Pharma offshoring market to touch $2.5 bn by 2012

Bangalore: Pharmaceutical offshoring in the country is poised to become a $2.5-billion (nearly Rs 11,600-crore) opportunity by 2012, according to Zinnov Management Consulting.

A beneficiary segment, the already booming clinical trials industry, looks set to become a $608-million (nearly Rs 2,825-crore) industry by 2012, at a CAGR of 31 per cent, Zinnov said citing its study called ‘Indian pharmaceutical offshoring landscape’.

A key driver of offshoring or outsourcing is the rising cost of R&D, which is forcing majors in the US and Europe to look for low-cost R&D destinations such as India and China.

On the uptrend is the offshoring of processes of the entire drug development value chain. Other areas are clinical trials, discovery research, clinical data management (CDM) and bio-statistics, medical writing, marketing and sales.

Offshoring itself is aided by the rich pharma talent pool of 13.5 million science graduates and the spread of pharma educational institutes. There may be a demand for 1.6 lakh pharma translators by 2010, spurred by increased number of clinical trials that global majors are conducting in the country.

Another incentive is the cost of basic production in India, which is up to 50 per cent lower than in the US. FDA-approved plants can be constructed at 30-50 per cent lower costs than in the established markets. Contract manufacturing worth $590 million was done in India in 2007 and may grow at 15 per cent.

Tax incentives, tough laws on data security and intellectual property related issues have also helped, along with allowing of pharma SEZs, all enabling the growth of the pharma industry, the study said.

Zinnov’s CEO, Mr Pari Natarajan, said, “Today, pharmaceuticals is one of the most happening industries globally, and India has the potential to become one of the key global players and also the backbone of offshored services… [The] influx of outsourced work from global pharmaceutical companies has given the necessary impetus for the creation of pharma SEZs, which would be one of the key drivers of outsourced pharmaceutical services growth in the coming [years].”

The domestic drug industry, growing at over seven per cent CAGR, is heading towards a $11.6-billion (nearly Rs 54,800-crore) opportunity by 2009. By 2010, it is expected to shift from being domestic-led to exports-driven.

Mr Rishikesh Mandilwar, Director, Zinnov, said, “Clinical trials today dominate the development offshoring market landscape followed by clinical data management. Marketing and sales is another key component of the drug development value chain and is currently a $ 100-million market, which is expected to grow at a CAGR of 36 per cent till 2012.”

Yet, “Indian pharmaceutical companies need to penetrate further in the generics market in regulated countries and also increase their investment in R&D to gain expertise in higher value chain processes,” Mr Natarajan added.