Scrip

Executive Summary

Take Solutions’ managing director outlines in an interview with Scrip a range of issues shaping the clinical research segment, including the "humongous" number of audits firms face against the backdrop of compliance woes in the sector, the “reach-out” from Chinese firms amid evolving regulations and a potential shift to outcome-based pricing in the CRO space.

India’s Take Solutions Ltd., which operates predominantly in the life sciences segment providing full service clinical, regulatory and safety services, says that clinical research organizations (CROs) are coming to grips with the rising trend of facility audits against the backdrop of compliance issues across the sector.

“Because of some of the 'noise' in the system, not only on the data integrity side but also GMP, the number of regulatory inspections is going up and at least on our system we consider it as a new normal,” Srinivasan said.

The executive also discussed a range of other issues including the potential of real world evidence to lower trial costs and how he expects CROs to shift to an outcomes-based service model in the years to come.

Lifesciences comprised 94% of Take’s revenues in the first quarter of fiscal 2019-20, with the supply chain management business accounting for the balance. Take is planning to exit the supply chain management business along with its joint venture partner at the “right value”, Srinivasan added.

Q) The clinical research segment in India has seen some rough weather over the recent past. How are things currently poised especially with the announcement of India’s New Drugs And Clinical Trials Rules 2019, which stipulate time-bound approvals and provide for conditional local trial waivers? (Also see "India New Trial Rules - Sponsors Interested But 'FAQ' Could Help" - Scrip, 16 Apr, 2019.) Do you see a pick-up in the interest of foreign sponsors?

A) Sponsor interest in the Indian demography is always there because it constitutes such a large portion of the world population. Most sponsors are insisting on Indian demographics but there is a catch – they don’t say it necessarily should be in India. An Indian based in the US can still be a subject of a clinical trial. But the environment in India has certainly become more clear – we went from a situation where we nearly shut down clinical trials and actively disengaged trials to a period where there was no proper guidance to now a fairly articulate system, which says that these are the guidelines and you can go ahead and do studies. It is good for India as one of the markets for clinical trials. But my personal view is that this is a necessary condition but not a sufficient one because today if Indian CROs are to succeed, you can’t just say 'I have access to India.' People are demanding multi-country/geography studies. If you don’t have the network of sites, then you can pretty much end up being a feeder to some other larger CRO. So, there is clarity and things should improve and you should see some of the Indian CROs bounce back - they have all the necessary conditions but the sufficient condition is that they expand beyond the shores of India.

Q) In general, have past compliance issues at some Indian CROs like Semler and GVK cast a shadow on firms across the sector including Take Solutions?

A) No, it hasn’t cast a shadow. Data integrity or any form of integrity issue anywhere is bad because you are dealing with pharmaceuticals and it affects people’s health. It happens elsewhere, it happens here and it has to be dealt with severely. There can be no condoning of practices of this kind. It hasn’t affected us but at the back of this, the number of audits you go through is humongous. Last year, at all our facilities put together we went through 72 audits - 12 by regulatory agencies and 60 by sponsors. In the first quarter of this fiscal year we had 26 audits – two by regulatory agencies (the US FDA and the Austrian authority) and 24 by sponsors. Because of some of the noise in the system, not only on the data integrity side but also GMP, the number of regulatory inspections is going up and at least on our system, we consider it as a new normal. Regulatory scrutiny overall has been higher and it’s not only been in India; we've got audited in Frankfurt, Russia etc. There is a reasonable workforce that is on a daily basis just attending audits. It is good because you establish credibility when you go through several rounds of probity. It is not unique to us, it’s across industry. Sponsor audits have become almost mandatory for securing new business, which wasn’t the case previously. It’s a whole new ball game.

Q) What’s your take on real world evidence and the potential use of evidence generated outside the traditional clinical trial setting to support regulatory decisions about product effectiveness?

A) Real world evidence is built on real world data - EHR [electronic health record] data and claims data are, to me, the two points of real world data. While they can be used back in the trial environment to design trials which are better, especially Phase IV studies, industry I think is at the first 10% on the curve of doing that…but it will evolve. Real world evidence is what I hope evolves because it has the potential to bring down the cost of trials and facilitate use of targeted therapy extremely well if we are able to do it, and data should be able to direct us to that. But my guess is that we are talking of anywhere between three and five years before that can be done at scale.

Q) Take recently referred to an emerging trend where customers across segments and geographies are renegotiating payment periods in order to address the current market environment. Is this essentially because of the pricing pressure and other headwinds that pharma is facing in key markets and do you expect this trend on stretched payment periods to persist?

A) It’s a general liquidity trend. I won’t say pricing pressure is causing it…that may be the case for generic companies, especially Indian firms. It’s across the board not just for Take Solutions...even big pharma is negotiating. It’s been building up for the last three years. We used to have 45-day payment terms, now everyone’s past 100 days. But I don’t look at it as a point for concern. Our bad debts have traditionally been just 0.03-0.07% and the kind of customers we have are those who pay, so we do not have any payment default. The anxiety comes when you run into payment defaults but that’s never happened.

Q) There’s huge interest in China from Indian pharma. (Also see "Cipla Docks Into China, Manufacturing Plans In Tow" - Scrip, 16 Jul, 2019.) What does it mean for CROs especially with China accepting foreign clinical trial data towards new drug approvals and new opportunities for generic supplies there? Any plans to set up a China arm or alliances?

A) China is attracting a lot of attention and especially on the generics side and BA/BE studies, we are getting a lot of reach-out from Chinese companies to do both pilot and pivotal studies. We are happy to do studies for them. They are reaching out to us because of the requirements of the Chinese FDA [now NMPA]. But we don’t have any immediate plans to expand into China. Almost 85% of our revenues is from innovator companies…we are a very innovator driven company. It’s not that China is not important but we are currently well deployed in other areas where we have a sizable order book.

Q) Take has made a string of acquisitions over the years – including KAI Research and DataCeutics both in the US, Ecron Acunova in India, WCI Consulting UK. Is there appetite for more, probably in some emerging markets?

A) All our acquisitions have been generally small and then we’ve tried to build business before we went on to acquire something else. Ecron Acunova was an $18m business when we acquired it; today our clinical business is more than $130m. We want to be able to demonstrate our ability to grow that business, then we are okay for the next acquisition. We are certainly open to acquisitions…we’ve just done two (DataCeutics and KAI Research) earlier this year and will wait to digest these, before we attempt another deal.

Q) Where do you see Take in a couple of years from now and what’s the next big thing in the clinical research segment?

A) In the next two years, we’d like to try and reach $500m in size and then take it from there. I think we are going to see outcome-based pricing in the CRO space. We are doing it now. Let’s say originally I provide a 24-month [timeline] to do a Phase II or III [trial] and give a fixed price for that. Then I’m going to ask that if I deliver that in 20 months, what’s my upside? I think that will drive down the cost of clinical trials. When we are using smart technology, real world evidence, artificial intelligence - those are all, to me, just channels or methodologies. What will it end up as? It will have to end up as outcome-based pricing. That will be very interesting. Over the next two years, I think you will see the market shift to outcome-based pricing.

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