Subir Roy: Biotechnology starts to sprint

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The Indian biotechnology industry, not unlike its counterparts in the developed economies, has looked "promising" for what has appeared to be inordinately long. This had created the feeling that a takeoff was nowhere round the corner. But if being able to promise a steady compound annual growth rate of 30-40 per cent is an indication that a nascent industry has gone "critical", then biotechnology can qualify.

In two years (2005-07) the industry has virtually doubled in size to reach $2 billion and, what is more important, nobody is anticipating a letup in this pace. Hence the confidence to look forward to a $5 billion benchmark by 2009-10. But domestic size is not all. China's software industry is several times India's in size but it is the Indian industry that is globally seen to have not just arrived but considered likely to beat the competition for some time to come.

In the last couple of years the biotechnology industry has acquired both depth and width, thus indicating that it is emerging as a serious player in the eyes of global industry watchers. The first change to be highlighted is getting somewhere from nowhere in agri-biotechnology. China was earlier perceived to be way ahead of India in this segment but India has now overtaken China in acreage under Bt cotton. This does not mean all the capabilities are there. Far from it. What has been demonstrated is the enormous business potential, which is likely to encourage both entrepreneurs and investors to look at the segment.

Expectedly, a Bangalore-based firm, Metahelix Life Sciences, is considered one of the most promising startups in the field. It has created and launched its own products (transgenic seeds for wheat and vegetables) and offers a range of services for contract R&D. Importantly, Metahelix has been able to obtain early stage funding from two sources (N S Raghavan Foundation and Kotak Private Equity), making it a demonstration model for aspiring players in agri-bio.

Equally significantly, the biotechnology industry has taken a leaf out of the Indian software book and seriously pursued service capabilities instead of being solely fixed on discovery and generics. R&D firms are now offering their services for many more parts of the discovery chain than was the case earlier. Consequently an operation like Syngene, the discovery services arm of Biocon, is booming, bringing in much-needed cash for Biocon as a whole to pursue its long-term ambitions in the discovery area. Services is what keeps the pot boiling and Biocon may well one day be able to claim success in what India's software giants have been unable to do""pursue both discovery and services under one umbrella.

The other notable area of progress is in vaccines. The pride of place in this goes to the Serum Institute of India, which in last year's (2005-06) Bio-Spectrum survey of the industry emerged as the top biotechnology firm. Other vaccine firms like Shantha Biotechnics and Bharat Bio have been able to turn the corner revenue-wise but with the exception of the leader, other players in the field are not scaling up the way they ought to. However, much has already been achieved. The Ernst & Young in its 2007 global survey of the industry notes that "the country has already achieved a leadership position in the global vaccine market; it accounts for about a third of global vaccine sales and is the largest producer of recombinant hepatitis B vaccine in the world".

Where progress has been slow and for good reason is in drug discovery. But players like Biocon are at it and psychologically prepared for a long haul. Most notably, it is developing a cancer cure through a joint venture with the Cuban Centre for Molecular Immunology. Perhaps the biggest setback for both Biocon and other ambitious Indian biotechnology players has been to bank on capturing a share of the developed countries' generics market. As in conventional pharma, prices have crashed, making it difficult to keep the top line at a respectable angle.

A lot has happened in the last couple of years but one cardinal reality has not changed. Indian biotechnology remains as starved of early stage funding as before. Global technology funds have not yet started supporting Indian startups. Innovation startups are being launched, often by returnees from the west, in both IT and biotechnology, but it is the former that is able to get the early stage funding till now.

Indian funds like ICICI Ventures, APIDC, the N S Raghavan Foundation and Kotak Private Equity are stepping in but it is still small beer. Avasthagen, which has been around for several years now, has accessed $24 million from European banks. Shantha Biotechnics has been acquired by French vaccine maker Merieux Alliance. But such examples of cash infusion are few and far between.

Nitin Deshmukh, a key figure in the industry body ABLE, who through Kotak Private Equity has funded three life sciences ventures, agrees that a "primary agenda is to increase seed level funding. India has the cost advantage across the sector and we have skilled resources to develop and manufacture anything. The large domestic market in agri bio and therapeutics is waiting to be accessed. But a biotechnology momentum in the stock market is yet to come".

Government funding remains largely confined to public sector laboratories and through small efforts like those via NIMITLI, the Technology Development Board and very soon the department of biotechnology's own Small Business Innovation Research Initiative. But government support for biotechnology ventures in India remains among the lowest in Asia. Despite this, India is seen to be behind only Japan and Korea. Says N Suresh, editor of the Bio-Spectrum group, which puts together the annual industry data, "It is in the nature of the industry to have a long gestation period, but at least we have an industry to speak of."

subir.roy@bsmail.in