Test Time for India's Drugmakers

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Glenmark has high hopes for a new anti-asthmatic molecule. Likewise, Nicholas Piramal is working on a promising anticancer treatment and Ranbaxy Laboratories is developing an antimalarial medicine. All told, local drugmakers have 60 new compounds in the pipeline in various stages of development. "India has created an opportunity for itself. That's a sweet spot," says Hitesh Gajaria, executive director at consulting firm KPMG.

Not Going It Alone

In addition to separating its R&D unit from its generics business, Mumbai-based Glenmark has focused on other ways to reduce the risks involved in drug discovery efforts. Eight years ago the company was among the first to focus on R&D for new drugs. Glenmark separated its generics business from its R&D efforts last November and now plans to list its generics arm in the next six months. But Glenmark also recognizes that it can't handle the task of developing new drugs by itself. It works on molecules in the preclinical stages, but when it comes time to begin testing on people, it then licenses its discoveries to global pharma companies such as Eli Lilly and Forest Laboratories.

Last October, Glenmark signed an agreement to license a painkiller molecule to Eli Lilly. The company has also received $150 million from Forest and Japanese drugmaker Teijin to develop the Oglemilast respiratory molecule, scheduled for a 2011 launch. Forest won approval from the U.S. Food & Drug Administration to start clinical trials. Glen Saldanha, Glenmark's CEO, claims the drug could earn upwards of $800 million on potential milestone payment and royalties. "We want to capitalize on both low-cost medicine and high-end innovation," says Saldanha.

Contract research and manufacturing services (CRAMS) of drugs, which began a couple of years ago in India, is also gaining momentum. In a report from last November, 2007, KPMG pegs the CRAMS market opportunity in 2010 at $31 billion, up from $20 billion currently. A key player is Mumbai-based Nicholas Piramal, which has grown through acquisitions. The company partners with global innovators from contract research and manufacturing, with facilities in India and Britain.

Lakshman covers India business for BusinessWeek .