Pharmabiz
 

"There is no crisis in biotech industry"

Thursday, August 7, 2008, 08:00 Hrs  [IST]

No doubt, 2007-08 wasn't a good year for the Indian biotech industry. The industry saw its growth tumbling to 20 per cent in the year from a healthy 30 per cent during the past five years. The fall was great, as it was, among other things, a result of tardy growth rate of all sections of the industry, except bio informatics sector. The most affected lot were bio pharma and bio agree sectors, which saw growth rate plummeting to 16 per cent from 26.87 per cent and 30 per cent from 54.85 per cent, respectively. In our quest to know what went wrong with the industry, Anil Mathew interviewed Dr K K Narayanan, president, Association of Biotech-Led Entrepreneurs (ABLE) and managing drector, Metahelix Life Sciences Pvt. Ltd. Excerpts: The growth of biotech industry has of late slid to 20 per cent from a robust 30 per cent. Does it indicate that biotech industry is going through a big crisis? What do you think has caused this slump? No, there is no crisis in the biotech industry. The slow-down as the base expands was not totally unexpected. There are several reasons for this slow down of the growth. Let me expand on a few of them. I have always held that to sustain the growth rate of over 30 per cent as the base gets bigger, we need to invest in innovation to develop new products that can be sold globally. Though investment in innovation has picked up in the last couple of years, we are still in the lag phase before the research can result in commercial products. Contract research is an area that can still grow. However, the big bucks are in innovative products. We are yet to see many such innovative products from Indian companies that can be sold globally. It takes time for the research to fructify and for getting the regulatory approvals. Besides, there has been an erosion of value for biotech seeds due to the price fixation by various state governments - a populist measure. Even though the area under biotech crops has almost doubled between 2006 and 2007, the value realised for the companies, which sold these seeds grew by only 27 per cent. Moreover, the appreciation of the rupee also had an impact on export realisation. According to you what all measures should be taken to reverse the situation? I would stress on continued focus on innovation to reverse the status quo. Then, artificial controls like price fixation, which are barriers to free trade, should be curbed while at the same time market competition should be encouraged so that the customer gets the best product at the best value. When it comes bio agree sector, the area under biotech cotton is already saturated and there can be no more significant increases in agree biotech revenues in the coming year unless new biotech crops are approved for commercial cultivation. The present procedural and bureaucratic constraints in the regulation of biotech crops have to be removed and the process hastened. This can be easily achieved without any compromise on safety. Given the present tardy growth rate, do you think that Indian biotech industry would meet the expectation of $13 to $16 billion revenue by 2015? This slackening of growth, I hope is only a temporary phenomenon. The growth rate should pick up in the next couple of years with new products kicking in and more biotech products hitting the Indian market. If it can get above the 30 per cent growth rate, the potential to reach over US $15 billion by 2015 is very much on. As per reports, the biotech industry in India drives around 58 per cent of their revenue through exports. What does this imply? Most of this revenue is from the export of generics as well as research services, including clinical research services. The total export revenue can grow in absolute terms with growing export volumes and increasing value with innovative products. However, one should remember that India with over 1.1 billion people is itself a potentially big market - approximately four times the size of the US. With increasing incomes in our country, I think in the next few years, we will see the domestic market far outgrowing the export market. Why is domestic market for biotech products so low? Today it is low because of lower purchasing power and systems which keep a check on price realisation. This is bound to grow with increasing per capita gross domestic product (GDP) and when new products from Indian companies, specifically addressing Indian needs, whether it is in the health or agricultural sector, hit the market. Do you think that a deal like Ranbaxy-Daiichi, which reduced the leading Indian pharma player to mere a subsidiary of the Japanese firm, would benefit the Indian biotech industry? How? Deals like this are one way to achieve global scale in an inorganic way. I do not see any harm in such a deal specifically for the Indian industry or consumer. Given that Daiichi Sankyo is a product of domestic consolidation, don't you think that it is the best example for Indian bio firms to follow suit? There could be lessons if one analyses this deal and also see how it fares in future. However, one cannot recommend that the best way for the Indian biotech firms is to follow suit. Compared to 2006-07, in 2007-08 the bio pharma's contribution to biotechnology has gone down to 67 per cent of the total industry's revenues from 71 per cent. Also, its growth rate has slipped to 16 per cent from 26.87 per cent. This is despite the fact that export from bio pharma has increased to 70 per cent from 61 per cent during the period. What went wrong? How do you see its future? It is early to say that things are going wrong. The apparent slow down is because new products have not contributed to the revenues of companies in a significant way. As mentioned earlier, the product development cycle, particularly in the pharma sector is quite long due to the research and regulatory process. There has also been an impact on the export revenues due to the appreciation of the rupee. What all things Indian biotech industry lack to achieve an envious growth? Instead of complaining about what we lack, let me answer this in a positive way by saying that we should relentlessly pursue innovation to create new products that can be sold globally. This is for the long term. For the short term, we should promote India as a destination for investments in biotech manufacturing, while continuing to grow the research services segment. Policies that encourage entrepreneurship and public-private partnership in research and development would be important to realise our full potential.

 
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