Indian pharma companies have been toying with different strategies to build their US business as the traditional low-cost model of selling generic drugs is no longer as lucrative as it used to be.

Some of the leading pharma companies invested in specialty business in a bid to create a long-term growth driver.

However, some of them are reviewing their decision given the impact on profitability. Specialty drugs are typically used to treat complex or rare conditions and chronic ailments.

They are complex-to-manufacture, often involving high-end research and high upfront investment towards product development and marketing.

The industry leader Sun Pharma has chosen to invest heavily in growing its specialty business – with products launched in dermatology and ophthalmology.

The company is witnessing a gradual traction in its revenues from this segment.

In the latest quarter to December, the company’s global specialty revenues were around $118 million across all markets while specialty R-D accounted for about 24 per cent of total R-D spend for the quarter. Lupin too is investing heavily in specialty segment through notable spending on R-D and promotion.

It got a new talent to head this business segment that has an inhalation product, complex injectables and select biosimilars.

In the company’s earnings call earlier this month, CEO Vinita Gupta said, “Our objective is in making sure that month-after-month, quarter-after-quarter, we see improvements and are working towards it.

At the end of the day, if we don't see that our promotion efforts have the right response, obviously, we will start optimizing the P-L wherever it makes sense.

But at this point in time, we are seeing promotion responsiveness from the reps as well as the other promotion efforts that we are making”. In contrast, DRL has pared down its specialty product portfolio over the past couple of years – selling or out-licensed its specialty products – especially in dermatology and neurology.

The company has hinted of prioritising the speeding-up of clinical trials of its biosimilar assets meant for US filings over specialty assets. Cipla too has a measured focus on its specialty pipeline with spending primarily on only a respiratory molecule – instead of the three that the company has.

It is not spending more on the molecule (Tramadol) of its institutional (hospitals) specialty business – pending a definitive categorisation by the USFDA.

In FY21, the company has guided to spend not more than 1 per cent of its revenues and less than 5 per cent of its EBITDA on its US specialty business – roughly similar to the numbers absorbed by its P-L. Umang Vohra, company's managing director at the recent earnings call said that: 'if the tramadol strategy doesn't work out well, then obviously we will try and see if there's another product we could go after.

But that is not going to be at the expense of our P-L.

We are very clear about the amount we can spend.

So we're exploring multiple partnering options right now with various partners in terms of what we can do with this business. Aurobindo Pharma is investing in its specialty portfolio but it is at an early stage with products under development and filing scheduled to begin from FY21.

Revenue generation is to largely start from FY21-22. While the Street considers Sun Pharma to be best placed to become a specialty player in the US, any significant contribution from the portfolio is unlikely to be made in the near term.

High costs, with their impact on profitability, also dent the impact of any specialty drug launch on the overall revenues.

Besides, recent specialty launches have not met investors’ expectations - providing them with little visibility of growth.

The decision of expanding into the specialty business in the US is a long term strategic call that companies need to take based on their capabilities, cash flow, focus and shareholders’ expectations.

There is a limited visibility also on the kind of capex required for Indian companies to make a mark in the US specialty market and whether it will be worth it.

What works for one player, may not work for another one.

Sun being the largest player in the industry can afford to go full throttle on its specialty business strategy.

However, several other ‘also-ran’ players will have to take a call on how much of a foray into the US specialty business can they afford to have at a time when they have not been able to create much value for their shareholders.

Current investment in specialty business is not providing hopes of business turnaround to the investors.