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Top Indian drug makers hike R&D budget to meet generics challenge

In a strategic move, top Indian drug companies have raised their R&D budgets for specialised medicines in order to meet the growth challenges posed by the launch of plain generics in the US. The R&D fund allocation of the top seven Indian pharma companies has expanded to around Rs 8,500 crore in the last fiscal year from Rs 2,700 crore in 2011, experts said.

As per industry projections, off-patent drugs may witness a dip in the US during the period from 2017 to 2020. To meet this challenge, the Indian companies have focussed their attention on the development of complex drugs.

According to ICRA, almost all the primary Indian pharmaceutical companies have advanced their R&D expenses over the last few years. The top seven Indian companies (based on FY2016 revenue) saw their aggregate R&D expenses increasing at a CAGR of 26 per cent over FY2011-16 as against revenue CAGR of 17 per cent.

“As the generics space becomes crowded and growth rate becomes a challenge by 2020, the only avenue for Indian companies will be to move up the speciality value curve,†said Anubhav Aggarwal and Chunky Shah, analysts with Credit Suisse, in a report.

The top seven Indian drug makers allocate nearly 9 per cent of sales on R&D as they eye high-return complex therapies such as inhalers, injectables, controlled-release drugs, dermatology products and biosimilars.

Acquisitions in emerging markets remain key centres for Indian pharmaceutical firms to scale up presence since the original growth route has proven somewhat time-consuming, said the ICRA analysts, adding that the focus of buyouts would be on filling gaps in product portfolio.

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