The Face of Partnering in India

India has rapidly emerged as an attractive destination for the global pharmaceutical industry. The country has an exceptionally skilled workforce, competitive labor and material costs, a well-established infrastructure for local and international regulatory approvals, and the largest number of FDA approved manufacturing plants outside the United States. However, despite its scientific talent and appeal to the global drug industry, most of the country's focus until recently has been on R&D and the manufacturing of generics.

Only a small number of local Indian companies are pursuing development of proprietary drug molecules, resulting in just a fraction of Indian owned compounds in clinical development compared to the large numbers in Western markets. Almost all those compounds in India are being developed by the larger drug firms with financial security and the necessary capital to invest in the early phases of novel discovery and development. In the West, we see that most new compounds come from smaller innovator companies.

PHOTOGRAPHY: PHOTO INDIA, PURESTOCK, GETTY IMAGES ILLUSTRATION: PAUL A. BELCI

In the past five years, the Indian government at the central and state level has invested a great deal of time and resources to create centers of excellence for biopharmaceutical companies and drug research in India. Biotechnology research spending has increased from $175 million to $350 million during this time period, clearly making the Indian market a valuable resource and target for the biotechnology and pharmaceutical markets. These government spending initiatives, including tax breaks and investment incentives, are a critical part of determining where a partnership adds the maximum value.

Today, the Indian contract research and manufacturing services market is quite robust, generating nearly $900 million annually and estimated to touch $6.6 billion by 2013, according to Frost and Sullivan. This incremental level of spending clearly indicates that many companies have already established manufacturing or small R&D operations in India and have aggressive plans for scaling up.

Partnering ABCs

Although India has clearly established itself as a player in the global drug development sector, the decision to partner with companies in India requires not only a view toward the bottom line but also an understanding of the domestic market's development path and future impact on the global drug pipeline. Companies that seek a presence in India need vision and determination, as well as specific expertise in navigating the international regulatory landscape, a thorough understanding of cultural nuances, and a solid governance system for daily oversight of the interests of both parties. Establishing access to experienced, reliable local expertise is an essential part of this equation.

When Aptuit decided to pursue a presence in Asia, the company studied the market in India closely. The company recognized the important role the country would play in the industry in the long term and decided to build upon an already established presence in the country. Aptuit has its Informatics Development and Support center of excellence in Bangalore, India—an area already known as the "Silicon Valley of India." This is an example in which Aptuit recognized India's strength in information technology and decided to leverage informatics to create a sustainable competitive advantage globally, regionally, and also locally.

In June 2007, Aptuit expanded its scientific offering to India and the global outsourcing market through the formation of a new contract drug development partnership, Aptuit Laurus, headquartered in Hyderabad, India. The new company combines Aptuit's existing capabilities and global offerings in drug development with Laurus Labs' R&D and manufacturing expertise and their newly built state-of-the-art facilities. The combined entity provides established and emerging pharmaceutical and biotechnology companies with integrated services, technologies, and manufacturing capabilities that span the entire drug discovery and development continuum, offering a much needed drug development foundation for potential pharmaceutical innovators in India.

After meeting with several companies and extensive due diligence, Aptuit decided to move ahead with Laurus Labs in recognition of their skill set, talent, and capabilities. They had the competencies, supported by the infrastructure, in two key areas in which Aptuit was not currently operating: front-end discovery and contract manufacturing. The result: Aptuit now can provide its clients with contract services spanning from discovery through drug development into commercial manufacturing on a global platform.

Breaking into the market

Before establishing a partnership in India, it is imperative to assess the organization's present and pending capabilities. Internally, organizations must honestly assess current strengths, available capital, and specific goals both in the region and globally. To achieve success in the region, recognizing and tapping into local talent is the key in India.

Many Indian companies have raw R&D and manufacturing talent that can be leveraged in a partnership. What Indian companies lack is the depth of experience in drug development as well as access to the necessary capital with which to foster proprietary drug pipelines. Despite this, companies seeking to partner in India should respect the know-how and intellectual property of India-based companies.

Over the past decade, Indian companies have amassed significant talent capital and scientific and business assets that are primed for success provided the proper tools and capital are brought in as catalysts. India is also experiencing a reverse brain drain, where the return of talent, especially at the top level, is helping the industry to shorten the learning curve. It is beneficial to leverage the existing leadership and program management within the partner organizations, as these internal assets will be crucial to bridging the cultural and scientific aspects of any foreign partnership.

Companies wanting to be successful might also consider the addition of an impartial, expert voice in the supervisory mix. Aptuit anticipated the value and embraced this thinking in structuring the Aptuit Laurus deal, deliberately organizing and balancing the company leadership and management board with representatives from both organizations in addition to that independent voice.

Business essentials

Beyond a simple appreciation for local talent, it is absolutely important when doing initial research and due diligence to understand the cultural nuances and differences between Western and Indian organizations. In terms of cultural norms, Aptuit was impressed by Laurus Labs' adoption of various Western philosophies and implementation of Western oriented ways of conducting business and looking after its employees. From the day-to-day management perspective, not only were Aptuit and Laurus' businesses seamlessly integrated, but the corporate cultures were also perfectly aligned. To this end, an important part of understanding a company's cultural norms includes assessing employee training practices, respect for talent, and how the potential partner handles aspects surrounding intellectual property.

From a more business operation perspective, workflow transparency is essential to any optimally functioning partnership. Clients and other stakeholders should know where their work is being serviced and by whom. This mantra holds true with the Aptuit Laurus partnership, from informing clients what country and facility is planned for use to which individual project managers will be responsible for the client's work. Aptuit's clients are fully aware of the relationship and the Indian presence, to the extent that the company is inviting clients to see these facilities and leverage the India advantage for themselves. They will know where work is getting done and will witness firsthand the company's commitment to hold all sites to the same standards of accountability.

Partnerships with Indian companies should also follow the guidelines established by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). India adopted this agreement to improve the security of IP in the region and protect product patents in 2005. India's adoption of TRIPS could be a key driver in accelerating the investment process within the country.

The future looks bright

The current state of India's drug discovery and development market is much like that of the biotechnology industry in the West 10 to15 years ago—all the pieces are there but it needs to reach critical mass to really be set in motion. Similar to how innovation spawned in the United States, India is birthing academic hot beds, which are poised to be the catalysts for development of this necessary critical mass.

India's government has supported the development of hot beds by establishing incubator sites and the infrastructure for the industry to flourish. One such example is the ICICI Knowledge Park in Hyderabad for small, emerging biotechnology and drug discovery companies. Additionally, an area called Pharma City, based in Vishakhapatnam, was created and is dedicated to biopharm companies that want to set up manufacturing capabilities. The site is considered India's first product-specific industrial park to house bulk drug units and allied chemical manufacturers. A host of biopharmaceutical focused Special Economic Zones are also being established across the country.

Leveraging these hot beds in partnering efforts in India, Aptuit Laurus' largest operations is the R&D Center located within Hyderabad's ICICI Knowledge Park. At this site the company will do all aspects of early-stage drug research in a state-of-the-art facility situated on over 10 acres of land. Aptuit Laurus' Hyderabad facilities were recently completed and offer over 40 labs for process chemistry, formulation and analytical development, and kilo lab production, including an ability to handle highly potent active pharmaceutical ingredients and low temperature and high pressure chemistry. Secondly, Aptuit Laurus' new large-scale contract manufacturing facility in Vishakhapatnam, or Vizag, is currently under construction on 34 acres of land in Pharma City. A presence there offers environmental clearance and tax breaks to companies establishing or growing their manufacturing operations.

Aptuit recognized that Hyderabad and Vizag are home to a number of colleges and universities providing a large pool of talented chemists. This is why the company has ties with Andhra University to collaborate in the areas of research, training, consultancy, and technology management. Aptuit Laurus conducts a comprehensive, intensive three-month classroom and lab-based training program for all its fresh graduates, where the employees earn diplomas from Andhra University.

While the bulk of Aptuit's customers currently serviced in the company's India facilities are companies based in the West, Aptuit sees the potential in eventually establishing a base of Indian biotechnology innovation-led customers. While most Western–Indian partnerships currently focus on R&D and manufacturing, soon we'll see the increasing opportunities for cross border licensing deals involving Indian companies that have discovered proprietary compounds.

When seeking to establish an Indian presence, it is essential to challenge the industry to not only view the Indian market as a set of components to be capitalized upon, but to envision the organization as a driver of the domestic market's potential and positively impact the drug discovery and development as a whole. A successful partnership will not only allow the investing company a strategic partner on the ground with highly trained, top-tier scientific staff and a foothold in a burgeoning market, but would also provide the Indian partner with access to capital required for innovation.

Aptuit's aim is to help create an ecosystem in India that would allow innovative Indian companies to use Aptuit Laurus as a strategic partner for their contract needs, and also to see Aptuit as a company that can provide them access to capital because of the relationships the company has with potential investors in the West. Based on this, Aptuit expects to see the emergence of Indian-birthed innovators who have discovered proprietary compounds and are seeking to advance new products into later stages of development.

From a Western drug development perspective, it is important to have confidence in a configuration that brings together companies successful in their own markets with skill sets that are complementary to each other. The focus should not be on short-term cost arbitrage but on the bigger picture of a need to create an ecosystem in India to help foster the next wave of innovation and discovery. Western companies should look at leveraging the India advantage to re-engineer the drug development process and see how that helps in reducing costs and timelines for bringing new molecules to market.

Kunal Khattar is director of corporate development at Aptuit Inc, Hyderabad, India, 3rd Floor, Uma Hyderabad House, Raj Bhavan Road, Somajiguda Hyderabad 500082, India.