Biotech attracts foreign funds, firms

With India updating its patents law, the rules of the game have changed for Indian biotechnology companies. They are repositioning themselves for increased competition and emphasis on new niches. Simultaneously, global investment in the sector is pouring in, as also partnering of a higher order.

With the patent regime coming into force, domestic and international companies, most of which have set up their base in India, are eagerly conducting research and development activities in the country, said "The Global Biotechnology Report 2006" brought out by Ernst & Young.

According to the report, partnering has also evolved from manufacturing and research agreements to active participation in global initiatives in front-end technologies. India was among the ten nations that co-operated in a project to sequence the rice genome, successfully completed in 2005, the report added.

The proposal to create a National Biotechnology Regulatory Authority will encourage efficient and professional regulation. The draft National Biotechnology Development Strategy released recently has proposals to give an impetus to the industry, said Utkarsh Palnitkar, head, health sciences at Ernst & Young India.

The Indian biotech sector has attracted funds from international organisations like the World Bank and companies are now successfully tapping investors for cash, with some hedge funds also joining the momentum. All this reflects growing investor confidence in the sector. However, the high risk factor has deterred active flow of venture capital into the sector, he added.

The report says that finding suitable valuation benchmarks in the Indian biotech sector is often a challenge, and a changing regulatory and policy structure adds to the complexity of valuing companies.

"Seed capital to fund start-ups will be critical for the growth of India's biotech sector and government incentives or initiatives to spur seed capital hold the key to investments in this sector," said Palnitkar.

Foreign companies are increasingly recognising latent Indian biotech potential resulting in many outsourcing partnerships evolving into equity investments. Similarly, Indian companies are expanding and scaling up manufacturing capacity to become global players.