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September, 2006 Pragati Maidan, New Delhi, India |
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Domestic Pharma R n`D Yet To Get A Booster Dose
Current expenditure way below global benchmark
Domestic pharma companies need to give a real shot in their research and development (R&D) arm if they want to enhance their share in global market as their current R&D is way below the global benchmark of 10% to 20% of sales.
If their balance sheets are anything to go by, barring frontliners like Ranbaxy, Dr Reddy's and Sun Pharma, the average expenditure on R&D by most Indian pharma companies remain far below the 10% level of their annual sales.
`Indian manufacturers cannot fulfill their ambitions to become players on the world stage unless they make significant increases to their R&D expenditures; at 2% of sales, these are currently far below the global level of 10% to 20%`, said a recent KPMG report.
Ranbaxy had an annual R&D expenditure of 13.29% of its sales in calendar year 2005, up from 8.88% during the previous calendar year. However, these figures are not strictly comparable with other companies as others follow the fiscal accounting practice.
The R&D spending of Dr Reddy's had prima facie declined from 14.90% in fiscal 2005 to 8.23% in fiscal 2006. However, this did not indicate any let up in the R&D efforts of the Hyderabad-based pharma company since it has hived off its R&D division into a separate company in association with ICICI Ventures during the fiscal. The consolidated R&D spending of the group would be much higher, said analysts.
Sun Pharma, which piped its peers in wealth creation for its shareholders, had an R&D spend of 11.3% of its sales in fiscal 2005-06, a tad lower than the previous year's figure of 11.71%.
However, the expenditure of most of the other companies, on R&D as a percentage of total sales is below the 10% mark. In some cases, it is as low as 3%. Industry experts, however, caution analysts against an apple to apple comparison between domestic companies and MNCs.
Date: 04-Jul-2006
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