Hurt by competition, price caps, drug firms turn to in-licencing

Buffeted by price controls and competition at home and price erosion and tougher scrutiny in the US, India’s drugmakers are turning their attention to in-licensing, where they develop and market products from other drugmakers.
The benefits: Fewer risks, new capabilities and a fresh revenue stream.
Indian drugmakers generally in-license drugs which they market locally, or in overseas markets. According to analysts and industry officials, there is an increase in both types of deals, apart from in-licensing of molecules under development.
Among leading Indian companies that have signed such in-licensing deals are Sun Pharmaceutical Industries Ltd, Lupin Ltd, Dr. Reddy’s Laboratories Ltd and Glenmark Pharmaceuticals Ltd.
In-licensing provides “some exclusivity and a unique value proposition” as Indian drug makers face pricing pressure and competition in the local market for branded generics, said Ramesh Swaminathan, chief financial officer and executive director, Lupin. “Whilst these are predominantly for exclusive products which have a patented life, they could also be for products with limited supply sources,” he said. The trend will continue and become a key growth driver for Indian pharmaceutical companies, he added.
Indian companies mostly in-license drugs in therapeutic areas of oncology, diabetes, respiratory, dermatology, ophthalmology, neurology and cardiovascular diseases considering high unmet needs and limited competition in these segments, a consultant with an investment banking firm said, on condition of anonymity.
A Sun Pharmaceutical spokesperson said the company’s focus differs across markets. “In US, our in-licensing effort is aimed at strengthening our speciality business focused on dermatology, ophthalmology, oncology and CNS (central nervous system). In India, the licensing strategy aims to strengthen our therapy portfolio with innovative offerings for managing diseases,” the spokesperson said in an email response to Mint queries.
For Lupin, cardiovascular, diabetes, oncology and respiratory are the therapeutic areas in which it is eyeing in-licensing opportunities for India, while Glenmark’s focus is on dermatology, respiratory and oncology space for the US market, the companies said.
In-licensing deals help companies get quick access to challenging products with limited competition, acquire strong technical capabilities to develop and manufacture complex or speciality products, and enter new markets or strengthen product portfolio, Glenn Saldanha, chairman and managing director of Glenmark, said.
Most in-licensing deals are likely to be for India and the US and few for Europe, Japan and emerging markets of Latin America and Africa, the consultant quoted earlier said.
The needs of Indian generic companies and global innovators converge in in-licensing, said Vishal Manchanda, research analyst at Nirmal Bang Securities.
“Global innovators now realize they need to maximize the potential from emerging markets like India as the developed markets are now reaching saturation, while growing competitive intensity in base business is pushing Indian companies to pursue new product opportunities that allow them incremental growth,” he said.
While in-licensed products usually form a small part of the revenue of pharma companies, they are gaining significance from a strategy point of view.


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