India Ready For Chemistry Outsourcing, Wyeth Says; Biology Remains In West

India is currently a viable option for simple chemistry outsourcing and offshoring; however, additional skill development is needed before medicinal chemistry and biology operations can be conducted there, speakers said at the Financial Times Global Pharmaceuticals & Biotechnology conference in London Sept. 18.

"At this moment in time, our assessment is that while the chemistry in India and Asia in general is of very high quality, what we and all other big companies are focusing on are so-called hit-to-lead phase, which is...the less complex chemistry," Wyeth Discovery Research Exec VP Frank Walsh said.

"There is very little, if any, so-called medicinal chemistry in Asia at this moment," he added.

In recent years, large pharmaceutical companies have been offshoring and outsourcing research and development and manufacturing operations to Asia, particularly India, mainly in an effort to reduce costs.

Offshoring refers to a company setting up its own facility in another country; outsourcing is contracting for services with a foreign firm.

Walsh offered Wyeth's outsourcing agreement with GVK BIO as an example of the type of chemistry capacity currently available through Indian firms. Wyeth has been a strong proponent of offshoring, developing R&D "supercenters" in Asia and South America (¹ (Also see "Wyeth’s R&D Strategy: Spoonfuls Of Enrollment With A Dash Of Outsourcing" - Pink Sheet, 3 Jul, 2006.), p. 18).

The GVK agreement focuses on benchmark compounds, intermediates, screening libraries, hit-to-lead and scale-up optimization.

Under the deal, GVK will dedicate 150 synthetic chemist FTEs to Wyeth. GVK is also building a stand-alone facility dedicated to Wyeth, which is expected to be fully operational by early 2007.

Walsh said Wyeth plans to take the GVK agreement "stepwise, but at this moment we are having a very positive experience because of the training of the individuals - we see that they will actually be contributing important parts of our business."

While the current GVK/Wyeth relationship focuses on simple chemistry, Walsh said he expects the medicinal capacity of Indian firms to expand going forward.

"We believe that by working with like-minded companies we can actually train these individuals in the skills of medicinal chemistry, which will require not just access to chemistry facilities, but will actually require an understanding of the more biological disciplines," he said.

"It is clear that the biological disciplines in Asia are less developed than chemistry, but for companies like GVK that are willing to invest in biology...we believe that in the next five years there will be some innovative medicines coming from" Asia, Walsh said.

GlaxoSmithKline Neurology and GI Centre of Excellence for Drug Discovery head Jackie Hunter outlined a GSK initiative to assess the ability of its Singapore research facility in biology.

The Singapore program is "an experiment to see if we can actually work together to break that traditional chemistry/biology boundary down and actually put the biology down with the chemists, actually give chemists what they have always wanted - the biology right by them," Hunter explained.

"That is something you can do if you take the research away from the mother ship...and establish if this is really practical," she added.

Ranbaxy Chief Mentor Brian Tempest said truly innovative research, not just simple chemistry, is beginning to be conducted in India, noting that Ranbaxy and GSK have an agreement that covers "the development and molecular optimization of their innovative medicines at our R&D facilities in Delhi."

"We also have a relationship for medicines for malaria," he noted. "These are true innovative medicines and Ranbaxy has got its own innovative medicines."

Regardless of Asia's biology capacity, Tempest said that pharmaceutical companies should place greater emphasis on the skill level of Indian firms, rather than the lower costs of outsourcing or offshoring operations to India.

"The common view of many people in the west is that the whole story of India is all driven by the cost to manufacture, but actually there is I think a story that goes greater than that, which is true innovation and the cost of innovation," he said.

"In terms of innovation - and not on the generic side of things, there is no doubt India is almost in control of the supply chain...but on the discovery side there is a real opportunity for using India for the markets of the U.S.A. and Europe in order to access entrepreneurial trends in chemistry," he added.

Tempest noted that Indian chemists are generally a third more educated, willing to work a third longer and will work at 7% of the salary of their U.S. counterparts. India also constitutes the second-largest reservoir of English-speaking scientific manpower, he added.

For this reason, Tempest predicted that there "is going to be a surge of people doing part of the development process in India."

However, he acknowledged that there are some areas where outsourcing or offshoring to India "may not be quite so optimized," such as toxicology work in mammals.

While Wyeth's Walsh emphasized the value of transitioning certain R&D offshore, he said that he does not expect that his firm will outsource an entire component of its research operations.

The GVK agreement represents "only part of our value chain," he noted. "We still have a 50-person hit-to-lead group internally at Wyeth. We also have a very large analytical group."

"Whether we ever actually get to that stage of having it totally in one place is a question. Hopefully not," he said. "I don't think that we are at the stage of taking a part of our value chain and putting it somewhere else, but it is something we will consider if the business conditions look right."

India is increasingly becoming a center of importance for generic manufacturers as they look to diversify geographically (see ² (Also see "Generic Industry Likely To See Increasing Geographic Diversification – Barr" - Pink Sheet, 2 Oct, 2006.) ).

- Andrew Kasper