Targeting tropical diseases

In a bid to fill their depleting research pipelines, multinational pharmacos are targeting neglected segments like tropical diseases. This is good news for developing markets like India which represent a table full of opportunities. Sushmi Dey finds out more

Multinational pharmacos are facing tough times on their home turfs thanks to patent expiries, increasing research expenses, stricter regulatory norms and more vigilant patient groups. With more drugs slated to lose patent protection in this year, European and US-based pharmacos have been searching for new molecules to replace these former blockbusters. According to international consulting agencies like KPMG and IMS, MNCs are expected to face a revenue loss of $60-70 billion in next five years on account of patent expiries in developed markets. This figure will only increase as many more molecules reach the end of their patent tenures in the next few years. IMS has also predicted that this loss of revenue will result in a lower sales growth of five to six percent during 2008. As sales in developed nations dwindle, developing countries like India are increasingly becoming the next favoured destination with a new and promising pipeline for R&D.

As a matter of fact, it is not just India but markets in other developing countries that are being targeted by MNCs. Interestingly, while MNCs are facing a drying research pipeline and intense competition from generics in developed markets, developing markets like India, Africa, Indonesia and Latin America have many unexplored therapeutic areas. One of the most promising areas seems to be the tropical and other neglected diseases segment. No wonder, a large number of MNCs like Novartis, Pfizer, AstraZeneca, Bayer, Sanofi-Aventis, J&J, Bristol-Myers Squibb and GSK are investing significant resources towards finding cures for diseases like malaria, tuberculosis (TB), dengue, trypansomiasis (sleeping sickness), leishmaniasis (Kala Azar) and onchocerciasis (river blindness), etc. Many multinationals are also funding research programs in HIV/AIDS and polio.

Neglected no more

"There is a drying pipeline of research that is affecting most top pharmaccos and it does not even look like they have any molecule in pipeline which can turn into a blockbuster in the near future" - Sujay Shetty Associate Director PricewaterhouseCoopers

With the change in the patent regime in India, foreign investors who have been eyeing the country's skilled human resource, massive domestic market and significant growth opportunities, have either set up manufacturing or research facilities in the country. At the same time, it has also opened a huge international market for Indian pharma players who are now giving tough competition to their global counterparts. However, the much larger opportunity is the huge unexplored or rather neglected segment of tropical diseases. HIV/AIDS is also one of the highly prevalent diseases in developing countries, especially in India and African countries. MNCs used to be apprehensive about investing in R&D in developing countries' diseases due to the lack of IP protection. Now, the environment in India seems to be much more conducive for investments in drug discovery and research. "MNCs now view these markets as relatively more profitable propositions than in the past and are conducting research focused on the tropical diseases in these countries," informs Hitesh Gajaria, Executive Director, KPMG India.

Reports suggest that as many as nine MNCs are investing to develop medicines for TB, whereas at least MNCs are focusing to develop drugs for malaria, another disease with huge market size in India and other developing countries. While companies like Novartis, AstraZeneca, Eli Lilly and GSK have set up research facilities and programmes dedicated to tropical diseases, Sanofi-Aventis and Wyeth are conducting research activities for polio. AstraZeneca, Sanofi-Aventis, Bayer, Bristol-Myers Squibb are also developing drugs for treating African trypanosomiasis. Besides medicines for tropical diseases, GSK is also researching vaccines for malaria, HIV and tuberclusosis. According to a GSK spokesperson, the company has almost 19 pharma R&D projects targeting diseases of the developing world.

GSK has a drug discovery unit in Spain dedicated to drug discovery initiatives in malaria and TB. "The dedication of an entire research unit to these diseases allows the concentration of resources and activity in the area and maximises our efficiency in making available new medicines and vaccines," says the company's spokesperson. Besides, GSK also has the Metabolic and Viral Diseases Centre of Excellence in Drug Discovery based in the Research Triangle Park, North Carolina, which focuses on discovering new HIV/AIDS therapies. The company's biologics facility in Belgium is involved in the discovery and development of vaccines including a malaria vaccine, a TB vaccine and an HIV vaccine. The company claims that many clinical trials are conducted in developing countries so as to make the research more authentic with patients and local healthcare professionals having the relevant clinical expertise.

Earlier situation

"With over $65-70 billion worth of drugs going off-patent over the next few years in developed countries and numerous generic versions coming into the markets, intense competition is expected in these markets. As a result of this, these markets are becoming less lucrative" - Hitesh Gajaria Executive Director KPMG India

Traditionally, MNCs favoured diseases prevalent in developed countries, and any R&D efforts that were made were directed towards diseases primarily found in those countries. The obvious reason behind having such a strategy was the availability of more money in developed markets. "Patients in developed countries have the capability to pay a lot more. Hence, undoubtedly, markets of developed nations are financially feasible," points out Sujay Shetty, Associate Director, PriceWaterhouseCoopers. Since R&D involves a lot of investment, the decision to invest in R&D of drugs related to tropical diseases and diseases of the developing world is a tough call to take. "R&D is a very complicated and expensive process. Hence, a decision to develop a drug for only developing countries is very difficult to make. This is why for many years, the research programmes of global pharmacos were concentrated on diseases highly prevalent in the developed world such as those related to the lifestyle segment," says Gajaria. Researching drugs for diseases in developing countries would also mean, in other words, developing affordable medicines. This would make it even more difficult for pharmacos to recover investments made in R&D of these drugs.

Beginning of change

The increasing loss of patents has almost turned the table upside down for these global MNCs. While earlier, MNCs were not investing much in diseases of the developing nations and rather focusing their investments in the developed world, they are now actively focusing their research activities on diseases that no more afflict their home countries. Many blockbuster drugs related to diseases of the developed world like cholesterol, blood pressure, diabetes and other lifestyle related problems are losing patent protection, resulting in a rush of generics, and hence, sharp fall in prices. "With over $65-70 billion worth of drugs going off-patent over the next few years in developed countries and numerous generic versions coming into the markets, intense competition is expected in these markets. As a result of this, these markets are becoming less lucrative," says Gajaria. Keeping that in mind, global pharmacos are aware that they are heading for a crisis in the coming years.

But, patent expiration, intense penetration of cheaper generic versions into developed world markets are not the only factors at play. "There is a drying pipeline of research that is affecting top most pharmacos and it does not even look like they have any molecule in pipeline which can turn into a blockbuster in near future," says Shetty. He says that this is certainly a major factor prompting pharmacos to look at markets in developing markets. Besides pipeline drought, the global pharma industry is also facing challenges in terms of stricter regulatory norms which is leading to even lesser number of new drug approvals. Last but not the least, scrutiny of drug safety and patent litigations with patient groups is becoming more vigilant with time and is giving a tough time to the global industry. All this and more has prompted global MNC pharmacos to explore and reinvent segments which have been neglected till date.

Dedicated research

Experts expect that apart from investing in R&D of drugs related to diseases of the developing world, some global pharmacos will set up their own research facilities in developing countries in the coming years. Doing R&D in countries such as India would also mean reduction in cost of research because the cost of discovering a new drug may be two to three times lower in India than in US or Europe. "Global pharma giants have made significant investments in research programs for tropical diseases by diverting a considerable share of their resources towards such research. They have made investments not just in the form of time and funds, but some have also set up their own research facilities in developing countries and devoted a large share of the highly skilled research talent for conducting such research programs," says Gajaria.

However, MNCs are realising that the gestation time may be longer in developing countries. Notwithstanding these hurdles, some pharmacos have already stepped in. AstraZeneca is one such company with a research programme in India completely dedicated to TB. The company's R&D facility in Bangalore is focused on medicines for the developing world's diseases. The company has plans to invest $35 million in next five years towards the development of novel therapies to treat infectious diseases that pose an increased threat to developing nations.

Favourable economics

Developing countries are becoming more attractive in terms of demand for drugs supported by a series of favourable economic and demographic factors. According to a recent KPMG report, the domestic pharma market is going through a transformation, led by strong underlying growth drivers and has witnessed robust growth over the last couple of years. While this growth was driven mainly by an increasing spend on healthcare, on account of rising disposable income, increasing penetration of health insurance and changing disease profiles, regulatory reforms also provided a significant boost. The industry has grown at a CAGR of 13 percent from 2002-2007 and is expected to grow at a CAGR of 16 percent over 2007-2011. "I think by and large, the market will grow in double digits given that the penetration level of modern medicine in the country is low and the fact that the health insurance sector is growing rapidly. Everywhere else in the world, economic growth is linked to increased longevity. So that being the case, I would say that there will be growth. Healthcare in general will grow and therefore the pharmaceuticals market will grow. And this growth would be led by prescription and volume and not price," says Dr Hasit Joshipura, Vice President, South Asia and Managing Director, GSK India, in the KPMG report.

With economic growth and significant rise in healthcare spend, experts feel that in long term, there will be a significant shift in the disease profile of developing countries. Chronic ailments will increase; while acute will decrease, as economic prosperity in these markets influences changes in lifestyle consumption patterns. According to Gajaria, the MNCs' move towards developing markets seems to make an eminent business sense in the long term as well. "There is bound to be an increase in consumption and also affordability of drugs in these countries due to growing economic prosperity," adds Gajaria.

The KPMG report also states that the prospects of the healthcare and the pharmaceutical industries are strongly linked to economic growth. As the strong economic momentum is expected to continue and the Indian economy is expected to grow by eight to nine percent in the next few years, the pharma industry will also reflect this growth in years to come. "There is a view that if the GDP of a country grows by one percent the pharma industry grows by approximately two percent. So if you are going to have 8-10 percent growth in the GDP, the pharma industry will grow in double digits," says Dr Brian Tempest, chief mentor, Ranbaxy Laboratories, in the report.

PPP model

India is not the only market on the radar of MNCs. The discovery and development of drugs for tropical diseases would also open up other emerging markets with huge sales potential. "Other than India, some of the other primary developing markets targeted by MNCs include Africa and Latin America, particularly, Brazil and Mexico," says Gajaria. No wonder several MNCs have also entered into public-private partnerships (PPP) with governments of developing countries and have felt that the PPP approach to drug discovery and development in diseases of the developing world is vital. The arrangement allows the double benefit of encouraging R&D and accelerating the product's use in the developing world. As part of the partnership, pharmacos provide technology, in which they have invested for decades and their discovery, development and distribution expertise, while public sector partners fund the development costs and also ensure the distribution of medicines and vaccines.

One good example of PPPs in this area is the Novartis Institute for Tropical Diseases (NITD). Novartis set up the NITD as a small-molecule drug discovery research institute in Singapore in 2002. The institute is a public-private partnership between Novartis and the Singapore Economic Development Board (EDP) and is precisely dedicated to finding new drugs for the treatment of tropical diseases. The institute has selected dengue and TB as focus areas with a possibility to expand the portfolio to other diseases in years to come. However, malaria has also been added to the kitty in 2006. NITD now has more than 100 researchers and supporting staff working on these areas.

GSK is also currently working in partnership with the US National Institutes of Health, Medicine Malaria Venture and Global Alliance on TB and many others. The company is also looking for new treatments for other neglected diseases, typically in collaboration with external partners. GSK is engaged in ongoing drug development programmes in leishmaniasis (sitamaquine or Kala Azar) and helminths (oxybendazone).

Eli Lilly, as part of its Corporate Social Responsibility (CSR) initiatives, has also started a Lilly MDR TB Partnership program to address the scourge of TB. The company has so far announced funding of $135 million towards this partnership that includes technology transfer, training of health care providers, R&D and community support programs for patient awareness and prevention. Recently, the Bill and Melinda Gates Foundation also announced that beginning March 31 2008, the foundation will accept grant proposals for the first funding round of 'Grand Challenges Explorations', a new $100 million initiative to help scientists across the globe pursue ideas that have never been tested before for solving major health problems. The four topics for the first funding round include 'Creating new ways to prevent or cure HIV infection' and 'Exploring the basis for latency in TB'.

Future ahead

Undoubtedly, Indian market is shining with a bright future for global MNCs with a research pipeline full of potential cures for tropical diseases and other diseases of developing countries. While research operations of Indian pharmacos, at present, are more focused on diseases in the chronic segments rather than on acute diseases, MNCs seem to be far ahead of their Indian counterparts in researching medicines for diseases which affect developing countries. "R&D of NCEs is still a relatively new segment for most Indian pharmacos, unlike their global counterparts, and very few leading Indian companies have forayed into this space. At present, only about 50 molecules are under different stages of development in the R&D pipelines of the Indian companies. Of these, very few molecules are in the tropical diseases segments," says Gajaria. In fact, Lupin is the only Indian company conducting research on a TB drug, while Ranbaxy is the only company targeting malaria.

However, according to Shetty, it remains to be seen how lucrative the tropical disease segments proves to be. A lot will hinge on the fate of the first few products slated to hit the market in a couple of years because currently we are lacking products that can represent new innovations. The drugs that are presently available for various tropical diseases are limited by factors ranging from parasite resistance to safety, compliance and cost. Hence, there is a dire need for new, effective and affordable drugs that can effectively treat tropical diseases that are responsible for the massive burden of disease on the developing world. Pharmacos require new approaches to 'drug discovery' for tropical diseases, because in order to develop a drug, one must discover it first.

sushmi.dey@expressindia.com