You are using an older browser version. Please use a supported version for the best MSN experience.

Glenmark to reduce R&D spending as challenges mount

LiveMint logoLiveMint 03-10-2017 Isha Trivedi

Mumbai: Glenmark Pharmaceuticals Ltd, among the early movers in India to invest in discovery of novel drugs, will limit spending on research and development (R&D) to 11-12% of sales for three years as it confronts a challenging business environment in key markets, particularly the US.

Glenmark has been raising spending on R&D annually over the last six years, with investment reaching a record Rs1,262.23 crore in FY17, close to 14% of sales (see chart).

The rationalising of the R&D budget will be mainly on plain-vanilla generics, and investments in specialty and innovative products will be higher, Glenn Saldanha, chairman and managing director, said.

“With the US undergoing structural changes in its market, it has become increasingly important to evaluate R&D spends on commodity generics. Thus, Glenmark will rationalize its R&D spends where it feels that there will be severe competition. Of the total R&D investment, contribution for generics will remain at 4-5% and the rest will be given to specialty and innovation products,” Saldanha said in an email interview.

Indian generic drug makers have been facing headwinds over the last two years because of price erosion and quality-compliance issues in the US, the biggest market for many large pharma companies.

At home, government price controls, and one-off policy measures such as a ban on fixed-dose combination drugs and demonetisation of high-value currency notes last year and implementation of the goods and services tax (GST) this year have affected growth.

Pharmaceutical companies’ return on capital employed has been shrinking over the last two-three years, prompting most to work on improving operational efficiencies, a Mumbai-based analyst, who did not wish to be named, said.

Earlier this month, CNBC-TV18 reported that Lupin Ltd was rationalising its R&D spending. The company plans to focus on near- to mid-term opportunities in complex generics and specialty products and scale down its new drug discovery programme.

In May this year, Cipla Ltd said it had dropped plans to manufacture biosimilar drugs in-house as part of a restructuring that involves exiting non-core and low-profit businesses. “This downturn (in the pharma sector) gives us an opportunity to tighten up in a way we have never done in the past and improve operational efficiency,” Nilesh Gupta, managing director of Lupin, said in June. For Glenmark, generics will be the growth driver in the next three years,while specialty and innovative products will kick after the 2019-20 financial year, Saldanha said.

The company plans to file applications for 15-20 generic products in the US every year with the focus on niche, competitive products, he said.

By 2025, the Glenmark expects its specialty and innovative drugs portfolio to contribute 30% of total sales. In fiscal year 2016-17, the company’s consolidated revenue was Rs9,185.6 crore, up 20% from a year ago.

More From LiveMint

image beaconimage beaconimage beacon