very interesting week in India:
There is no question that some Indian pharmaceutical manufacturers are facing some difficult times right now. Since 2013, a dozen or more manufacturers have been cited by the US FDA for data integrity and other issues. Some plants have been banned outright from exporting to the US.
Yet, Indian companies are not alone. A quick review of the FDA web site shows that plants and companies around the world have similar issues.
Now these concerns over manufacturing are spilling over into the contract research space, especially on the clinical side.
So is the CDMO industry in India declining?
We certainly don’t think so, at least from what we saw.
Irrespective of what is reported by the press, the factors which drove this shift towards India remain intact:
One facility we visited was an ultra-modern drug discovery center, complete with modern labs, equipment, and a spotless vivarium. Another facility was on a 9-10 acre, well-manicured campus surrounded by palm trees and a stunning open-air cafe.
Who wouldn’t prefer to work there compared to some towns in the Northeastern US?
It was interesting to listen to scientists when they provided their backgrounds. We would estimate that of all the PhD-level folks we met, 75% or more earned their advanced degrees from a University in the US, Canada, or the UK. Many were returnees from the US, having spend their post-doc and early professional careers in Big Pharma in the US.
Qualifications like these don’t come cheap anywhere. But if highly qualified, English-speaking scientists with ample facilities are readily available, who wouldn’t want to take advantage of this?
Now is everything in India picture perfect?
No, it certainly isn’t.
There are definite problems which were observable, even to casual visitors.
For example, rolling blackouts are common, even in major cities like Bangalore.
Now many companies have their own power supplies, so this is not an issue. But it is a little unsettling when the power goes out in an already dark neighborhood.
And, India continues to struggle with issues of poverty, illiteracy, and the wide gap between those that have and those who do not. Health care, clean water, and sanitation are visible problems in the areas we visited.
In fact, it was these contrasts, such as a modern R&D center in the midst of a challenging neighborhood which were the most unsettling aspect of our trip.
We don’t think the Indian pharmaceutical industry, especially the CDMO/CRO segment, is going to decline and fall anytime soon. Sure, there may be peaks and troughs, and issues with oversupply/excess capacity will affect the market. But these are normal behaviors of any market.
Importantly, India now has rules in place which forbid First-In-Man trials unless the NCE was “born” in India (or owned by an Indian company). This leads us to believe that companies will want their NCEs to be discovered there in order to enable entry into formulation development, scale up, and early Phase I studies.
Certainly the facilities and expertise are reality available. So the strategy makes sense, especially for companies looking for Target Validation, Hit-to-Lead services, and Screening services.
The fact remains that the people available to do the work, combined with excellent facilities (problem facilities aside) will likely keep those direct flights from Newark to Mumbai close to capacity for the foreseeable future.