From being import-dependent in the 1960s to now meeting 20 per cent of global generics demand, the Indian pharmaceutical industry has rightfully earned India the title of ‘Pharmacy of the World’. The sector has witnessed a transformation over the years, evolving from a domestic supplier of generic medicines to making strides in the innovation space.
India not just ensured an uninterrupted supply of medicines during the pandemic but also created and deployed various types of vaccines at breakneck speed.
Today, the Indian pharma sector aims to grow to $120-130 billion by 2030 and $350-400 billion by 2047. One of the key drivers for this growth would be the expansion of the industry’s presence in the innovation space which continues to account for two-thirds of the global pharmaceutical opportunity. The pharmaceutical industry is a knowledge-driven sector. On an average, the global clinical trials process alone takes over 11 years with high risk of failure. Hence, continuous investment in R&D is critical. Furthermore, the current regulatory processes, requirements and timelines make it challenging to acquire funding. Funding being a critical factor in fuelling innovation, it is of paramount importance that we explore novel ways of funding.
Public funding
The government has launched various initiatives to promote innovation and R&D in the pharmaceutical sector. The Department of Science and Technology and the Biotechnology Industry Research Assistance Council (BIRAC) provides early-stage grants and funding to start-ups and companies.
The recent announcement of Promotion of Research & Innovation Programme with ₹5,000 crore funding by the government is a major move to incentivise funding for innovation and encourage collaboration among pharmaceutical companies, government research institutions, and start-ups. This programme is designed to provide support to both well-established companies and emerging start-ups.
As drug candidates enter the clinical development stage, funding is largely provided by corporate (pharma) and venture capital. Continuous and sustainable funding over a period of time will be critical for the success of clinical trials. The Indian venture capital ecosystem has evolved significantly in the last decade. According to one estimate, VC firms invested $90-100 billion between 2012 and 2021, resulting in 100+ unicorns in various sectors.
However, VC funding in life sciences has been low with only $0.2 billion in the last five years. Hence, it is crucial to incentivise public-private partnerships for funding. For instance, funds focused specifically on life sciences and biotechnology can attract investors who are interested in supporting drug development.
Corporate funding is largely provided through equity or licensing mechanisms. This was evident from the recent pandemic when the Indian pharmaceutical companies were increasingly open to forming strategic partnerships and entering into licensing agreements with other established companies, start-ups and research organisations. These partnerships help in complementing the resources, technology and the potential for long-term collaborations.
The Indian pharmaceutical sector is experiencing a diversification of funding sources, with a focus on fostering innovation and growth. As we look to the future, the collaboration between industry, government, and investors will continue to be instrumental in driving groundbreaking discoveries that improve healthcare outcomes not only in India but around the world.
The newer avenues of funding not only provide capital but also offer expertise, technology and support, helping pharmaceutical start-ups and research projects thrive in a competitive global landscape.
The writer is Chairman, Dr Reddy’s Laboratories