India has emerged as one of the preferred destinations for research and development (R&D) in the world. This is primarily due to cost arbitrage, stronger Intellectual Property Rights (IPR) laws, and abundant scientific manpower that is available in India. None other than the President of the United States, Barack Obama, has repeatedly emphasized this strong scientific capability.
According to the University Grants Commission (UGC) 8420 PhDs were awarded in the science and engineering field in 2005-06. Indians constituted the third largest group of non-US citizens awarded PhDs in the field of science and Engineering from US universities, next to Chinese and Koreans. India produces close to 1.5 lakh engineers annually. This immense scientific talent coupled with low cost is one of the main reasons why India is being viewed as a preferred R&D outsourcing destination.
Pharma, biotech R&D set to increase
One of the areas that have seen significant growth in R&D is the pharmaceutical and biotech industry. This sector spends more on R&D than any other industrial sector in India. Signing of the Trade-Related aspects of Intellectual Property Rights (TRIPS) agreement and the subsequent patent protection regimen that came into effect from 2005 have increased the focus on R&D for domestic companies and also led to outsourcing high-end R&D work to India by MNCs.
Pharma, biotech R&D expenditure
Analyzing the physical and chemical properties of various compounds and materials used in numerous applications in the pharmaceuticals and biotechnology industry is an essential process . Knowledge of biology in the form of Genomics and Proteomics is a major component of today’s drug discovery and development process. Laboratory analytical instruments and reagents serve this purpose and are considered critical for most of these applications.
(See chart 1)
Analytical instruments market
The Indian laboratory analytical instruments market is characterized by the presence of a majority of foreign companies that cater to the local market. Indian manufacturers of laboratory analytical instruments have existed since the 1960s. Indian companies such as ELICO, Toshniwal Instruments, Systronics, AIMIL, etc. started manufacturing simple instruments such as pH Meters, spectrophotometers, etc. However, companies have since then repositioned themselves as traders or distributors supplying equipment manufactured by foreign companies to Indian customers, as they were unable to keep pace with technological advancements. With the opening up of the economy and emphasis on R&D, foreign players were able to tap the Indian market with more vigour. Companies such as Thermo Electron, Waters, Bio Rad, Agilent, Perkin Elmer, Eppendorff etc, started their direct sales and marketing and in some cases their R&D centres in India.
The global laboratory analytical instruments market, covering the separations as well as the molecular spectroscopy markets was worth Rs. 390.6 billion in 2007.
The size of these markets in India has been estimated to be around Rs. 7,893.3 million in 2008. India still comprises less than two per cent of the global market, despite having the highest growth rate. Government agencies and institutes comprise the largest segment of the Indian market, accounting for close to 50 per cent. Indian companies and MNCs having R&D setups in India account for the rest.
The Indian laboratory analytical instruments market has been growing at a rate much higher than the average growth of this market in other economies. While the global laboratory analytical equipment market is growing at less than five per cent, India has shown growth rates of around 10-12 per cent in the past four years, and is expected to exhibit an even healthier growth in the near future.
Lab chemicals market
The laboratory chemicals market in India is comprises various sub segments. They vary from locally manufactured reagents, imported lab reagents, microbiological reagents and bioscience reagents. Despite the fact that India has a mature and accomplished pharmaceutical manufacturing sector, most of the lab reagents are imported. Only a very few Indian companies have been able to establish themselves in the market. Foreign brands rule the roost and are most preferred by the Indian scientific community. The domestic lab reagent market was worth Rs. 2110 million in 2009 and grew at a CAGR of 9.5 per cent during the period 2006-09, with the pharmaceutical sector accounting for 35 per cent. The imported lab reagents market composed of only sales through distributors was Rs.1720 million in 2009 and grew at a CAGR of 17 per cent during the period 2006-09, with the pharmaceutical sector accounting for 37 per cent. Further growth in this segment is expected with rise in drug discovery as these chemicals are used to analyze newly developed chemical entities. The market for microbiological reagents was Rs. 750 million in 2009 with a CAGR of 20 per cent during the period 2006-09. Indian company Himedia Laboratories was dominating this segment, accounting for 60-70 per cent of the total market in 2006-09.
Bioscience reagents
Out of the various sub segments in the laboratory reagents market, the bioscience reagent market is the most diverse and is expected to see a lot of activity in the coming years. The market for bioscience reagents in India was estimated to be between Rs. 2000 and 2500 million. The market grew by approximately 20-25 per cent in revenue terms every year between 2006 and 2009. This market is driven mostly by imports and there are a large number of players in almost all sub segments. Many operate in India through distributors who reaches out to a large number of players and supply products across many segments. Some major distributors are Genetix, Imperial Biosciences, Hysel, Labmate, and Wipro Biomed. Key companies with a direct Indian presence include Sigma Aldrich, GE Healthcare (Amersham), Invitrogen, Bio-Rad Labs, Merck, Thermo Fisher, VWR, etc. Research institutes constitute the main demand segment in this market, accounting for 60 per cent of the market demand. Quality and availability holds the key in this segment. The key end users comprising research institutes, pharma/biotech R&D and biopharmaceutical producers are very time conscious due to the perishable nature of the reagents. This was confirmed by a recent Frost & Sullivan study which looked at the important product and service characteristics that customers expected from reagent vendors.
The bioscience reagents segment is growing in the lab reagents area and is expected to grow at a CAGR of 20-30 per cent over the next three to five years . Sub segments such as Nucleic Acid isolation reagents, Polymerase Chain Reaction (PCR) reagents, Electrophoresis reagents, etc, are expected to continue growing at a CAGR of 25-30 per cent. The consumption of PCR reagents is increasing rapidly due to quantitative PCR gradually becoming the preferred research and diagnostic tool.
Emerging areas
Stem cell research is an area that is seeing considerable growth in India. Currently there are close to 60 projects in stem cell research that are being supported by various government agencies, mainly the Department of Biotechnology(DBT) and the Indian Council for Medical Research (ICMR). Over 35 research institutes, hospitals and private companies are involved in stem cell research, covering areas from basic stem cell biology to regenerative stem cell therapy. The market for stem cell research reagents is expected to see robust growth at around 30 per cent over the next five years due to continuing encouragement from the Government of India and also increasing interest of private companies to tap into the regenerative therapy market. Other areas that are expected to see increased interest are in the field of pathway analysis and Ribo Nucliec Acid (RNA) interference. Considerable research is being carried out in this area in India with increased funding expected. Major research areas are Alzheimer’s, Parkinson’s, cancer and diabetes and other studies on cardiovascular diseases, virology, and immunology. Studies on kinases and cellmediated pathways are also increasing. Products such as antibodies, enzymes, inhibitors, substrates, assay kits, apoptosis detection kits etc. are included this segment.
This market is expected to grow by approximately 25 per cent in revenue terms over the next three to five years.
A number of companies are viewing India as an attractive destination to set up their biological services facilities. Some of these companies are looking at setting up labs offering high-end services such as genomic, proteomics testing services to cater to the increasing amount of biological focused research work that is happening in academia and industry. There are currently a few companies in India that are offering this solution.
A bio safety service is another segment that is expected to see significant growth in India. Currently there are no companies in India offering high-end service that is targeted at biopharmaceutical companies. Currently Indian vaccine and biopharmaceutical companies need to send their samples abroad for viral load clearance, Deoxy Nucliec Acid (DNA) clearance, host protein clearance etc. Companies spend close to Rs. 10 million on cell line characterization of their master cell banks. With increasing number of companies planning to enter the highly specialized area of biosimilars and monoclonal antibodies, the need for viral clearance, Transmissible Spongiform Encephalopathies (TSE) clearance, and other high-end biosafety services is expected to increase. This, in turn is going to lead to increasing demand for reagents and associated instruments. The market for biosafety service in India is expected to grow at 15-20 per cent over the next couple of years.
Over the next five years, the contribution of the private sector to the market is expected to grow with increasing emphasis and encouragement given to indigenous R&D efforts. Pharma/biotech R&D spending has been the single biggest driver of the laboratory chemical and equipment market and the impact of this driver is expected to increase over the years. We are already seeing this with the current budget proposing to increase the weighted tax deduction on in-house R&D from 150 to 200 per cent, thus encouraging pharma biotech companies to increase spending on purchase of analytical instruments and chemicals.
-The author is an industry analyst, Healthcare Practice, Frost & Sullivan .
(For more information, contact Anish Charles e-mail – anishc@frost.com