Aurobindo sees costs to double as it gets into biosimilars

 In addition to TL Biopharmaceutical’s four products – Aurobindo is also developing eight other biosimilars on its own targeting therapeutic segments such as oncology, rhemutology, ophthalmology and respiratory. The company has set up a fully functional research and development centre for biologics development and is also establishing a manufacturing facility in Hyderabad, which is likely to be ready by September. Aurobindo management said in the earnings  that the company will incur higher expenditure to the tune of 7-8 percent of its revenues going forward in contrast to its current spend of 3.5 percent. Aurobindo reported sales of Rs.13,896 crore in FY17. Aurobindo keeps its  expenditure much below the industry average spend of 7.1 percent, as it primarily focuses on generic drugs. Aurobindo said it may also consider the option of out-licensing some of its biosimilar molecules at a later stage close to completion of phase-1, to mitigate the high cost of development. The company said it plans to do almost 70 percent of clinical trial work in India and the rest in Europe to save costs.

 “We are conscious of not getting expenses out of bound, we are looking at options of out-licensing the molecules in certain markets where we are not very strong,” said N Govindarajan, managing director of Aurobindo Pharma at the company's earnings call. A biosimilar is a copy of biological drug, unlike generic drugs that are cheaper copies of branded chemical drugs, biosimilars are harder and more expensive to develop as they are made from living cells and cannot be identically replicated. Depending on various factors, analyst estimate the cost of developing a biosimilar for the regulated market can vary from US$30mn to US$100mn –largely determined by the size and location of Phase-3 trial. The global biosimilar market is predicted to have sales of USD 25 billion by 2020, according to a 2014 Thomson Reuters report. Developed markets account for a lion’s share. Indian drug makers who thrived on generic or copycat drugs taking advantage of cost arbitrage and chemistry skills offered in India, are now facing intense competition and pricing pressure in the US. To stay relevant in the cut-throat competition and changing market dynamics - Indian companies have been investing on specialty drugs and biosimilars 

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