Good afternoon everybody again. Look, I think this is going to be a very different session than what you've been going through for the last couple of days. Different because we're going to be pivoting a little bit outside of our familiar territory of GCCs and what we do in technology, and then look at a completely different industry but having such a powerful application for technology and what you could potentially get done. We couldn't have found a better person to talk to than Prasad, who's kindly agreed to be with us and share his thoughts on why technology is so critical to what he does and what Dr. Reddy's does broadly in the marketplace.
First of all, I want to again thank you Prasad for really accepting our invitation and being here. It's a privilege for us. Before we even get into the questions I have for you, I want to get your thoughts on this hall, everybody in this room. They are part of the GCC ecosystem, many leaders who have done a phenomenal job of curating, building the GCCs, leading the GCCs and growing at a much faster scale. You are in Hyderabad, the GCCs transformed Hyderabad, right? When you drive on the roads of Hyderabad, I can tell you 20 years ago and now there's a huge difference. So any thoughts before we get into a real conversation?
Sure. First of all, thank you very much for having me here. I've always been inspired by the IT industry. I learned a lot from the leaders in the IT sector, many things such as governance, scaling, working around the clock, thinking of pushing the limit and growth and all of that. So I'm honored to be here. We're a very small company compared to your sector. The sector itself is not so big as the IT sector but I think it's a very important and emerging segment of the industry where India is globally competitive at least in the generic and active ingredients part of the value chain.
The point about Hyderabad and its growth, I also see a lot of pharma majors, the innovators of the world coming to Hyderabad, setting up their GCCs here. For me it's not a great thing because they suck up the talent from our companies and that's a push and pull that we have there. But it's wonderful to see so many companies like Novartis, Amgen and GSK coming in and setting up companies which have revenues of 50, 80 billion dollars. So I think the ecosystem with the GCCs is going to get better because we also get the opportunity to participate in this whole ecosystem.
Of course. I think that's wonderful. As they say, rising tide lifts all boats, right? The fact that there's so much activity especially in Hyderabad, you mentioned that these days when you come into Hyderabad it almost looks like Hong Kong. Having said that, you also talked about the importance of technology in pharma, medtech, and how you use this in both synthesis as well as the usage of technology in other parts of your drug discovery and all of that. Give us a sense of how much technology you use in Dr. Reddy's which has made Reddy's what it is today. I must argue if you may, technology plays a slightly bigger part than maybe some of the others. What do you think of that? Do you agree with that?
I think technology is a force multiplier. It is certainly something that every company has to use to remain competitive. But in our industry, I think the science has the primacy, the basic sciences, the engineering and all of that, and digital and AI and all that you guys do actually helps us become much more productive, effective and also find things that would not have been possible without the application of these technologies. Just briefly, we are a generic company primarily. So we have drug discovery as an activity today but we don't have revenue from that. We have some small royalties and stuff like that but our main business is generics. Generics, both drug substance and drug product. Substance is the actual chemical that you produce. Product is the tablet, capsule or injectable, whatever you use on your body. So we use technology in developing processes, manufacturing, doing the tech transfer, all of those.
In recent past, in the last say five years, these technologies have really started making a big impact in terms of our productivity as well as efficiency. Taking for example a drug substance. A drug substance is an organic molecule usually, or a large molecule in terms of size if it's a biologic drug. But just for simplicity let me address this small molecule part. An organic chemical which is complex but made from simpler chemicals and there are any number of ways you can make it. It's a creative process of arriving at the most efficient route to get the lowest cost and the fastest time, also not infringing others' IP.
So this is a very human-intensive process where talented chemists have to use their mind and imagine the best route and also study literature, study patterns and do all that. This used to take a long time for scientists to do and you really needed very good talented scientists to analyze what has been done and come out with a very efficient way. Today we can do all this with a program called Synthia which is, or another product also, I don't remember the name, but these are AI-driven, based on fundamental physics and chemistry and also the learning from all the history of work that you do. And they can go from the molecule back to the very basic stages and optimize the selection of the route based on the parameters that you want to achieve, whether it's lowest cost, whether you want non-infringing IP, whether you want a green process, green chemistry, all of that. And you can replace a lot of the innovative thinking that humans used to be doing. So this is one example.
For the drug product, again there are many examples. Studying the literature, coming out with a suggested method to formulate the drug, and then doing virtual experiments, predicting the stability of the product. An enormous amount of work is possible now without doing the work. You can do all this silicon simulation using AI, using generative AI as well as traditional AI, machine learning, computer vision, all of these have become part of our labs now. So in a sense, the full force of digital technologies merged with chemistry and the low cost of computing is really transforming how research is done in the industry.
This is generics. But if you go to drug discovery, Rajanand was here before, Google had this AlphaFold which has determined the structures of 90% of the proteins known to humanity. And using that information you can now design drugs again in silico, test them in silico also, and then actually go and do the experiments. So this has really accelerated drug discovery. And if you combine AI and robotics and automation with very high throughput experimentation, you can really accelerate the whole journey of drug discovery many, many times.
So would you then also bring in a little bit of biology in the sense of advancement of technology in our understanding of biology? Does it have an impact as well on what you do?
Absolutely. AlphaFold is that. The structure of a protein, a protein is a very complex molecule and it's not stationary, it keeps changing, keeps folding. And to do all that modeling and simulation today, it's impossible without the computational power we have. So using modeling, using the NVIDIA kind of computational power, GPUs, and fundamentals of physics and math, you are able to do a lot more in biology than was possible. I think this is a whole new world out there and the whole understanding of the human body, the proteins, the role that they have in disease as well as in cures, has improved, has increased tremendously because of the computational power we have today.
Absolutely. One related topic which I thought is very topical is the whole GLP-1 and the impact of what Mounjaro and Ozempic and the likes of that have had on people's lives at least globally. And the big pharma companies like Eli Lilly, the ability for them to come to India and then release an Indian version at a potentially lower price point or an Indian price point, is sort of revolutionizing the way people look at some of this. I know you might have a different view, but how far are we from creating a generic, and do you think Dr. Reddy's will be interested in it? And do you also have some broad suggestion for the people out here who are looking at GLP-1.
So I'm not a doctor and I hate to give medical advice, but this product has really transformed the field of diabetes and obesity. Till recently there was no cure for obesity other than diets, exercise, and people were always blaming the obese person for not having enough willpower. And we all suffer from that kind of thing. And if you have a high BMI and your BMI is north of 30, this is a good product. The risks of being obese outweigh the risks of the product, right? And that is why it has been approved. Of course people are misusing it, people want to look good and become thin, models are using them and all of that, I don't support. But for clinically obese people, this is a fantastic drug.
We already make the product for testing. We have not launched it yet because it's under patent. We are registering the product all over the world including India, and generic versions will start rolling out as soon as the patents expire, which is about a year. I think the first countries opening out would be Canada, Brazil, India is a little later than Canada, but 2026, 2027 should see launches of at least the first few generic versions of GLP-1s.
Excellent. Now talking about generics, one other related topic would be that big pharma always had a huge score to settle if you may with generic companies such as Dr. Reddy's. While you've really been very innovative in your own way in terms of getting to where you are in terms of generics, but big pharma always said that they spend disproportionate amount of money on R&D and doing all the research and drug discovery, and then it becomes easier for the generic companies around the world to do what you do. I know that's not fully the truth. Would love to hear from you what your experience has been and what the real truth there is.
See, no company can have monopoly rights forever. Patents expire and allow others to enter and that's how prices come down. If we didn't have the generic companies, you would have innovators pricing their products very high forever. That's not a situation which can last. So at some point intellectual property rights expire, then you have competition come in. Sometimes the intellectual property is weak. Generic companies try to attack that weakness and get in early and make a lot of money. So this is the way the world of commerce works.
Of course innovators are required because they advance medicine. They make better drugs, drugs which solve real problems of disease. And without an innovator company, there is no generic company. A generic company needs an innovation molecule to copy. And if there was no generic company and innovation lasts forever, why would they change? Why would they improve? Why would they drive innovation? So it's like the yin and yang. You need generic companies to challenge the patents and overcome them or launch generic versions after the patent rights expire. And you need innovators to find and discover new drugs to solve medicines or make them better. So it's a very nice way of driving innovation and driving affordability. They're two different sides of the same coin in some sense. So you need both.
So you're saying that you need the generic companies to sort of drive some innovation as well. Yes. I want to go to the audience and see if they have any questions for you. So maybe you can get the mic ready. I'm going to ask one more question by the time you get the mic ready and then people have questions. Please put your hands up and it'll come to you.
Can I ask you a question also afterwards?
Sure. Okay. Now this is the danger of going to the audience. He wants to ask me a question, right? Which is a problem, but yes, let me finish this and of course we'll love to get your question as well.
With all the pricing pressure that you have, you talk about regulations and you deal with so many regulations every market you serve. They're highly regulated and they want you to sort of jump through the hoops before you could do anything with generics in those markets. So how do you make sure that you stay competitive and stay relevant in those markets that you serve?
So every country has a regulator to protect the health of their citizens and that's given. There are varying levels of rigor of implementation and all that, but the broad law is the same everywhere. Do no harm, keep your patients safe, find drugs which will improve their health and don't harm them. That is the basis of regulation apart from the IP part and all that, that's common for everybody else. So we are used to that. We are used to doing safety studies. We are used to doing post-marketing surveillance. The whole systems evolved to address the regulation, just like the aviation industry understands regulation, the banking industry. So we have our own regulations and it's part of our processes. And a lot of the GCCs manage the regulatory work from India. So there's a lot of expertise in India for regulatory management also.
I agree. You can certainly ask your question, but can we, Krishna, Dr. Krishna Raj Kopal?
Dr. Krishna Raj Kopal, I was an ex-cancer researcher. I help pharma companies and startup companies to go into market. I help pharma companies and biotech startup companies get funding and go into the market. I'm an ex-Harvard cancer researcher. The question I see is, a lot of generic companies in India and China and other places, they follow the established products and then focus on the generic market. But the biggest thought process was, as AI and generative AI and all the technologies come in, and as you mentioned today that these are being applied in the lab and other places, and obviously there are more clinical trials being done with AI and you have all the digital clinical trials coming in, patients not going to the hospitals etc. If you combine that R&D within India with the application of this AI and GenAI and other technologies, how long will it take for generic companies to actually become product companies?
Good question, and all of us have this dream of doing that at one point, but it's a very different game. The generics business is about making low-cost medicines of already known medicines, generic versions of them, and selling them all over the world through scale and efficiency. Innovation is about combining many disciplines, biology, chemistry, medicine, health technology, using technology, all of that, and developing a novel product which actually improves health or a disease condition. And the cost of all this is north of a billion dollars at the lowest, even in India with Indian costs. And generics are 2 million, 3 million per pop. So in generics you take a large number of small bets. In innovation you take a very small number of very large bets. It's a very different industry.
So we manage it, but we manage it very differently. We have a drug discovery business also, but it's not a business yet, still R&D activity. Generative AI, all these things are tools which will help, but you still have to do the clinical development. And the major bottleneck is clinical development, it is not drug discovery. Drug discovery is probably 10 to 20% of the total cost of developing a new product. 80% is clinical development. And clinical development has not changed much. You have digital tools to monitor, to understand parameters, to do data management, all that, but the actual act of dosing patients, testing them, all that hasn't changed. So only when we have technologies which can cut the development cycle, then we will see dramatic shift in productivity of innovation.
Having said that, I think several Indian companies are trying hard to bring innovative products. We have a pipeline of about seven or eight products in the clinic today, being tested for various kinds of cancers. We focused on oncology as a disease area, and there are other companies which are doing similar stuff.
China actually is experimenting in the biotech space with a model that I don't think I need to tell you, where they are coming up with molecules at fractional cost, and this is original product development. I don't think this is generics by any stretch of the imagination. They're having this combination of academic institutes plus startups, and I won't run deep into that model, which is working splendidly well. And you have all of these Western companies now putting tons of money there because they know they will not be able to do it at the cost what is working there. That is not working here because of which we are not able to do this correctly, I mean, model head-to-head replicated between the two countries.
Again, very good question. The Chinese have been very good at this and they've been following this for the last 10 to 20 years. They've been investing in biotech. I don't think they're doing fundamentally new innovation though. They are doing a fast follower act but they're doing it at such speed that it's very hard to replicate. And they're doing both biosimilars, biologics, small molecules, and they're running it at a very high pace.
It's not that they're spending less money. They have invested hundreds of millions of dollars in building those capabilities. They also have a lot of scientists returning, the sea turtles like what they call them, well trained. If you meet the top management team of a Chinese biotech, they'll be as good as any US company. And today I think they're number two in innovation. China, US is still number one but they are number two and they're catching up very fast. They've also invested a huge amount of money in innovation. They also created a market.
You ask me what's different in China versus India. If you have an innovative product in China, you have high price protection, you have a protected market and you have reimbursement for the innovative products. This is a lot of money. We don't have that in India. So the moment you price it a little high here there's a lot of hullabaloo and we don't get reimbursement, there's no theory of reimbursement at all in India. There's insurance but they won't reimburse any expensive drugs. So the system still has to evolve, the ecosystem is not there for high-priced innovative products in India yet.
But having said that, I think the current government is putting a lot of emphasis. Of course they're saying 100 NCDs by 2037 or something, but we hope that some action will follow.
