| The death knell sounded by Novartis over India's pharmaceuticals industry last week could be sour grapes but the concerns highlight some of the challenges facing the burgeoning sector. Daniel Vasella, chief executive of Novartis, warned that a recent court judgement would likely push him to divert substantial future funding to other countries. "We will not discontinue activities, but India is forgoing opportunities for future investment," he said, reacting to the Chennai High Court's decision this month to reject a patent application on the company's cancer medicine Glivec as only representing an "incremental innovation". While his comments may seem at odds with the recent growth of India's pharmaceuticals sector, they highlight a major issue facing the industry - an even faster pace of growth in China. And some international drug companies argue that it is not India but China that offers the most potential. "India will take time. It's not a major opportunity for us now. China is completely different," says Bruno Angelici, executive vice-president for most of AstraZeneca's non-United States sales. He forecasts China will be the world's fifth largest drug market by 2010. China - where partnerships are more difficult but the market potential is great - has triggered more eye-catching research projects in recent years. Novartis has pledged $100 million to create a biomedical research centre at Shanghai's Zhang-jiang Hi-Tech park, next to facilities opened by Swiss rival Roche in 2004. While AstraZeneca unveiled $40 million in investment plans for a tuberculosis research centre in Bangalore in 2003, it topped that last year with $100 million earmarked for an oncology research centre in Shanghai. "India has a longer tradition and a greater skillset but China has such huge resources and lower costs it is becoming a focus for biotech," says Fintan Walton from PharmaVentures, a pharmaceuticals consultancy. However, neither place is "a bed of roses for intellectual property", argues Robert Jones, head of government relations for India and China at GlaxoSmithKline. The Indian pharmaceuticals industry has undergone dramatic change since 1970, when many foreign companies left after a law designed to promote the generic drug industry sharply weakened patent rights. Foreign direct investment into pharmaceuticals has jumped significantly since tougher intellectual property rules were enacted in 2005 following World Trade Organisation membership. Investment Much of this investment has gone into building sales forces and production facilities, as companies seek to tap into the rising demand spurred on by the growth of India's middle classes. Jones says GSK has invested heavily in India, building a strong domestic position especially for over-the-counter medicines. Investment in contract manufacturing for medicines has also grown, partly driven by India's strong generics industry and traditional expertise in chemistry. The country has the largest number of US Food and Drug Administration-certified facilities outside of the US, making its companies tempting partners and acquisitions. Highlighting this trend, Actavis, the Icelandic generics group, this year acquired Sanmar Speciality Chemicals, based in India, in an attempt to reduce manufacturing costs. Meanwhile, Vasudeo Ginde, president of iGate Clinical Research, says that stronger patent protection has helped to boost sharply interest in conducting clinical trials in India since 2005. Trials carried out in India are 40-60 per cent cheaper than in the US and patients can be enrolled more quickly. As in China, Indian regulators are increasingly requiring new drugs filed for approval to be tested on their own people, forcing companies trying to enter the market to conduct clinical trials locally. For earlier-stage research and development, however, the picture is more mixed. Drugmakers say they are tempted by India's large pool of English-speaking scientists, many of whom work for less. Foreign players often seek partnerships with well-established and trusted local companies. GSK has a long-standing partnership with India's Ranbaxy. In January this year, Eli Lilly of the US agreed a deal with Nicholas Piramal India across a range of therapy areas. Ajit Dangi, director general of the Organisation of Pharmaceutical Producers of India, a trade body, remains upbeat on the progress of the sector in India, in spite of the warning from Vasella. "One such case shouldn't deter people from investing in India. I don't think anyone will pull out." | 
