Clinical trials

Clinical trials by biotech companies are the next catalyst for growth of the pharma sector in India. With margins from generic drugs getting lower by the day, the pharma sector is all set to become an outcast as far as the stock markets are concerned. Only those companies which do high end CRAMS work (Contract research and manufacturing) will survive the profitability conundrum. Under these circumstances, clinical study, research and trials in the bio pharma and life sciences space has come as a blessing in disguise for Indian companies which are nowscaling up rapidly to meet the outsourcing demand. Yes outsourcing of clinical trials is here to stay in India. IT companies have become so synonymous and addicted with the term "outsourcing" that they too are jumping into the fray. Companies like Infosys, IGATE global have opened up separate verticals in clinical research to work in areas of bioservices and bio informatics. India with its vast demographic profile in terms of its population provides a large pool of samples for clinical trials apart from the low cost advantage. Clinical trials can fetch anywhere between Rs.10 lakh to Rs.25 lakh per volunteer tested depending on the nature of the product tested on human body. Research and development costs for clinical trials alone cost 70% of the total cost of bringing a product to the market. With most pharma companies both within India and outside facing pricing pressures, the emphasis will be on cost management and control which is facilitated by outsourcing to low cost destinations with the requisite talent pool and resources.

Biocon and many other MNC pharma companies have already started outsourcing work to niche small bio pharma companies to undertake clinical research and study. Biocon derives 10% of its total revenue from clinical research work being a fully integrated bio technology player.

The potential for clinical trials are huge in segments like cardiovascular therapy, nutritional therapy, anti cholestrol, diabetes and cancer therapy etc. Niche small players in bio pharma/ bio services/ bio informatics space should focus on client retention, timely delivery and better turnaround time for clinical studies, widening the product and services profile, effective cost management to offset negatives like lack of earnings visibility in this space, thereby attracting investor attention in future. Atleast one or two interesting players are expected to emerge in the next decade or so on the Indian bourses in the biotechnology space apart from biocon. Celestial Labs is one such stock with an interesting story which gives it the potential to come on top. We will have to wait for the story to pan out positively.