Riding the IT Success Wave
Riding the IT Success Wave
April 27, 2007
By Seema Singh
Red Herring
Indian life sciences industry builds momentum in contract services.
The wave started with information technology and has now reached life sciences: using contract services to build bank balances and bolster the industry in India.
And it is poised to go a long way, according to a contract research and manufacturing services (CRAMS) report released by Frost & Sullivan on Friday in Mumbai. The Indian CRAMS industry netted revenue of $895.44 million in 2006 and is expected to grow at about 33 percent annually to $6.6 billion by 2013.
?This model is slowly moving up the value chain,? says Mahesh Sawant, program manager in Healthcare Practice at Frost & Sullivan in Mumbai. ?And the focus is now shifting towards providing services in areas within contract research and manufacturing which were traditionally not looked at.?
According to a 2006 report published by Cygnus, India could capture 10 percent of the global CRAMS market, which is estimated to be $168 billion by 2009.
The industry is currently divided into contract research, clinical research, and manufacturing. While contract manufacturing accounts for 71 percent of the market share, chemistry-based outsourcing will be the key driver of this market, the report says.
Biopharmaceuticals manufacturing is likely to be the next boom in outsourcing. ?Cost and regulatory pressures are likely to force pharmaceutical companies to increasingly outsource manufacturing,? the report estimates.
Acquisitions and Alliances
The way acquisitions and alliances are being forged in the CRAMS industry, clearly Indian companies?both mid-cap and startups?are embracing this business model to become one-stop solutions for their clients.
In one of the largest overseas acquisitions by an Indian company in the CRAMS sector, Jubilant Organosys acquired Spokane, Washington-based Hollister-Stier Laboratories for $122.5 million on Wednesday. Jubilant is a leading CRAMS player with presence in the drug discovery and development area.
This acquisition is a good strategic fit for Jubilant. Hollister is a foremost contract manufacturer of sterile injectable vials and Lyophilization (freeze-drying) products and a top global producer of allergenic extracts.
?[The acquisition] gives us a ready entry into contract manufacturing of injectables and presents a compelling business opportunity, especially in the U.S. market,? said Shyam S. Bhartia, chairman and managing director of Jubilant Organosys.
In another significant deal, India?s largest biotech company Biocon, which posted a 23 percent increase in operating income this week largely due to CRAMS business, signed a landmark research and service contract with New York-based Bristol-Myers Squibb in March.
Bristol-Myers, which has also announced extension of its outsourcing contract with Accenture India, will pump $300 million into these two deals over the next eight years.
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