BIOTECH SUPPLY
CHAIN ACADEMY
October 8-9, 2012
Crowne Plaza, Foster City, CA
Opportunities and Challenges of
Pharma Outsourcing in India and China
A comparative evaluation of two emerging
sources for Pharma & BioPharma products and
services
Presenter Bio
Shankar Suryanarayanan is the VP of Emerging Market at
BSMA. He was the head of Takeka’s Indian operations, and
before that a member of executive committee at Roche
Consumer Health. Shankar has over 20 years of operations
experience for life science and industrial companies. He has a
M.S. in Management from MIT Sloan School of Management
and M.S. in Mechanical & Aerospace engineering from
University of Missouri in Columbia. His undergraduate degree in
Mechanical Engineering is from the Indian Institute of
Technology
Yingming Yue is the Associate Director of Supply Management
at Nektar Therapeutics. He has over fourteen years of
experience in supply chain management in the life science and
technology-based firms. Prior to his current position, he was an
operations consultant with Deloitte Consulting and PRTM. Mr.
Yue received an MBA degree from The University of Chicago
and also attended Operation Management Program at
University of Texas at Austin. He is Certified in Production and
Inventory Management.
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The Endless comparison
India vs. China
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Agenda
I. Opportunities
a. Overview of Indian and Chinese Pharmaceutical Industries
b. High-level capabilities assessment
c. Compare and Contrast - Service Offerings
II. Challenges
a. IP , Quality and Regulatory compliance
b. Communications and project execution
c. Compare and contrast - Soft capabilities
III. Future Trends and critical success factors of Pharma
outsourcing in China and India
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Overview of Indian and Chinese
Pharmaceutical Industries
Both China and India have a larger and faster-growing domestic market. But their current
share of global market are still small
Market Size
(Pharma/Contract
Manufacturing)
Market Growth Rate
(Pharma/Contract
Manufacturing)
Industry
Characteristics
Source: China Pharma Association
India Pharma. Association, Various 2010 10K
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9th largest
~$10B/~$1.8B
5th largest
~$20B/~$1.2B
15%/20%
20%/20%
Top 10 firms makes
up 40% of total
revenue, leading
firms with
significant int’l
experience
fragmented, top 10
firms makes up 20%
of total revenue, less
firms have significant
int’l experience
WW
~$700B/$35B
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Overview of Indian and Chinese
Pharmaceutical Industries -India
•
The Indian generic pharmaceuticals industry was born in the early 1970s when the
government of India abolished product patents in favor of process patents
– Created a vibrant private sector generics industry that served the captive
domestic market and established chemistry skills, manufacturing scale and
cost competitiveness
– Generics companies then leveraged their comparative advantage to launch
generics business globally starting with less regulated markets, then highly
regulated markets
•
A few leading companies has established reputation and presence in Western
markets (Dr. Reddy’s, Zydus, Ranbaxy, Lupin, etc)
•
Now the generics industry is climbing up the innovation ladder
– Offering world class Contract R&D and Manufacturing for small molecules
– Targeting biosimilars as next frontier for growth
– Investing in R&D, aspiring to produce the first ‘Indian molecule’
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International Strategy
Synergy
Creation
Marriage between cheap manufacturing facility,
large pipeline of generics, with distribution setup
and technical capabilities in developed countries
Market Share
Increase
Acquisition of generic firms in developed economy
create link with MNE and provides instant credibility to
Indian pharmaceutical firms
Access to Regulated
Market
Set up shop closer to customers, ability to bid on early
stage R&D and scale-up projects, alleviate concerns on IP
protection
Moving up the value
Chain
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Avoid head-to-head completion with China, and
Move into high-margin products
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High-level capabilities assessment
•
Early Stage Discovery/Medicinal Chemistry (CRO)
– Both countries have vast pool of talented chemists, with similar skill sets and
capabilities in drug design and optimization
– India: High capabilities in the area of bioinformatics, experienced and large
workforce for public data collection and curation
– China: stronger expertise in the synthesis of specialty chemicals and building
blocks, Many chemicals that can not be profitably synthesized in other
countries can be sourced in China at a reasonable price
•
Preclinical Research
– China:
• Abundant animal specifies in a favorable regulatory environment
• Chinese company has capabilities in in vivo efficacy testing for non-human primates, none of
the indian firms have the capabilities
• Entrance of multinational CROs has raised the bar of service quality and made the sector quite
competitive (JV, partnership, or wholly-owned branch)
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High-level capabilities assessment
•
Clinical Research
– India:
• More Indians CROs are qualified to provide services
• Indian CROs offer central lab service,
• India has world-class capability in clinical data management,
Pharmacovigilance, and statistical programming
– China:
• Vast pool of treatment-naïve patients and specialized hospitals that have
medical facilities, specialists and knowledge to conduct the trials.
• Most of the clinical trials are carried out by big Pharma or multinational
CROs. However, locally founded CROs are quickly emerging
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High-level capability assessment
•
Process R&D (CMO)
– India: Stronger expertise in chemical development (From Lab scale to kg scale)
– China: with the exception of a few leading suppliers, majority of these API
producers do not have deep expertise in process R&D
•
API Bulk Manufacturing
– India: moving up the food chain, focusing on smaller set of high-margin APIs
(400 APIs)
– China: Largest API producer in the world, 1400 APIs offered (out of 2000 WW)
by ~1000 API producers. Better infrastructure and capability to optimize cost
at metric ton scale.
•
Finished Drug Product Manufacturing
– India: strong expertise in almost all type of dosage forms compared with
limited number of dosage forms from Chinese suppliers
– China: relatively weak in formulation development, particularly for difficult-tomake forms, such as injectibles and soft gels
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Compare and Contrast of service
offerings
Expertise
Functions
India
Cost
China
India
China
Research
Medicinal Chemistry
Custom Synthesis
Biology
Bioinformatics Research
N/A
Bioinformatics Curation
N/A
Development
Clinical trials
3
3
5
5
Clinical data Management
4
1
3
3
Pharmacovigilance
2
1
3
3
Chemical Development
4
4
5
5
4
3
5
3
CMC
Formulation Development
Analytical Development
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Challenges
•
•
•
•
•
Intellectual Property Rights
Regulatory and quality concerns
Communications and distance
Technical expertise & Project Execution
Anything else?
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IP Protection Policy
Legal framework for IP protection are in place for both countries. There is still
long way to go in terms of enforcement
• India
– From 1947 to 1970, pharmaceutical industry dominated by MNCs, lack
of access to healthcare and affordable drugs
– Indian Patent Act of 1970, only process patents are recognized
– After TRIPs in 2005, both process and product patents are recognized
• China
– Patent law first enacted in 1984, excludes drug from patent protection,
but will provide protection for manufacturing methods of
pharmaceuticals
– In 1992, the patent law was amended and legalized patent drug patent
protection for 20 years
– Following entry to WTO in 2001, patent law was amended again to
harmonize with that of western countries, new patent law enacted in
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Government Policy & Company
strategy on Contract Manufacturing
Both countries have favourable policy to stimulate growth of Pharma
outsourcing market
• India
– Clearly-defined contract manufacturing strategy. CRAMS division within
major generics manufactures
– Success as 2nd innovator has led to partnership with major MNCs
– Government policy is conducive to contract manufacturing
• China
– Had a late start on contract manufacturing due to government
imposed restrictions, it was consider illegal to carry out contract
manufacturing in 1999
– In 1999, SFDA opened the door for CM, partly due to the desire to
better utilize excess capacity. But many restrictions remains
– Since 2001, CM has been legalized by SFDA, restriction on crude drug
has been lifted
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Regulatory Compliance
Indian Pharmaceutical firms easily surpass Chinese Pharmaceutical firms from the
standpoint of regulatory compliance, as evidenced by number of FDA-inspected
Plants, and DMF filed with FDA, and ANDA approved by FDA.
India
China
Number of Plants
inspected by FDA
> 100
70
Number of DMF*s filed
with FDA
> 300
>70
>30
>10
Number of ANDA*
approved by FDA
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Source: Thomason Research
DMF: Drug Master File
ANDA: Abbreviated New Drug Application
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Compare and Contrast – Soft
Capabilities
India
China
Project Cost
Communication
Excellent
Flexibility
Good
Infrastructure
/Supply Chain
Average
Quality System
Basic
Regulatory
Expertise
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Future Trends and Predictions China
– Larger number of western-trained Chinese scientists and managers are
returning to China, drastically closing the gaps with India on communications
and understanding of established market
– Major Chinese pharmaceutical firms are recognizing the importance of
contract manufacturing as a growth driver as the domestic growth will
unlikely to sustain itself
– More prominent CMOs will emerge as Chinese pharmaceutical industry
continue the trend of consolidation
– China’s infrastructure and dominance on API and intermediates will likely
position itself for long-term COGS reduction
– China will likely maintain the lead on biotech R&D and manufacturing due to
early lead and favorable government policy
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Future Trends and Predictions
- India
– With its stronger global presence and higher expertise in quality
system and regulatory affairs, India will maintain the lead over China in
the contract manufacturing business in the next few years
– India will benefit from China’s quality missteps in the short-term ,
resulting from Heparin and melamine incidents
– India will continue to lead in the small molecule API manufacturing
space
– India will continue to rely on raw material supply from China
– Collaboration between China and India Pharma industry will expand
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Critical factors to succeed in
sourcing from China/India
• Supplier Due-Diligence
–
–
–
–
Conduct research to understand the firm’s size, financial stability and reputation
Conduct Reference check
Leverage local team and share knowledge with the rest of the company
Work with sourcing specialists with Chinese/Indian background
• Supplier Management
–
–
–
–
Establish PERSONAL relationship
Understand the cultural sensitivity and adjust communications accordingly
Insist on regular communications and level of details
Avoid subcontracting
• Risk Management
– Limit the scope of outsourcing projects
– Proactively manage supply chain constrains
– Contract or not? Keep it simple
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Questions and Comments
Shankar Suryanarayanan
s1.shankar@yahoo.com
Yingming Yue
yingming.yue@gmail.com
Thank you!
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