Sandoz, the world’s second-largest generic drugs company and a unit of Swiss drug maker Novartis has decided to shut its active pharmaceutical ingredients or API development facility near Mumbai. A Novartis spokesperson said in an e-mail to this writer that this was part of “recent project portfolio optimization within Sandoz Global Development.”
The spokesperson added that “API development activities currently carried out in India will be consolidated into other development centres in Europe” without naming any countries. Sandoz is known to have API development capabilities in Slovenia and Austria.
The Indian facility employs about 45 people, said a person familiar with the company. “Sandoz is committed to minimize the impact on colleagues by utilizing redeployment to matching vacancies in the company,” the spokesperson wrote in the e-mail.
Formulations development, manufacturing and commercial operations that form “the majority” of the company’s India presence will continue, the spokesperson said.
The move is surprising given that India is still a relatively low-cost destination for API development and also that the chemical generics opportunity is peaking as blockbusters come off-patent in key developed markets.
But look at it this way – for many generics companies, the future is not about vanilla chemistry alone. Most large generics producers would’ve already filed for approvals to market generics of many of those soon-to-be-off-patent drugs or are on the verge of doing so.
They’ve no doubt begun to prepare for life after the so-called “patent cliff.” This is when the value of small molecules going off-patent drops. An article that I had written for The Economic Times in October 2011 pointed out the value of drugs going off-patent between 2016 and 2020 will fall 62% from the value in the preceding five-year period (2011-15) by some estimates.
So smart companies will focus on the next big thing (or things). Think, for instance, of the biosimilars opportunity where Sandoz has placed a big bet. Or value-added drugs where the challenge lies in combining drug with delivery system, altering dosage, and so on. This calls for investments.
Viewed through this prism, the decision isn’t that surprising.
Of course, the closure might well not be a larger commentary on the future of generic small molecule API development. The reasons could be unique to Sandoz. The company has been acquisitive and this could be part of an overall chop-and-change resulting from past acquisitions or leading up to future ones, reasoned another person familiar with the company.
However, given the finite nature of the “patent cliff” opportunity and given that there are scores of scientists employed in API development in India “‘is it time to worry?” seems like a pertinent question yet. Thoughts welcome.
Apothecurry 