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“Private equity players look at returns in the short run and drug discovery research is a high-risk business involving big investment for a longer period of 10-15 years. They prefer to invest in contract research companies or clinical trial companies or those having promising drug pipelines and products in late-stage clinical trials,” he said.
In a recent trend, India's leading drug companies have hived off their R&D assets to separate companies to insulate the investors of parent companies from risks associated with long-term drug research, and to attract private equity funding for drug research. The hived-off facilities are yet to announce any private equity participation or strategic investment. “The investment by private equity companies are on a case-to-case basis and that depends on the firm and its strengths. Generally, it is true that PE firms are not interested in firms that lack returns within a few years of investment,” noted a senior relationship manager for the life science and pharmaceutical sector of a leading private equity player in India. Arlington said the global pharmaceutical industry is undergoing a serious change and companies are looking at governmental support to carry on their business and drug research. It is estimated that an investment of $20 trillion will be required for healthcare costs by 2010. Development costs of drugs have become higher and less drugs are coming out into the market. This is mainly because of factors such as stringent regulatory hurdles, need to develop drugs with nil or less side effects, changes in genetic composition of both patients and disease-causing microbes and emergence of existing drug resistant microbes. |
Source: Business Standard