Accutest Research is the first deal we (Aureos India) did. Accutest is a contract research company so it basically grows behind the strength of pharmaceutical companies.
First we will look at the big picture, right? The business itself is big: every drug that you launch, in any part of the world, needs to go through certain guidelines. Every regulated market tells you how to launch drugs: you need to test it on rats and whatever, and then finally you have to test the drug on volunteers and healthy patients, and that is an entire regulated process. These tests together are called clinical trials.
Running clinical trials is an established big business. Now India has never been a part of this because in the past India never launched new drugs: we have not been IP driven, in the drug perspective.
So what did this company, Accutest, do the last 3-4 years, if they haven't been involved in developing new drugs? Well, what you have seen in the market is that Indian pharmaceutical companies have taken drugs which are off-patent in any of the regulated markets, like the US or UK, and launched generic versions of those drugs. You know, at 10% of the price or 5% of the price of the original drug.
Now to launch a generic drug you have to test your drug on healthy patients, get the analysis, and submit it to the US FDA or any other regulatory body. You have to show that the chemical reaction of your drug is the equivalent chemical reaction to the original drug, right. Only then the FDA approves you to launch your drug in that market.
So the first call we took is that the US developed-market health care cost have to come down, right? There is no way about it. And if they have to come down, they have to reduce the prices of drugs. And how do you reduce the prices of drugs? You need to curtail your time that you take to develop and test, or you need to do your testing at reduced cost; there are multiple things you need to do.
Also, most markets are going to allow more and more companies to launch generic drugs because that also drives the pricing of the drugs down. In fact, today you are seeing a lot of Indian companies launching generic drugs in the US and everywhere. And all of these companies have to test their generics, and prove they are chemically equivalent to the original drug, before they can launch.
So the first call we took is that this portion of the business is growing and will continue to grow.
The second thing is the opportunity to grow the new businesses in running clinical trials, even for drug discovery. You are increasingly seeing pharmaceutical companies coming into the newer markets. You know people are concerned about what reactions Indian customers would have to their drugs. Now India is becoming a huge market, so they want to test their drugs on Indian patients also. So that is the thing which is opening up as well.
Accutest is a specialist in the testing of generics to show their chemical equivalence to the original drugs. They are one of leaders, in terms of having facilities to test all these drugs on healthy patients. They have hospital beds, they have doctors. And they have done this process. Most of their facilities are US FDA approved and everything, so this is a business, right. This is the existing business of the company.
The team members have worked for big companies and they have done Dpharma. I mean, first they worked for ten to twelve years, and they understood the business. And they came out of it thinking: "I know how it works and what it takes, so why can't I do it on my own?" They sensed the opportunity in the generic area.
A lot of time that's the only way you spot an opportunity. You become so good in a particular area that you sense a small little niche in whatever you are doing. And your company where you are working is not prepared to exploit that niche, because it is a larger company and this is too small a business for them. But something triggers you, right! And that's how you can get started.