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London Eye: Good reasons for SII to step into UK

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Extensive UK government support for R&D is proving a major draw for Indian pharma companies.

London Eye: Good reasons for SII to step into UK
The sudden flight of Serum Institute of India (SII) CEO Adar Poonawalla to Britain last week sent shock waves through India, given particularly the context he declared to the media on arrival. That was of coming under immense pressure from some of the “most powerful” in India for more and more vaccines that the SII produces but could of course not magically produce.
It seemed that he had not taken a flight—but that he had taken flight. And with him, the SII, and India’s reputation as the ‘Pharmacy of the World’, of which SII is the flagship producer. Sure enough, within days of arrival, he announced plans for a 240 million pound investment in the UK.
That decision though seems neither abrupt nor emotive. It rides a huge and growing flow of Indian pharmaceutical companies into Britain. The SII is in fact a late arrival on that flight path.
“Indian pharma companies have been growing and expanding in a big way in the UK,” Chandru Iyer, head of business development for South Asia with the company Grant Thornton tells CNBC-TV18. Of the 49 fastest-growing Indian companies in the UK that the firm tracked, the growth was fastest among pharma companies.
This year’s report shows that pharma companies were close to 30 percent of the fastest-growing companies, almost double the number the previous year. The firm produces an annual tracker report that profiles the presence of Indian companies in Britain.
Much of this growth is along expected lines. “They have been bringing generic drugs to the UK market, so, if you take anything off a supermarket shelf, a Paracetamol or an Ibuprofen, or an antibiotic from the pharmacy, more often than not this will be made with drugs coming in from India licensed from Indian companies operating here in the UK,” says Iyer. “But a lot of them also have a strong R&D (research and development) focus primarily because of access to technology and access to resources.”
Resources for R&D
Extensive UK government support for R&D is proving a major draw for Indian pharma companies. “The UK government promotes R&D in a big way,” says Iyer. “One of the things that companies do is accessing very generous R&D tax credits. For an SME that can be to the extent of 130 percent, which means that for every 100 pounds you invest in R&D work, you get 130 pounds tax relief which is very generous.”
For a larger company such as SII, there is an R&D expenditure credit scheme which offers a 13 percent tax credit on R&D expenses. “And this can be R&D work done by the country and also sub-contracted out,” says Iyer. “So some good savings there, and after all that a project can always give rise to a new product developed.”
Serum Institue has not sketched out its investment plans in any detail, but it has pointed to research in developing vaccines with its partners AstraZeneca and the University of Oxford. That makes the UK an obvious destination to launch research that could lead to new products. The development of a nasal spray as protection against COVID-19 has been announced as a priority.
“I’m not privy to any insider information on the SII plans, but one factor clearly would be proximity with their partners AstraZeneca, and working more closely with Oxford University as new products are developed,” says Iyer. “Given new mutants, a vaccine will need to evolve continually. But of course, it will be tempting to use the UK as an R&D hub and use the tax credit facility here. The UK is a fantastic place to develop a new product. There will be advantages also to positioning SII as a global player supplying out of here.”
Threats or promise
Poonawala has faced rather different choices between India and Britain. On the one hand, threats after the SII has done all it could and more to produce vaccines at speed and on a scale. And threats, Poonawala said, was an understatement. “The level of expectation and aggression is really unprecedented,” he told The Times. “It’s overwhelming. Everyone feels they should get the vaccine. They can’t understand why anyone else should get it before them.”
As the world’s largest pharma company based in India, there would be a strong case for the Indian government to offer it incentives for research, and encouraging support for increased production. At the least, some understanding of the difficulties the company has been negotiating. From the Indian government, SII has found quite the opposite.
The SII is still not abandoning India – far from it. Poonawala did take a flight, he did not take flight. But if the government is unhappy over the SII stepping partly out of India, it has only itself to blame.
London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around.
Read his other columns here

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