In an environment of heightened competition and changing regulatory and intellectual property (IP) regimes, the biotech industry in India continues to transform itself. Government initiatives are helping bridge gaps, while Indian companies are competing aggressively in critical competitive niches - reinventing themselves through research and development (R&D), acquisitions and alliances with companies around the world. Indian firms are developing their own brands of recombinant products, which are increasing market share and rivaling leading global brands in quality.
Government support
The policymakers in India are responding to the industry's demand for a simplified regulatory framework through critical reforms. With the amendment of the Indian Patent Act in 2005, stronger IP protection is spurring innovation. This legislative change allows for patenting pharmaceutical products for the first time. The previous regime allowed for patenting the process used to make a product, effectively allowing companies to legally produce patented products as long as they found an alternative production process. Conglomerates and pharma companies are diversifying into biotech, while the established players are committed to robust expansion.
In April 2006, the draft National Biotechnology Development Strategy was released for comments. Based on input from key constituents and relevant ministries and departments, a final cabinet note has been prepared and awaits final approval. The draft strategy seeks to promote innovation in small and medium biotech companies. It calls for establishing a single National Biotechnology Regulatory Authority and providing a faster and more efficient clearance for all biotech products. The strategy proposes exempting all biotechnology segments from compulsory licensing requirements and allowing expedited foreign direct investment up to 100 percent using the 'automatic route'. It also suggests continuing all existing biotech fiscal incentives through 2010.
The draft strategy also offers increased incentives for commercializing scientific research - often critical for spurring technology transfer. A key proposed clause is that for all publicly funded projects, one-third of the value of the patent would go to the scientist who created the IP, one-third would go back for funding R&D and one-third to the institution that created the project. The Department of Biotechnology in India has announced support for setting up numerous biotech parks, five of which are already being established. These parks are intended to spawn clusters by assembling companies, universities and R&D institutes in one location. The finance minister has proposed concessions for incubate-entrepreneurs to strengthen entrepreneurial R&D.
The Indian government had conceptualized Special Economic Zones (SEZs) as early as 2000. But the absence of supportive legislation deterred the flow of money into these zones. However, with the introduction of SEZ Act and the country's first SEZ - Serum Bio Pharma Park - the situation has changed in India in February 2006. Other SEZs given final clearance include projects by Biocon and Jubilant Organosys.
Access to capital
Venture capital (VC) is in a nascent stage in India. A handful of prominent VC firms, including ICICI and Morgan Stanley, are fairly active, but most VCs are unwilling to invest in biotech R&D. Instead, they prefer companies whose products and markets are clearly identified or who focus on funding the commercialization of techniques already developed.
While access to venture capital has been challenging, Indian biotechnology firms have increased options through government funding.
The Department of Biotechnology is poised to announce its first investment under its Small Business Innovation Research Initiative (SBIRI). The proposed investment is designed to fund early stage, pre-proof-of-concept research. The Indian government also has earmarked funds for the industry through soft loans from the Technology Development Board. State governments, particularly Maharashtra, Gujarat, Andhra Pradesh and Karnataka have also earmarked funds for developing biotechnology, both for R&D and commercial ventures.
The Gujarat Biotech Venture Fund (GBVF), a 12-year close-end fund with a target of Rs 500 million (US $11.1 million), has received fund commitments to invest in startups as well as early-stage and growth companies in biopharma, agricultural biotech, contract research and industrial biotechnology. GBVF is managed by GVFL Ltd. (formerly Gujarat Venture Finance Ltd). In September 2006, GVFL announced that it is providing early stage funding of Rs 20 million (US $444,000) to Ahmedabad-based Celestial Biologicals. Global financial institutions are looking at the Indian biotech industry with renewed vigor - due in part to the better protection of patents under the amended 2005 Indian Patent Act.
The International Finance Corporation, the private-sector arm of the World Bank Group, committed equity of up to US $4 million to Andhra Pradesh Industrial Development Corporation (APIDC) Biotechnology Fund. In August 2006, biotech firm Avestha Gengraine raised €20 million (US $24 million) from European banks to fund its expansion plans and pipeline.
Key competitive niches
Vaccines & recombinant therapeutics: With its highly skilled research scientists, large institutional buyers and low cost of operations, India is an ideal location for vaccine development. The country has already achieved a leadership position in the global vaccines market. The country's vaccines market accounts for about a third of global vaccine sales and is the largest producer of recombinant hepatitis B vaccine in the world. India also is well positioned to seize emerging market opportunities in the global recombinant therapeutics market. The Department of Biotechnology estimates the Indian market for recombinant therapeutics products at US $90 million with an annual growth rate of 30 per cent.
India's presence in recombinant biologics dates back to 1997, when Hyderabad-based Shantha Biotechnics launched shanvac-B, an indigenously developed hepatitis B vaccine. This was followed by a spate of launches by companies like Bharat Biotech, Biocon, Biological E. Limited, Cadila, Dr. Reddy's Labs, Intas Pharmaceuticals, Panacea Biotec, Serum Institute and Wockhardt, who reinvented a market that had previously been dominated by global majors.
The Indian vaccines market was traditionally marked by damaging price competition and increasing market fragmentation. However, with initiatives by the Indian government and organizations like WHO and UNICEF, players have gradually shifted focus to global markets. These organizations have engaged companies such as Serum Institute of India, Panacea Biotec, and Shantha Biotechnics, as pre qualified vaccine manufacturers. They also procured vaccines from these companies at highly competitive prices.
New vaccines are being developed in close cooperation with premier research institutes. Bharat Biotech has partnered with US-based Novavax to develop an avian influenza vaccine. The company has also aligned with Acambis for a vaccine against Japanese encephalitis. Serum Institute of India, supplier of vaccines to over 137 countries around the world, is partnering with Chiron on a meningitis vaccine, the Gates Foundation and PATH for accessing testing technology for a pneumococcal vaccine, ICMR and WHO for an improved delivery system for an aerosol measles vaccine and John Hopkins University and ICMR for Hib vaccine development.
Indian Immunologicals is collaborating with the Indian Institute of Science to develop a DNA vaccine for rabies, while Shantha Biotechnics is developing a cholera and typhoid vaccine in cooperation with International Vaccine Institute of Korea and a rotavirus vaccine in conjunction with the US National Institutes of Health (NIH).
Stem cell research: Stem cell research continues to be an area of aggressive investment. The country's Department of Biotechnology, under the Ministry of Science and Technology and Indian Council, has jointly formulated draft guidelines for stem cell research, classifying different activities as 'permissible' (e.g., adult and umbilical cord blood stem cell research), 'restricted' (embryonic stem cell research) and 'prohibited' (reproductive cloning and the introduction of animal embryos in humans).
The Center for Cellular and Molecular Biology (CCMB) has made rapid strides. CCMB has a collaborative arrangement with the Deccan Medical College for liver stem cell research and is partnering with the Japanese Nichi-in Centre for regenerative medicine in human trials using stem cells in end-stage liver failure patients. The CCMB has also worked with the L.V. Prasad Eye Institute to grow corneal limbal cells to help repair damaged corneal tissue and restore vision. The All-India Institute for Medical Sciences (AIIMS) has made progress in therapeutic stem cell research work, using bone marrow mononuclear cells in clinical trials with about 40 patients. Reliance Life Sciences is investing in an animal house to conduct regulatory toxicology and preclinical efficacy studies for cell-based therapies. Stem cell banking firm Asia Cryo-Cell expects to start massive clinical trials at its stem cell transplant center in Chennai using technologies licensed from Japanese and US biotech firms. Chennai-based Life Cell, which currently operates 26 stem cell transplant centers throughout India, is opening an additional five centers in Spring 2007.
Bioinformatics: India's proven strengths in computer science and software, along with a large pool of trained professionals in life sciences, have created a prosperous bioinformatics segment. With the diversity of its human gene pool, the country is well positioned to play a leading role in genome analysis. The Institute of Genomics and Integrative Biology (IGIB) in New Delhi is leveraging India's diverse population to develop a database of genetic profiles. Global biotechnology companies could increasingly outsource services to India's bioinformatics segment, as well as source specialized software tools and databases.
Alliances
In 2006, Indian companies continued to use alliances as a strategy to increase their global competitiveness. In February 2007, Reliance Life Sciences acquired UK-based GeneMedix - the first-ever overseas acquisition of a listed biopharmaceutical company by an Indian company. For Reliance, the life sciences arm of India's largest conglomerate, the acquisition provides an opportunity to enter the European market, expand its growing portfolio of therapeutic proteins under development with a complementary portfolio from GeneMedix, and leverage the UK company's manufacturing facilities.
In recognition of the bio-manufacturing prowess of Indian companies, French vaccine maker Merieux Alliance acquired a 60 per cent stake in the Hyderabad-based Shantha Biotechnics in November 2006. Shantha was India's first biopharmaceuticals company to develop, manufacture and market a recombinant hepatitis B vaccine.
The acquisition boosts Merieux's presence in Asia, a key market for vaccines for infectious diseases. It also hark back to 60 per cent acquisitions of US biotech companies such as Chiron and Genentech by European pharmas.
Also, in November 2006, the Hyderabad-based Ocimum Biosolutions acquired the BioMolecules synthesis business division of Netherlands' Isogen Life Science. The acquisition could give Ocimum, a provider of laboratory information management systems, bioinformatics solutions, microarrays and contract research, an opportunity to become a global player.
Indian companies are entering into co-development alliances with global companies, often sharing marketing rights. For instance, Biocon co-developed Biomab-Egfr, a monoclonal antibody-based drug for certain cancers, through a joint venture with Cuban Centre of Molecular Immunology (CIMAB). Biocon holds the marketing rights in India, while CIMAB has a licensing tie-up with another company for US, European and Japanese markets.
Outlook
Despite the biotechnology industry's rapid emergence in India, critical gaps remain. Venture capital has been a challenge, while new government funding initiatives will help and 'smart money' will be critical. Vigilant enforcement of IP laws will continue to attract foreign investors, spur new product development and create a culture of innovation - one that moves the industry from an outsourcing service role to a robust R&D hub. To date, much of the biotech research has been conducted by government institutes in partnership with the private sector. The country will need to incorporate biotechnology into educational curriculum and accelerate the pace of integration between academic and commercial science.
India also has much in its favor. Low operational costs, a strong science base, cost effective technologies, booming national economy, growing demand for biotechnology products, one of the largest agricultural sectors in the world and proactive support from the government are some of the factors that is expected to propel the industry forward. Indian biotechnology companies are showing tremendous creativity and nimbleness, as they focus on strategic niches, enter alliances and face the future with increased confidence and competitiveness.
(Courtesy: Beyond Borders: The Global Biotechnology Report 2007 - Ernest & Young)