EXPORT-IMPORT BANK OF INDIA                        OCCASIONAL PAPER NO. 137   BIOTECHNOLOGY INDUSTRY IN INDIA:      OPPORT...
CONTENTS                                                                  Page No.List of Tables                          ...
List of TablesTable                            Title                                   Pg. No.No.1.      Global Biotechnol...
List of ExhibitsNo.                           Title                                       Pg. No.1.    Share of Population...
List of BoxesNo.                            Title                                    Pg. No.1.    DNA – Cornerstone of Bio...
EXECUTIVE SUMMARYINTRODUCTION                            participation, and most importantly,Biotechnology is a generic te...
inudstry posted loss in operations,         Science and Technology (DST) inalthough the loss in the year 2008          198...
crore), and BioInformatics (Rs. 220       25% to Rs 7,152 crore. Sub-crore). Recent trends in turnover of      segments li...
process, the Government has              been supporting the sector throughproposed the establishment of the        provis...
countries like Australia, Canada,       competition, and ever changingFinland, Germany, Sweden, USA,          regulations,...
years, especially due to its export    15 different vaccines. A BioSpectrumorientation. In 2008-09. exports       estimate...
Rs. 1340 crore). On a yearly basis,      organizations (CRO) and to somethe revenue increased at 16.5% -         extent cu...
they may no longer perceive as their       Hybrid Seedscore competence area, as also              The Indian population ha...
segment, have been growing at a           of 16.6% over the previous year.healthy pace since the last few           While ...
2008-09. Considering the rapid         are called as biosimilars.diversification     of     software    Biosimilars attemp...
“interchangeable” biosimilars,            convergence of nanotechnologydefined as a product that can be          and biote...
world, which could potentially          hundreds of stem cell lines aroundtransfigure treatment of diseases in    the worl...
India’s ranking is 132 out of a total   plays a crucial role in ensuring theof 153 countries, and also the          culmin...
biotechnology industry will be to      Biosecuritywork and liaise widely with the        Biosecurity is another challengec...
Patenting of Micro-organisms           by various authorities providingAnother associated challenge to the    numerous spe...
to investing in biotechnology            solutions in drug discovery andprojects, especially in their            validatio...
commercial        trends        and       manpower. India has already madeopportunities. Integration of             its ma...
programmes with attractive               concentrate their business modelscompensation package in order to         in cove...
standards for the Indian contract       Emerging Biosimilar Marketresearch firms, but will also help to   Biotechnology in...
proteins and peptide therapeutics        the economic, entrepreneurial andidentified in the US as potential        social ...
environmental impacts of green          industry. With a huge base ofhouse gas emissions, and limiting       talented, ski...
1. INTRODUCTION    Biotechnology is a generic term       industry has assumed increasingthat encompasses a wide spectrum  ...
Box 1:                DNA – CORNERSTONE OF BIOTECHNOLOGY DNA, or deoxyribonucleic acid, is the hereditary material in huma...
and critical medium to help gear the       expected to feed India’s burgeoningcountry to face such challenging           p...
compete with foreign firms and this      growth in this industry is inevitable.has enhanced innovation. Western         Th...
Box 2:                      RECOMBINANT DNA TECHNOLOGY     Recombinant DNA is the foundation of modern biotechnology. The ...
2. GLOBAL BIOTECH INDUSTRY    The 21st century is witnessing       entity, has the largest number ofconsolidation and expa...
Exhibit 2:     TOP BIOTECHNOLOGY NATIONS, 2008 (BY NUMBER OF FIRMS) SOURCE: Ernst & Young 2009, OECD Report 2009; JETRO; U...
Exhibit 3:    TREND IN FINANCING OF GLOBAL BIOTECH INDUSTRY (US$ BN) SOURCE: BioCentury, Nature Biotechnology Journal 2009...
expiry of many patented products in      economies, these companiesthe next couple of years, the            increasingly s...
talent pool. However, developed         sales, which was much lower ascountries (especially USA) still        compared to ...
Exhibit 5: SHARE OF REGIONS IN GLOBAL BIOTECHNOLOGY REVENUES - 2008                    (Public Company Data) SOURCE: Ernst...
Table 2:               REGION-WISE BIOTECHNOLOGY DATA, 2008 Units         Parameter             USA       Europe    Canada...
Analysis of R&D expenditure per       US$ 158,120. Interestingly, USA hademployee for the globe and across         the hig...
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  1. 1. EXPORT-IMPORT BANK OF INDIA OCCASIONAL PAPER NO. 137 BIOTECHNOLOGY INDUSTRY IN INDIA: OPPORTUNITIES FOR GROWTHEXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings ofresearch studies carried out in the Bank. The results of research studies can interestexporters, policy makers, industrialists, export promotion agencies as well asresearchers. However, views expressed do not necessarily reflect those of the Bank.While reasonable care has been taken to ensure authenticity of information and data,EXIM Bank accepts no responsibility for authenticity, accuracy or completeness of suchitems. © Export-Import Bank of India Published by Quest Publications January 2010
  2. 2. CONTENTS Page No.List of Tables 5List of Exhibits 7List of Boxes 9Executive Summary 111. Introduction 322. Global Biotech Industry 373. Biotechnology in India: Current Status 564. Indian Biotech Segments: Emerging Opportunities 825. Challenges & Strategies 111 Project Team: Mr. S. Prahalathan, General Manager, Research & Planning Group Mr. Ashish Kumar, Chief Manager, Research & Planning Group Mr. Rahul Mazumdar, Manager, Research & Planning Group 3
  3. 3. List of TablesTable Title Pg. No.No.1. Global Biotechnology Data for 2007 and 2008 422. Region-wise Biotechnology Data, 2008 433. Top 10 Biotech Products by Estimated Sales by 2014 484. Top Ten Biotech Drugs in 2008 495. Top Biotech Clusters in India - 2008-09 686. Top Biotech Cities in India - 2008-09 697. Biotech Parks in India 718. Understanding Key Segments in Biotechnology Industry 849. Select Key Firms in the Biopharma Business in India 8610. Recombinant Therapeutic Drugs Approved for Marketing In India 9011. Biotech Crops in Field Trial in India, 2008 9412. Area, Production and Productivity of Cotton in India (2002-08) 9713. Consumer Goods made with Industrial Biotech 10014. Comparison of Generics, Biosimilars and Biologics 10415. Key Biotech Products Losing Patent Protection in the US 122 5
  4. 4. List of ExhibitsNo. Title Pg. No.1. Share of Population above 65 Years in Select Countries (in%) 342. Top Biotechnology Nations, 2008 (By Number of Firms) 383. Trend in Financing of Global Biotech Industry (US$ Bn) 394. Number of Greenfield FDI Projects in Biotech Industry 40 in the World- 2004–20095. Share of Regions in Global Biotechnology Revenues - 2008 42 (Public Company Data)6. Share of Regions in Global Biotechnology 44 R&D Expenditure - 2008 (Public Company Data)7. R&D intensity (%) and R&D Expenses Per Employee 44 (US$ 000), 2008 (Public Company Data)8. Share of Regions in Global Biotechnology 45 Employment – 2008 (Public Company Data)9. Share of Regions in Terms of Number of Players 4610. Average Revenue Per Employee & Employee 47 Intensity Per Company11. Indian Biotech Industry in 2008-09 5612. Evolution of The Biotechnology Industry in India 5813. Key Advantages of Biotechnology Industry in India 5914. Indian Biotechnology Industry Structure 6315. Indian Biotechnology Industry – Revenue by Segments 6516. Domestic Business of Various Biotech Segments in India 6617. Export Business of Various Biotech Segments in India 6718. Top Biotech Regions in India - 2008-09 6819. Budgetary Allocations in The Five-year Plans in India (Rs. Crore) 7520. Growth of The Biotechnology Industry in India 8321. Key Segments in Indian Biotechnology Industry 8322. Biopharma Revenue By Segments in India 8523. Segmentwise Shares of Biopharma Industry (2008-09) in India 8624. UN Human Development Index Rank by Select Countries 11225. Trends in Pharma-Biotech M&A Deals 119 7
  5. 5. List of BoxesNo. Title Pg. No.1. DNA – Cornerstone of Biotechnology 332. Recombinant DNA Technology 363. Centers of Excellence in Biotechnology Sector in India 614. Biotechnology Patent Facilitating Cell 725. National Biotechnology Development Strategy 766. Biotechnology Institutional Infrastructre in India 77 (Existing and Proposed)7. “Builder” Scheme 788. India’s First Nanotech Park 1089. Umbilical Cord Blood Banking 10910. Ramalingaswami Fellowship - An Initiative for Reversing Brain Drain 11811. Exim Bank’s Support to Research & Development 121 9
  6. 6. EXECUTIVE SUMMARYINTRODUCTION participation, and most importantly,Biotechnology is a generic term that due to the proactive and enablingencompasses a wide spectrum of policies of the Government. In fact,scientific and technological the various policies of theapplications used across a variety Government over the last threeof sectors. Biotechnology therefore decades have enabled the Indianmust be seen in the context of a biotechnology industry to carve outcontinuum of other disciplines and a niche for itself in the globallytechnologies where its synchronized competitive environment andapplication drives new products and consolidate its position.technologies. In the present daycontext, the importance of the GLOBAL BIOTECH INDUSTRYbiotechnology sector has assumed The global biotech industry isincreasing significance. The sector predominantly skewed in favour oftoday possesses the ability to the developed countries, both inprovide crucial leads, which can terms of number of firms as alsohelp not only in curing critical in terms of revenues. USA tops thediseases but also reduce list with over 1750 companies,widespread hunger. With a strong followed by France (824), Southand consistent research and Korea (773) and Spain (659). India,development thrust, the sector is with 325 biotech companies inincreasingly being viewed as an 2008, was ranked 11th in the worldanswer to diseases, such as cancer and fourth in the Asia-Pacific regionand AIDS; as an instrument to after South Korea, Japan andenhance agricultural productivity; Australia.and in providing solutions to climate Notwithstanding the recentchange and promoting sustainable economic meltdown, the revenues ofdevelopment through use of the public biotechnology companiesbiofuels. across the world increased from The industry today has achieved US$ 84.7 bn in 2007 to US$ 89.6 bna global status through firm-level in 2008, an increase of 5.7%. In spitestrategies, active industry-level of this increase in revenues, the 11
  7. 7. inudstry posted loss in operations, Science and Technology (DST) inalthough the loss in the year 2008 1982. The NBTB acted as an apexdeclined from US$ 2.6 billion in 2007 body, which was given the task ofto US$ 1.4 billion in 2008. The R&D identifying priority areas andexpenditure in the biotech industry evolving a long-term plan for theregistered a marginal decline of 0.3% development of biotechnology. Fourin 2008, reflecting the overall years later in 1986, the NBTB wasrecessionary situation prevailing in upgraded to a full-fledgedthe world economy. The total Department of Biotechnologyemployees engaged in the public (DBT). This paved the way forbiotechnology companies also furthering the growth ofexhibited similar trends registering a biotechnology in the country.marginal decline of 0.5% in 2008, toreach a little over 2 million. The global The progress for biotechnologyrevenues per employee in the industry in India has been possiblebiotech industry were to the tune of due to the inherent advantages thatUS$ 0.44 million, while the global the country has, including diverseemployee intensity per company in flora and fauna, large gene pool,the biotech industry was at 42.5 temperate climate, quality manpoweremployees. In the year 2008, there and low-operational costs. Further,were more than 4700 companies the proactive policies and measuresoperating in biotechnology industry taken by the Government of Indiaacross the globe, with most of them and its agencies, have allowed the(83%) controlled by private entities. industry to capitalize upon such advantages. Today, biotechnology isBIOTECHNOLOGY IN INDIA: being promoted in the countryCURRENT STATUS keeping in view its enormousThe Indian Biotechnology industry potential to improve agriculture, food,has been evolving over three health, environment and energydecades. The milestones of the requirements of the population.evolution of biotech industry in Indiabegan in 1978, in Bangalore, when In terms of market dynamics, thethe country’s first biotech company Indian biotech sector had a healthyBiocon was established for growth in 2008-09 with its revenuesproducing industrial enzymes. The reaching Rs. 12137 crore. WithinGovernment provided a major this, BioPharma contributedthrust to the sector with the Rs. 7883 crore, followed byestablishment of the National BioServices (Rs. 2062 crore),Biotechnology Board (NBTB) under BioAgriculture (Rs. 1494 crore),the aegis of the Department of BioIndustrial segment (Rs. 47812
  8. 8. crore), and BioInformatics (Rs. 220 25% to Rs 7,152 crore. Sub-crore). Recent trends in turnover of segments like BioPharma andthe industry indicate that the Indian BioServices have had a majority ofbiotechnology industry recorded a their revenues coming from exports,CAGR of 31.5% during the period with export revenue constituting2001-02 to 2008-09, increasing from around 62% and 95%, respectively,Rs.2345 crore to Rs. 12137 crore in these sub-segments during 2008-during the period. The domestic 09. In fact, these two segmentsbiotechnology market clocked constitute over 95% of the totalrevenues of Rs 4,985 crore in 2008- biotech exports from India.09, registering a 10% growth as BioInformatics (2.37%), BioIndustrialcompared to the previous year, and (1.24%), and BioAgri (0.89)% areaccounting for around 41% of marginal contributors to overallrevenues generated in the industry. export of indian biotech industry.As regards segment-wise data, The Indian biotechnologyfor the year 2008-09, industry is spread across manyBioPharmaceutical sector accounted states in the country. These statesfor the largest chunk of the biotech have unveiled state-specific biotechindustry, garnering a share of 65% policies and have established biotechin total revenues, with vaccines being parks to attract investment in thisthe largest contributor within the industry. These parks have emergedBioPharmaceutical segment. as a focal point of some of theBioServices (17%) and BioAgri leading biotech clusters such as(12.3%) are other major sub- Genome Valley in Hyderabad andsegments of Indian biotech industry. Hinjewadi in Pune. The respectiveSegments like BioIndustrial and government policies in these statesBioInformatics garnered a share of and scientific ambiences have also3.9% and 1.8%, respectively of the been responsible for the growth oftotal revenue in 2008-09. bioclusters.Interestingly, the share of the various Government of India on its partsegments of the biotechnology has initiated certain far-reachingindustry remained almost the same legislations to promote the growth ofwith minor changes in 2008-09, as the biotechnology industry in thecompared to 2007-08. country. In India, there are The Indian biotech industry is involvement of several organisationslargely export-driven accounting for regulating the development of60 % of the total revenues in 2008- biotechnology, which has often09. In rupee terms, the resulted in overlap of functions. Inexports business went up by almost order to streamline the regulatory 13
  9. 9. process, the Government has been supporting the sector throughproposed the establishment of the provision of funds. WhileNational Biotechnology Regulatory Government funding to the ScienceAuthority (NBRA), to provide a & Technology sector increasedconsistent mechanism for regulatory nearly three times from the Tenthapproval. In July 2008, the DBT Five-Year Plan to the Eleventh Five-introduced the National Year Plan, support to the biotechBiotechnology Regulatory Act, which industry increased by as much aswould establish the NBRA as an four times during the same periodempowered body to approve with the budgetary allocationgenetically modified crops, food, shooting up from Rs. 25301.35recombinant biologics like DNA, crore in the Tenth Plan tovaccines, recombinant gene therapy Rs. 75304 crore in the Eleventhproducts, and recombinant and Plan. In fact, the Department oftransgenic plasma-derived products Biotechnology received almostsuch as clotting factors, veterinary 8.5% (Rs. 6389 cr) of the totalbiologics and industrial products. budgetary outlay of the Ministry of Science & Technology in the The enactment of New Patents Eleventh Plan. Though the DBTAct, 2005, brought a paradigm shift remains the main fundingin research and development in the organization for the Biotech sectorsector. Previously, India had a patent in India, there are other scientificprotection for process rather than the departments, which have alsoproduct, which brought about started contributing in this field.complacency without initiating mucheffort upon the development of new Research & Developmentproducts. The New Patents Act of Facilitation2005 enforces product patentsthereby inspiring firms and research The DBT and other organizationsinstitutions to undertake the have also proactively taken up ainnovation at their behest. Apart from number of initiatives in creatingthis, there are two bills, namely, DNA institutional infrastructure and aProfiling Bill, and The Protection and strong research base in the countryUtilization of Public Funded in areas relating to agriculture andIntellectual Property Bill, which are forestry, human health, animalon the anvil and are expected to be productivity, environmental safetypassed by the Parliament shortly. and industrial production. DBT has also been at theGovernment Funding forefront of maintaining manyIn addition to creating enabling international collaborations andpolicies, the Government has also introducing joint proposals with14
  10. 10. countries like Australia, Canada, competition, and ever changingFinland, Germany, Sweden, USA, regulations, the Indian biotechJapan and the EU. Under the industry has been successful inNational Bioresource Development creating a niche for itself in theBoard, a major initiative has been world.taken for the establishment of a The biotech industry in India canMicrobial Culture Collection– be broadly categorized under fiveBiological Research Centre at Pune. distinct segments - BioPharma,The Centre has provision to hold BioServices, BioAgriculture,more than 2,00,000 bacteria and BioIndustrial, and BioInformatics,fungi following international with each sub-segment contributingstandards, with the gradual to the growth of the biotechnologyupgradation of the facility as an industry.International Depository Authority onmicrobial collections. Under the BioPharmaceuticalsprogramme on prospecting of drugs BioPharmaceutical products arefrom microbial sources, about one therapeutic or preventativelakh bacterial isolates have been medicines that are derived fromcollected and screened. More than materials naturally present in livingtwo lakh extracts have been organisms using recombinant DNAprepared, and about 7,000 promising (rDNA) technology. The growth inhits obtained. BioPharmaceutical drugs and biologics has outperformed theINDIAN BIOTECH SEGMENTS: pharmaceutical market. This hasEMERGING OPPORTUNITIES been so largely due to two factorsThe biotechnology industry has a – firstly, the former addresses areasglobal presence today. While the of clinical needs that areindustry has its roots in the unmanageable with conventionaldeveloped country markets, therapeutics, including cancers andemerging countries like India have genetic diseases; and secondly,started playing an important role they are able to command aleveraging upon its USPs (Unique premium price. The totalSelling Proposition) through better BioPharma segment in Indiacoagulation of academic research registered a 14.3% growth in termsand commercial development, of total revenues in 2008-09 tocoupled with the synchronization of aggregate Rs. 7883 crore asscience and finance to emerge as against Rs. 6889 crore recorded ina strong contender in the global 2007-08. The segment has beenbiotech industry. Amidst an the single largest contributor to theenvironment of continuing cut-throat Indian biotech industry for many 15
  11. 11. years, especially due to its export 15 different vaccines. A BioSpectrumorientation. In 2008-09. exports estimate put the size of Indianaccounted for 62% of the vaccine sub-segment at Rs 3,587BioPharma revenue, while domestic crore (US$ 737 million) in 2009, andsales accounted for the remaining is expected to grow at about 20-25%38%. With India having a relatively over the next few years; whilewell developed pharmaceutical globally, the vaccine sub-segment issector, there are synergies that valued at US$ 20.6 billion and isexist between the two sectors. The growing faster than the pharmasuccess strategies adopted by the industry. The world market size ofIndian pharmaceutical sector combination vaccine is projected totherefore needs to be suitably cross US$ 2 billion mark in 2013,leveraged by the Indian biotech which implies an annualplayers in order to realize the compounded growth of over 18%.untapped business potential. As far as the therapeutic sub- The BioPharma sector can be segment is concerned, it contributedfurther classified into three broad around 37% of the total revenuessub-segments, viz. vaccines, generated from BioPharma in 2008-therapeutics and diagnostics. The 09. During 2008-09, the Indianvaccines sub-segment is the prime therapeutics market recorded a 19%contributor, accounting for close to growth to record revenues worth Rs.46% of the total revenues arising 2956 crore. Human insulin was thefrom the BioPharma sector in 2008- largest contributor to the therapeutics09. The vaccines segment has also market, a reflection of India’s largeshown a healthy growth trends diabetic population. With diabetesrecording a CAGR of 15.3% during now ranked as the fifth leadingthe period 2005-06 to 2008-09, disease causing death acrossincreasing from Rs. 2341 crore to developed country markets, andRs. 3587 crore. On a yearly basis, forecast to grow, the market forthe revenue in 2008-09 increased at once-a-day drug delivery and non-10.2%, from Rs.3250 crore in 2007- invasive drug delivery systems08. continues to offer significant potential for expansion. India is predicted to The recent upsurge in demand lead the way with 73.5 million peoplefor vaccines, both in domestic and expected to have diabetes by 2025.international markets, is importantboth from public health and The diagnostics businesseconomic perspectives. According to accounted for close to 17% of theDepartment of Biotechnology, total BioPharma business in 2008-Government of India, there are 09, recording a CAGR of aroundaround 15 companies involved in 14% during the period 2005-2009marketing over 50 brands for (from Rs. 905 crore to16
  12. 12. Rs. 1340 crore). On a yearly basis, organizations (CRO) and to somethe revenue increased at 16.5% - extent custom manufacturing. Thefrom Rs.1150 crore in 2007-08. BioServices sector, whichHowever, this increase has been accounted for about 17% to thelower as compared to the growth in total biotechnology industry’sthe previous year, which was around revenues, and recorded a growth21%. It is estimated that of 31% in 2008-09, over theapproximately 60-70% of medical previous year. Exports dominatedtreatments in India are based on the BioServices segmentlaboratory diagnostic tests. accounting for almost 95% of theDiagnostics revenue market total BioServices revenues ofincreased from Rs.905 crore in 2005- Rs. 2062 crore in 2008-09. In fact,06 to touch Rs.1340 crore in 2008- the BioServices segment09. contributed to over 27% of the total With increasing health exports from the biotechnologyconsciousness among the Indian industry. Even in this sub-segment,population and an increase in the country holds certainawareness of diseases such as advantages that could be suitablyAIDS, Hepatitis, coupled with the leveraged. According to a recent ATGovernment’s efforts to promote Kearney global survey, India iscommunity health, such as ranked third across all countriescompulsory testing by blood banks (after the USA and China) in termsfor AIDS, there exists enormous of its overall attractiveness as apotential for the diagnostic sub- clinical trial destination. India, withsegment. It is also important to note the availability of large scientificthat with a higher disposable income pool is well placed to cater to aand with a growing middle class significant part of this demand.population, the market for quality Of late, a new trend inmedical facilities are increasing in BioServices sub-segment is beingIndia. Hospitals and diagnostic observed, where large companiescentres across the country are outsource their clinicaltherefore concentrating on equipping manufacturing facilities whilethemselves with the best in class retaining commercial manufacturingmedical and diagnostic services. and control over cost of goods,This is likely to be another driver of quality, and on supply. On the othergrowth for this sub-segment. hand, it has also been observed that some specialized clinicalBioServices manufacturing organizations preferBioServices mainly include clinical to outsource the routine job ofresearch and contract research commercial manufacturing, which 17
  13. 13. they may no longer perceive as their Hybrid Seedscore competence area, as also The Indian population has alreadyoutsource the core business of crossed the 1 billion mark. Toresearch and development. As the provide food and nutritional securityBioServices business expands, for such a large population,many firms engaged in this segment including protection againstare offering services in areas like malnutrition, it is important thatdata management, clinical trials, site productivity levels are increasedmanagement, bio equivalence and through the use of right qualitybio availability studies, toxicology seeds, which have the capacity tostudies, apart from catering to produce more with lesser inputs. Inknowledge process outsourcing for this context, the seed industry haspharma industry. All these trendsoffer significant opportunities for the a critical role to play inIndian biotech companies. dissemination of latest agricultural technology to the farmers, andBioAgri making good quality seeds available to them. Adoption ofBioAgri contributed around 12% of genetically modified (GM) cropsthe total market value of would assure higher productivityBiotechnology in India after and nutritional security. Presently,BioPharma and BioServices, in GM plants are largely in use for2008-09, with a total revenue commercial agriculture andgeneration of Rs. 1494 crore, of predominantly linked with traits ofwhich domestic revenues one or two transgenics that fostersconstituted around 96%. The salinity and alkalinity resistance,BioAgri segment revenues drought resistance, herbicidewitnessed the second highest tolerance, insecticide resistance,growth rate after BioServicessegment, with over 24% growth in and resistance to microbial2008-09, over the previous year. diseases. With the success of BtThe domestic market, combined Cotton, the Government haswith a reasonable scientific realised the enormous potential ofinfrastructure in agriculture, rich bio- such technologies and has beendiversity and skilled human-capital, keen to put in place policies andmake India an important global regulations, which would promotebase for BioAgri research. The responsible crop biotechnology.surge in opportunities are expectedto improve agricultural productivity, Biopesticides and Biofertilisersespecially at a time when per capita The biopesticides and biofertilisersarable land and water resources sub-segments, though constitutingare diminishing. a modest proportion of the BioAgri18
  14. 14. segment, have been growing at a of 16.6% over the previous year.healthy pace since the last few While almost 81% of the revenueyears. The Government of India in the year 2008-09 was generatedhas initiated a number of from the domestic market, this subprogrammes to control major segment contributed around 1% ofweeds and pest-diseases of the total biotechnology exports fromimportant crops, vegetables and the country during the year.plants to increase their productivity Indian BioIndustrial companiesthrough various biocontrol agents. produce various enzymes, whichA number of universities and include amylases, proteases,institutes have been working in the cellulases, xylanases, gluco-area of biofertilisers. The agriculture amylases, pectinases, papains,sector in India has been supported bromelain and catalases amongby public research programmes in others, with around 45% of totalvarietal development, yield enzyme production catering to theimprovement and disease pharmaceutical industry. It is worthmanagement. Several international noting that the product range andcompanies have set up research services offered by the firms in thisand development facilities in India sub-segment are growing rapidly asfor developing hybrid seeds and the use of enzymes is gainingother biotechnology-based widespread acceptance. Firms todayactivities. are increasingly looking at producing various types of industrial enzymesBioIndustrial using natural methods of production,The BioIndustrial segment from plants and vegetable origin, andpredominantly consists of enzyme fermentation.manufacturing and marketingcompanies. These enzymes are BioInformaticsused in manufacturing segments The share of BioInformatics in totalsuch as detergents, textiles, food, Biotechnology sector is aroundleather, paper and pharmaceuticals. 1.8% in 2008-09. This sub segmentAlthough the use of enzymes is still made a modest progress,at a relatively low level, interest in increasing from Rs. 75 crore inthe benefits of using enzymatic 2002-03 to Rs. 220 crore in 2008-solutions in India has been showing 09, thereby growing at a CAGR ofan upward trend. The BioIndustrial 19.64%. The sector is largelysegment is estimated to have export driven with almost 77% ofgarnered revenues to the tune of the total revenues coming fromRs. 478 crore in 2008-09, a growth offshore markets in the year 19
  15. 15. 2008-09. Considering the rapid are called as biosimilars.diversification of software Biosimilars attempt to copy theapplications and the continuous process, which leads to thequest for growth in the IT industry, production of the original innovativeBioInformatics segment presents a biotechnological medicine.prospective area for IT application. As regulatory obstacles toBioInformatics segment uses biosimilars development iscomputer software tools for increasingly being resolved, adatabase creation, data growing number of opportunities aremanagement, data warehousing, being created for generic companiesdata mining, and global in the BioPharmaceutical market.communication network. The Indian According to IMS data, the worldfirms have been strategically BioPharmaceutical market wasdevising tools so as to cater to the valued at US$ 85.9 billion in 2007.world requirements. Some of the Conservative projections estimatefirms based in India, such as that sales of BioPharmaceuticalStrand Life Sciences, Molecular products would exceed US$135Connections, Mascon Life Sciences billion by 2011. With some of theand Helix, have created indigenous earliest BioPharmaceutical productstools for various components having already lost patent protection,across the drug discovery value the originators of BioPharmaceuticalchain that are being used all over products are facing intensethe world. Strand Life Sciences has competition from genericsdevised a software program called developers. In response, originators‘Avadis’ for which it has received are resorting to a range of defensiveawards from organizations like Red tactics, including the reformulation ofHerring, Frost & Sullivan, and existing products to improve efficacy,World Economic Forum. “Avadis” isan integrated decision analytics the implementation of more efficientprogram that deals with data mining delivery systems, and the pursuit ofand analytics needs of the various high-level intellectual property (IP)life sciences sector. battles. The US, one of the largestEmerging Niche Areas in biosimilar markets in the world,Biotechnology recently introduced the Waxman Biosimilars Bill in March 2009, whichBiosimilars provides the approval of biosimilarThe expiry of patent protection and products that are defined as “noregulatory data protection for clinically meaningful differencescertain biotechnological medicines between the biological product andhas led to the development of what the reference product”, as well as20
  16. 16. “interchangeable” biosimilars, convergence of nanotechnologydefined as a product that can be and biotechnology. From an Indian“switched one or more times” with the context, nanotechnology is at a veryreference product “without an nascent stage, but given theexpected increase in the risk of potential of the sector, it is expectedadverse events”. The Bill, upon to grow at a robust pace in thepassing into an Act is expected to coming years. Nanotechnology alsoprovide immense opportunities for has the potential to revolutionizeIndian firms, especially those that the Indian agriculture scenario. It ishave already ventured into the predicted that nanotechnology willBiosimilars space, and have filed transform the entire food industry,Abbreviated New Drug Applications changing the way food is produced,(ANDAs) in the US. With a few processed, packaged, transported,players in the Biosimilars space, thecompetition is expected to be and consumed. Several Indian firmscomparatively low and thereby acts and research institutes are workingas a great boost for biosimilar players on nanotechnology products forin the market. drug delivery, water filters, arsenic removal, reducing water and air According to Datamonitor, the pollution, antimicrobial coatings andIndian biosimilars market is projected river cleaning projects. Theto grow to more than US$ 2 billion Government on its part isby 2014 as key patent expires for proactively promoting variousdrugs such as epoetin alpha, programs under nanotechnologyfilgrastim, interferon beta 1a, initiative. A ‘Vision Group’ has beeninterferon alpha, human growth formed with members fromhormone (hGH), and insulin-glargine. While many of these drugs academia, industry and research, torepresent the low-hanging fruit of the develop a national nanotechnologybiologics world and are unlikely to policy. Government of India hasprovide the monetary gains of more announced an investment ofcomplex drugs, they do offer Rs. 1,000 crore through a missionmanufacturers the opportunity to on nanotechnology from 2006 toposition themselves within the 2011. The Government has alsobiosimilars sector in anticipation of announced a US$ 250 millionmore lucrative targets. programme to build three national institutes for nanoscience.NanotechnologyNanotechnology is considered Stem Cell Researchwidely as the most promising Stem cell research is being toutedtechnology of the 21 st century. as the next wave of biotechnologyRecent years have witnessed a not only in India but also across the 21
  17. 17. world, which could potentially hundreds of stem cell lines aroundtransfigure treatment of diseases in the world for US fund, and this isthe next couple of decades. expected to expand collaborationsAccording to a study by Frost & with Indian researchers, who haveSullivan, the global market for stem over the past decade, under fewercell therapy is projected to be restrictions, carried forward thisaround US$ 20 billion by 2010. initiative with their own funding.There are almost 180 prominentcompanies working on stem cell CHALLENGES & STRATEGIESresearch in the world, majority ofwhich are based in the US, followed Challengesby the EU, Israel, Thailand, Skill DevelopmentCanada, and Australia. The StemCell Research Forum India (SCRFI) In spite of mushrooming ofhas predicted India to have a educational institutions offering amarket size of about US$ 540 range of courses in biotechnology,million by 2010 with an annual the void between the needs of thegrowth rate of 15%. industry and skills taught at these institutions still remain, though the The potential of stem cell gap is being narrowed down. Mosttechnology to develop therapy for of these institutions have limitedmany untreatable diseases through ability to provide the rightcellular replacement or tissue pedagogy, or the requisiteengineering is being widely infrastructure. The challenge ofrecognized. Therapies using stem bridging the gap between thecells are giving hope to millions of needs of the industry and thepatients afflicted with chronic curricula taught at variousdiseases. Globally, stem cells are institutions needs to be addressedused to treat over 130 diseases, and by cohesive actions from theit is estimated that more than 500 Government, industry andclinical trials are being done to academia.develop therapies using stem cells. Indian companies are becoming Basic Education &an important part of this revolution, Health Systemhelping to treat patients with Amongst the most critical buildingdiseases ranging from eye problems blocks for biotechnologyto heart disorders. The Government development and its success, goodof India has supported more than 55 education and health systems areprogrammes on various aspects of very important. India has beenstem cell research. Apart from this, positioned low in terms of boththe new initiative by the US these measures as reflected by theadministration in 2009 frees up UN Human Development Index.22
  18. 18. India’s ranking is 132 out of a total plays a crucial role in ensuring theof 153 countries, and also the culmination of a concept into alowest as compared to other commercially viable product. Globalcompeting countries in this sector. financial crisis has affected thePart of this can be attributed to the funding prospects of biotechlow healthcare expenditure by the companies, as risk aversionGovernment. increased among venture capitalists, angel investors as alsoGovernment Health Expenditure financing institutions. These haveMost Governments in developing been further exacerbated by thecountries usually finance slow activity in the IPO market dueprogrammes that support child to anaemic stock market. Accordingimmunization against various to the Biotechnology Industrydiseases as part of the basic public Organization (BIO), prospects forhealth package. India too has such biotech IPOs are likely to remainimmunization programmes, but, due dim in the year 2009, on the heelsto relatively high birth rate and of a very weak base (the yearpopulation, the share of 2008), with amounts raised in 2008Government health budget in total through this instrument being onlyhealthcare expenditure is relatively US$ 116 million, as against US$low (25% in 2009). In comparison, 2.3 billion in 2007.other emerging countries like Brazil(47.9%), Russia (63.2%), China Ethical Issues in Genetic(40.7%) and South Africa (37.7%) Researchportray a better management of Biotechnology has been confrontingGovernment healthcare system. It the world with some ethical issues,may also be noted that as a which have raised numerouspercentage of the GDP, the total challenges with no definitehealth expenditure in India is only solutions. Genetic research and its3.6%, far below than that of other applications like geneticemerging economies. Thus, there engineering, manipulation, testing,is an urgent need to augment therapy, eugenics, selectivebudgetary allocation to the health abortion, GMOs, stem cellsector, particularly in improving research, and cloning, openedprimary health care facilities. significant ethical and consumer issues, including the potential risksFunding that may be adversely impactingThe inherent characteristics of the the environment. The issue ofbiotechnology makes the industry a genetically modified food appearshigh investment one with long to be of a particular concern. Agestation period. Thus, funding challenge for the Indian 23
  19. 19. biotechnology industry will be to Biosecuritywork and liaise widely with the Biosecurity is another challengecommunity and earn its confidence and there is a growing debate andand investors. Awareness may be discussions among the academicgenerated among the consumers and policy spheres with regard tothrough provision of detailed bioterrorism, biosafety, andinformation, ranging from the basics emergence and re-emergence ofof gene technology to details of the infectious diseases as concerns toregulatory processes. the society as a whole. The threats associated with misuse ofConcentration of IPRs biotechnology affect the growthIntellectual property rights (IPRs) prospects of this industry, whichare intended to promote research otherwise present potential benefitsand development by allowing for global populace at large,researchers to generate revenue to especially in area such as health,meet the development costs. food and environment.However, there are concerns thatthe current level of biotechnology Bio-hackingIPRs are concentrated mainly in the Biohackers are a group ofhands of the private sector. It is enthusiasts who are involved inreported that globally, few working with cells and genescompanies are responsible for the without any sound knowledge. Withvast majority of agri-biotech the fall in the cost of equipmentsresearch. These companies have capable of manipulating DNA, thefocused on crops and traits (such threat of growing number ofas herbicide resistance) that are biohackers is significant. The workhaving commercial significance, raises fears that people couldand thus, may not be willing to create a deadly microbe ontransfer it to others. Globally, purpose, just as computer hackersMergers & Acquisitions trends have unleashed crippling viruses oramong biotechnology companies hacking into various websites. Suchhave also been on similar lines, a scenario may lead to “bio-spam,encouraging the concentration of bio-spyware, bio-adware” and otherIPRs, which may affect the ability bio-nuisances. An unrestrictedof developing countries like India, biohackery scenario could put theto negotiate for access to health of the biohackers, theproprietary technologies at a community around them, and thereasonable price. This challenge environment, under unprecedentedstems largely from patents that risk, and poses significantconfer broad rights over GMOs and challenge that needs to be suitablyplant varieties. addressed.24
  20. 20. Patenting of Micro-organisms by various authorities providingAnother associated challenge to the numerous specialised sciencebiotech industry is patenting of degrees at the Masters’ level.micro-organisms and associated These institutions also provide anbiosafety requirements, as strict effective network of researchbiosafety norms have to be laboratories. Efforts should befollowed while handling micro- made to bring in a seamlessorganisms. The regulations for transfer of knowledge and peopleaccessing strains from a depository among these universities, institutes,have to be carefully worked out to and corporates for betterensure that these do not land into coordination, and to share theirwrong and/ or technically research-based information on anincompetent hands. India too needs ongoing basis. Corproates couldto bring in a patent law for have preferential access to theprotecting micro-organisms and intellectual property generated inrules for accessing strains from a such jointly funded projects.depository. In this context, the Another alternative could beDepartment of Biotechnology, encouraging public-fundedGovernment of India, has proposed successful R&D institutions toto build an internationally establish ‘not for profit’ companiesrecognized depository in the to facilitate collaborative work withcountry. It is hoped that following industry. There should be anthe establishment of the depository, industry-academia alliance whereina law in this regard would be the industry could have an activeenacted based on similar laws participation when it comes toprevailing in other countries. planning curriculum and methods of evaluation. Private firms may alsoStrategies share the responsibility to promote academic excellence by creatingPublic-Private Partnerships Chairs in Universities and furtherPublic-private partnership needs to strengthen the industry – academiabe encouraged and supported in relationship.areas that are vital to nationaldevelopment, from a scientific, Need for enhancing Ventureeconomic or social perspective. The Capital funding in Indiafocus needs to be on technology One of the biggest challenges forand product development. India has the Indian biotech industry isa wide network of universities, attracting investment throughdepartments and specialized venture capital mode. With theinstitutes that have been promoted corporate sector being risk averse 25
  21. 21. to investing in biotechnology solutions in drug discovery andprojects, especially in their validation based on genomics,gestation and early phases, the proteomics, pathway analysisneed of VC funding becomes (determining how toxic orcritical for the growth of the biotech radioactive substances reachindustry in India. Venture capital humans), and clinical trials onfirms typically source majority of humans. Drug discovery andtheir funding from large investment innovations in drug delivery,institutions such as pension funds especially in areas like diabetes,and financial institutions, who like cancer, and inflammatory ailmentsto invest long term only with could take the industry into greaterassurance of high returns. Thus, heights. Indian biotech industryventure capitalists make careful should also look forward to movinginvestment decisions, which leads up the value chain in terms ofto high risk aversion rates. Instead, geographies so that India is presentIndia may consider promoting in more premium markets.venture capital investment on thelines of Russian model. Russia has Enhancing Biotech Applicationsbeen boosting venture capital Modern research finds applicationsector from scratch, by seeding of biotechnology in variousfunds with Government support, industries, and thereby adds valuethrough the Russian Venture to the products and processes ofCompany (RVC). Israel has also such industries, includingadopted similar approach of state- agriculture, forestry, marine,backed venture capital model to environmental management, pestboost the investments in knowledge management, and management ofbased industry. human and animal healthcare. To capitalize on the potential benefitsStrategy to Move to a Higher and to ensure internationalValue Chain competitiveness, it is important toIndian biotechnology industry, over promote speedy and widespreadthe years, has developed a number diffusion of biotechnology to theof biotech products, but has been broader industrial community, whilefound to perform tremendously well maintaining its responsible andin the vaccine segment. The sustainable use. Industry initiativesplayers in this industry as well as and entrepreneurship commitmentsthe research institutions should are particularly essential in thisincreasingly focus upon moving up regard. The Government couldthe value chain by enhancing promote research-industry linkagesstrengths in new products and and facilitate market informationapplications, and by offering R&D including technological and26
  22. 22. commercial trends and manpower. India has already madeopportunities. Integration of its mark in scientific research in thebiotechnology with various world, with a large pool of scientificmanufacturing sectors could also manpower. The education systembe encouraged through better in India, with its wide network ofsynergy and coordination of universities providing qualityactivities among various science education has helpeddepartments / institutions, with the immensely in this regard. However,Department of Biotechnology, with the changing composition ofGovernment of India, serving as economic growth there is anfocal point. emerging trend of students not preferring science stream for careerLucrative Domestic Market opportunities. This may lead toThe domestic biotech market is shortage of qualified manpower inexpected to post robust growth with highly research oriented activitiesrising income levels, improving such as biotechnology. Thus, it isliving standards, growing medical important to devise policies thatinfrastructure, increasing health would attract more students to theinsurance penetration, enabling science stream. Many countriesregulatory framework and give both financial and fiscalinstitutional infrastructure, and the incentives in the form of grants andgrowing number of organized preferential loans, to encouragepharma-retail chains. For example, students to opt for science streams.in a country like India (which is A similar scheme could be thoughtoften referred to as the diabetic of, particularly for encouragingcapital of the world), it is certain to students to take up biotechnologyfind a market for products like as a subject of their specialisation.insulin. With more and more peopleleading a sedentary lifestyle, there Reversing Brain Drainmay be opportunities for the Indian Shortage of manpower due tobiotech industry to innovate brain-drain is another challengeproducts that cater to the demand faced by the Indian biotech industry.for controlling such chronic The expected shortage ofdiseases. scientists / skilled professionals in OECD countries may enhance theBiotech Skill Development brain-drain from India in the comingBiotechnology industry is highly years, unless suitable policyR&D intensive. In order to remain measures are taken to reverse theglobally competitive, the industry trend. There is an urgent need torequires a pool of highly skilled expand the current research 27
  23. 23. programmes with attractive concentrate their business modelscompensation package in order to in covering a part of the productattract world-class talent. In this development value chain. Biotechcontext, it may mentioned that firms are often not much engagedGovernment has initiated a in entire product development valueprogramme ‘Ramalingaswamy chain due to shortage of funds andFellowship’, aimed at bringing back necessary know-how.scientists of Indian origin working Pharmaceutical firms couldabroad in various fields of complement the biotech sectorbiotechnology, and who are through their knowledge anddesirous of pursuing R&D in Indian financial power. Also,institutions. It may be mentioned pharmaceutical firms, which requirethat China Academy of Sciences continuous innovation, could benefit(CAS) has established cooperating with biotech firms whoprogrammes, such as Specially provide new product concepts andHired Foreign Research Fellows, innovative technologies.and Young Foreign ScientistProject, through which the country Strengthening North-Southwould arrract over 600 Chinese Collaborationsscientists working abroad, annually; Many Indian firms use serviceseach returning scientist would contracts with foreign firms to fundreceive funding of around their operations, developUS$300,000 per annum. Corporate commercialization capabilities andentities too may get involved by access valuable internationalproviding adequate exposure to the technology and expertise. Servicesbudding talents through training and provided include R&D, clinical trialsplacements. This would also and manufacturing. Multinationalprovide the Indian biotechnology corporations are increasinglyindustry a tremendous manpower conducting clinical trials in India andadvantage over its competitors. rely on Indian contract research organizations to manage theseSymbiotic Relationship between trials. It will be vital for the IndianPharma and Biotech Sectors biotech firms to expand theirUse of organisms for the capabilities in clinical trialimprovement of medical processes management, and pay closeconstitutes one of the major attention, not only to good clinicalbusiness segments of the practice guidelines, but also tobiotechnology industry. This bioethical principles, providing aprovides significant opportunities for high level of care and protecting thepharmaceutical firms also. In rights of patients. This will not onlygeneral, biotech firms would facilitate achieving of global28
  24. 24. standards for the Indian contract Emerging Biosimilar Marketresearch firms, but will also help to Biotechnology industry in India hasbring in more foreign exchange a well-developed foundation with aearnings, through enhanced exports strong pharmaceutical andof services. Though the biosupplier sectors. The globalGovernment of India in this regard market for biosimilars is expectedhas taken a number of steps by to grow significantly in the next fewcollaborating with a number of years as several ‘blockbuster’ drugsinstitutions in various countriesabroad, a lot more needs to be lose patent protection. A recorddone in furthering this initiative. number of drug patents expire over the next few years, which shouldEncouragement to Innovative lead to stiff competition fromFunding Models generics and a drop in prices. Evaluate Pharma, an industryPharma / biotech firms could set consultancy, estimates that aboutup Special Purpose Vehicles half of the US$ 383 billion-worth of(SPVs) which could be contractedby the parent firms for product patented drugs to be sold in thedevelopment work in areas such as world in 2009 may lose patentspecialty generics, topicals, protection within five years. In 2010steroids, hormones, and alone, the industry is likely to bebiopharmaceuticals, which may put at risk with nearly 15% drop inhave high initial product its revenues from patented drugs.development costs, and which are Indian companies appear wellnon-infringing process, based on positioned to leverage upon theirregulatory compliances. Such cost-effective manufacturingfunding models may not stretch the capabilities to compete on a globalbalance sheets of the parent scale and garner some of thiscompanies, nor result in equity market.dilution. An agreed percentage of In the context of patent expiry onrevenues from the SPV funded bio-pharmaceuticals, it may be notedprojects could be returned back to that USA would emerge as one ofthe parent company, or funding the largest biosimilar markets afterbank, towards the investment. In approval of Waxman Biosimilar Bill,the case of institutional financing, providing opportunities for Indianonce the funding bank recovers its firms. Biosimilars is a term used toinvestment or IRR, the ownership assign a sense of similarity betweenof the products would flow back to the originator biologic and a genericthe company without any version. According to industrycomplications what so ever. sources, there are at least 75 29
  25. 25. proteins and peptide therapeutics the economic, entrepreneurial andidentified in the US as potential social fabric of the region.profitable targets for new products.Most of these were approved as New Leveraging InternationalDrug Applications (NDAs) to facilitate Partnershipsbiopharma companies to develop Biotechnology is globallybiosimilar products. It is expected recognized as a rapidly emerging,that stringent regulatory approval complex and far reachingwould be put in place to permit technology, and therefore a strongmarketing of biosimilar products at international partnership, both at thean affordable costs. levels of research institutions and at corporate front, is essential.Catalysing Coherence in International cooperation andClusters partnerships can be leveraged toCluster development is a key achieve global best practices in thestrategy to promote innovation, country’s science and technologicalaccelerate technology transfer and efforts for joint intellectual propertyfacilitate product development. generation, harmonization ofBiotechnology, being inter- regulatory processes, smooth crossdisciplinary in nature (encouraging border movement of biologicalscientific and engineering materials, and access to globalresearch), requires enabling markets for the country’s productsinfrastructure for promoting and and processes. Such an approachnurturing innovation for building would not only bring in bettersuccessful enterprises. The technical know-how, but would alsoclustering concept maximises help in enhancing India’s researchsynergy and efficiency of firms and development resulting inlocated in the cluster. Although this quicker and faster outcomes.approach has already been Efforts have already been taken atemerging in the country, it is the Government level to leverageimportant to ensure that such the institutional strengths across thestrategies deliver desired results countries. Such efforts should bethrough a coherent effort of all the enhanced with collaborationstakeholders. Existing biotech measures on continuous basis.clusters could also be examinedwith respect to any voids that could Biotechnology Usage inbe plugged to achieve the desired Biofuelsresults. Efforts could also be made Biotechnology could also be one ofto set up clusters around the the most effective and innovativeexisting institutions of excellence, tools to make sustainable use ofand to integrate them deeply into biofuel, reducing the adverse30
  26. 26. environmental impacts of green industry. With a huge base ofhouse gas emissions, and limiting talented, skilled and costthe diversion of land from food competitive manpower, and a well-crops to fuel crops. Biotechnology developed scientific infrastructure,could also be critical to increase India is poised to become a leadingland productivity both in fuel crops global player in biotechnology. Theand food crops, through plant vast population of India helps notscience, modern plant breeding only in creating significant domestictechniques and with state-of-the-art demand, but also provides biotechapplication of crop protection. Since research companies with a vastthe introduction of biotechnology in gene pool. The institutionalagriculture and food production in infrastructure in the country offersthe early-1990s, biotechnology has a strong foundation for thesebeen utilized to develop new tools strengths to get transformed intofor improving productivity. In 2005, business opportunities. Indian firmstwenty-one countries planted could focus on acquiring overseasbiotech crops covering a total of biotechnology units in countries like222 million acres. These crops the US, which have seen plunginginclude soybeans, corn, cotton, valuations due to the globalcanola, papaya, and squash that meltdown. Though India has a longare improved versions of the way to go in terms of innovationstraditional varieties. In addition, in processes, instruments, andrapid-rise yeast, and an enzyme funding, the future looks bright forused to make cheese, are both the industry with India poised tocommonly produced through become one of the global leadersbiotechnology. in this industry. India, with all its inherent strengths, can definitelySUM UP use biotechnology as a vehicle toIndia is already being reckoned as improve the lives of billions acrossa frontrunner in the biotechnology the world. 31
  27. 27. 1. INTRODUCTION Biotechnology is a generic term industry has assumed increasingthat encompasses a wide spectrum significance. The industry todayof scientific and technological possesses the ability to provideapplications used across a variety of crucial leads, which could help insectors. Biotechnology therefore curing critical diseases, as alsomust be seen in the context of a reducing widespread hunger. With acontinuum of other disciplines and strong and consistent research andtechnologies where its synchronized development thrust, the industry isapplication drives new products and increasingly being viewed as atechnologies. solution provider to diseases such as cancer and AIDS; as an instrument To quote Former US Senator, to enhance agricultural productivity;Robert F Kennedy, “we live in and in providing solutions to climateinteresting times” - it is indeed a change and promoting sustainablematter of great awe that an industry development through the use ofas nascent as Biotechnology (i.e. biofuels.during the 1970s) has come a longway by changing the way living With such a wide array of endbeings across the globe perceive and use, and more still under study, thelive life. It is worth noting that the realms of biotechnology today are inbiotechnology industry began amidst an expansion mode, entering intoa lot of regulatory hurdles, but in due other emerging contours likecourse of scientific breakthroughs, it nanotechnology, stem cell research,proved its mettle and has today etc. The global biotechnologysettled the doubts of most sceptics, industry today is at the beginning ofto emerge as a successful a technology curve whose limits areinstrument in fostering the still being explored andendeavours of the scientific comprehended.community for the betterment of the Realising the potential of thehuman populace at large. biotech industry, the Indian players In the present day context, the have been prompt in embracingimportance of the biotechnology biotechnology. Today, Indian32
  28. 28. Box 1: DNA – CORNERSTONE OF BIOTECHNOLOGY DNA, or deoxyribonucleic acid, is the hereditary material in humans and almost all other living organisms. Nearly every cell in a persons body has the same DNA. Most DNA is located in the cell nucleus (where it is called nuclear DNA), but a small amount of DNA can also be found in another part of the cell called the mitochondria (mitochondrial DNA or mtDNA) Considering that all cells virtually speak the same genetic language, DNA from one cell can be read and acted on in another one—even a different cell type from a different specie. This feature is what makes DNA the cornerstone of modern biotechnology. Scientists can, for example, use a yeast cell to make human insulin by inserting the human insulin gene into the yeast. DNA is also the foundation for hundreds of diagnostic tests for genetic diseases and predisposition to disease. Some new tests can even identify which treatment, and what dosage, is best for a particular patient. Because DNA and related cellular processes are so specific, biotechnology products can often solve problems with fewer unintended consequences than other approaches. In fact, the best words to describe today’s biotechnology are specific, precise and predictable.biotechnology industry is one of the 21 st century, the pressure on thehigh performing knowledge-based country’s resources would besegments. The industry has immense. Under suchachieved a global status through firm circumstances, biotechnology islevel strategies, active industry expected to act as a powerful enablerparticipation, and most importantly, that can revolutionize agriculture,due to the proactive and enabling healthcare, industrial processing,policies of the Government. In fact, while promoting environmentalthe various policies of the sustainability.Government over the last two It must be noted that while Indiadecades have helped the Indian currently has a demographicbiotechnology industry to carve out advantage, being home to younga niche in the globally competitive population, who are less thanenvironment and consolidate its 25 years of age, in due course (byposition. the year 2050), they would graduate With the country emerging as to the old-age group (of around 65one of the fastest growing years) which would have its owneconomies and projected to be pitfalls and challenges. A robustranked among the top three biotechnology industry, under sucheconomies by the middle of the circumstances, can act as a strong 33
  29. 29. and critical medium to help gear the expected to feed India’s burgeoningcountry to face such challenging population and ensure the nutritionalsituations. security of the nation. Another important aspect of In India, an admirable start hasIndia’s demography is the already been made throughburgeoning population, for whom the measures like a well-conceivedcountry has to find possible avenues regulatory framework being put inof feeding. This is where the role of place to approve bioagriculturalthe biotechnology industry becomes crops and recombinant DNAeven more critical. Biotechnology is products for human health. Based onideally positioned to help improve the sound ethical guidelines, a policy thatefficiency and profitability of the allows stem cell research is also inagricultural sector through higher place. Some of the recent initiativesyields and reduced dependence on by the Indian government to promotepesticides. This is crucial in an age biotechnology such as 100% rebatewhen despite progress in agriculture, on R&D expenditures, and allowingmillions of people in India still do not 100% foreign direct investment in thehave access to adequate food biotech industry, are also contributingsupplies. In the coming years, to the growth of the industry.enhanced yields and increasednutritive value of crops using The patent reforms haveagricultural biotechnology is exposed the domestic firms to Exhibit 1: SHARE OF POPULATION ABOVE 65 YEARS IN SELECT COUNTRIES (in%) SOURCE: World Population Prospects 2008, Exim Bank Research34
  30. 30. compete with foreign firms and this growth in this industry is inevitable.has enhanced innovation. Western The biotechnology industry thereforecompanies, lured by strong skilled can act as a long-term sustainablemanpower and lower cost research, competitive strength for India with itshave boosted investments into the enormous potential to improveindustry along with strong linkages agriculture, food, health,and partnerships. With the environment and energyannouncement of the National requirements of the population.Biotechnology Development Further, the shrinking physicalStrategy, and the likely establishment boundaries enable biotechof a nodal authority, National companies to tap large marketsBiotechnology Development around the world.Authority, the emergence of strong 35
  31. 31. Box 2: RECOMBINANT DNA TECHNOLOGY Recombinant DNA is the foundation of modern biotechnology. The term recombinant DNA literally means the joining—or recombining— of two pieces of DNA from different sources, such as from two different organisms. Human beings began to change the genetic material of domesticated plants and animals thousands of years ago by breeding individuals with valuable genetic traits while excluding others from reproduction; as a result, the genetic makeup of the plants and animals was changed. Now, in addition to using selective breeding, genes at the molecular level are recombined using more precise techniques of recombinant DNA technology. Making manipulations more precise and outcomes more certain, biotechnology decreases the risk of producing organisms with unexpected traits and avoids the time-consuming, trial-and-error approach of selective breeding. Genetic modification through selective breeding and recombinant DNA techniques resemble each other, but there are important differences: Genetic modification using recombinant DNA techniques allows movement of single genes whose functions are known from one organism to another. In selective breeding, large sets of genes of unknown function are transferred between related organisms. Techniques for making selective breeding, more predictable and precise, have been evolving over the years. In the early 1900s, Hugo DeVries, Karl Correns and Eric Tshermark rediscovered Mendel’s laws of heredity. In 1953, James Watson and Francis Crick, deduced DNA’s structure from experimental clues and model building. In 1972, Paul Berg and colleagues created the first recombinant DNA molecules, using restriction enzymes. Ten years later, the first recombinant DNA- based drug (recombinant human insulin) was introduced to the market. By 2000, the human genome had been sequenced and today recombinant DNA techniques are used in conjunction with molecular cloning to: Produce new medicines and safer vaccines; Enhance biocontrol agents in agriculture; Increase agricultural yields and decrease production costs; Reduce allergy-producing characteristics of some foods; Improve food’s nutritional value; Develop biodegradable plastics and other biobased products; Decrease water and air pollution; and Slow food spoilage.36
  32. 32. 2. GLOBAL BIOTECH INDUSTRY The 21st century is witnessing entity, has the largest number ofconsolidation and expansion in the biotech firms in the world,global biotechnology industry, with estimated at 1836 in 2008.new inventions of its widerapplications and use. Biotechnology, GLOBAL FINANCINGif used to its optimal capacity, is The ongoing economic meltdown,expected to have a significant impact amongst the severest in recenton the healthcare and agriculture times, has had a visible impact onsector for the betterment of the world a number of industries across thepopulation, in addition to providing globe. The main manifestation ofcommercial and industrial benefits. the crisis, especially in 2008 andThis untapped potential in thisindustry has been encouraging early 2009, has been a total creditcountries across the world to invest squeeze and liquidity crunch in theand design programmes promoting global financial markets. Thisthe industry, especially in research resulted in deferment of expansionand development. plans of various companies, including those in the biotechGLOBAL RANKINGS sector. In fact, in 2008, it was for the first time in five years that theMajor countries, based on the global biotech industry witnessed anumber of biotechnologycompanies, both public and private, decline in funds raised. It has beenare illustrated in Exhibit-2. USA tops observed that the major sources ofthe list with over 1750 companies, financing the biotech sector wasfollowed by France (824), South largely through initial publicKorea (773) and Spain (659). India, offerings (IPO), follow-on, privatewith 325 biotech companies in investment in public equities2008, was ranked 11th in the world (PIPEs), partnerships or throughand fourth in the Asia-Pacific region debt and other instruments. Clearly,after South Korea, Japan and the economic crisis has had aAustralia. However, it may be noted major bearing on these instrumentsthat European Union, as a single of raising funds, reflected by a 37
  33. 33. Exhibit 2: TOP BIOTECHNOLOGY NATIONS, 2008 (BY NUMBER OF FIRMS) SOURCE: Ernst & Young 2009, OECD Report 2009; JETRO; UK Trade and Investment; Exim Bank Research.sharp fall in actual funds raised by US$ 34 bn in 2007 to US$ 23 bn infirms in the biotech industry. 2008. Venture funding, constituting According to BioCentury (a US- over 9% of the total capital raised bybased publishing house), the overall global biotech industry in 2008,capital raised by biotech companies declined modestly in absolute valuesacross the globe declined by around globally, by around US$ 1.6 bn in36% from US$ 52.79 bn in 2007 to 2008, to touch US$ 3.1 bn.US$ 33.76 bn in 2008. It was quite However, it may be noted thatevident that the most drastic fall was the decline in funding is expected toin funds raised from public investors.Data for the year 2008 revealed that continue in the coming few years andin spite of the drastic market thereby creating a challenge for theconditions, IPOs constituted over biotech firms to source funds for60% of the total funding of the sustaining its growth. Thoughindustry. However, the total amount venture capitalists are still in theof capital raised from IPO, combined market, they are expected to be morewith follow-on, dropped by 32%, from selective in their ventures.38
  34. 34. Exhibit 3: TREND IN FINANCING OF GLOBAL BIOTECH INDUSTRY (US$ BN) SOURCE: BioCentury, Nature Biotechnology Journal 2009.MERGER AND ACQUISITION increase in M&A activity among(M&A) DEALS biotechnology firms of similar size toM&A activity in Biotech industry was improve cash positions, but does not necessarily see increased M&Arobust in the US and Europe in activity in the Biotech industry by2008. According to a Ernst & Young pharma firms. However, it is believedreport, there were 53 M&A that large companies may not starttransactions involving US buying assets in large numbers thatbiotechnology companies in 2008, do not fit their strategic objectives justrepresenting a total value of US$ because the valuations are relatively28.5 billion, a record high, not cheaper. Instead, the pharma firmscounting megadeals in recent years may remain interested in more(the previous megadeal was in mature biotech companies, on the2007 with the acquisition of lines of the recent biotechMedlmmune by AstraZeneca). In acquisitions such as Genentech,Europe, M&A activity in Biotech MedImmune (Gaithersburg, MD),industry was valued US$ 5.0 billion; Millennium Pharmaceuticals, andthe value of strategic alliances have ImClone. Roche acquiredalso increased. Overall, the Genentech in 2009, andpotential value of strategic alliances AstraZeneca (London) acquiredinvolving companies in US and MedImmune in 2007. TakedaEurope still remains immense. acquired Millennium in 2008, and Eli The Ernst & Young 2008 report Lilly acquired ImClone in 2008. It mayobserves that there has been an also be observed that owing to the 39
  35. 35. expiry of many patented products in economies, these companiesthe next couple of years, the increasingly seek new locations inpropensity of big pharmaceutical the emerging countries to tap thefirms acquiring biotech companies wide knowledge base that aremay increase. available at competitive prices. Even in difficult marketGLOBAL DIRECT conditions, cross-border investmentINVESTMENTS in biotechnology continues to grow,Unlike the funding scenario, direct and has not shown a decline frominvestments, especially the the investment level of the year 2008.Greenfield investments, in the The number of greenfield FDIbiotech sector have maintained projects in the biotech sector hastheir pace even in the current been increasing over the last fiveeconomic turmoil. With years. In 2008, an estimated US$ 2.9governments across the world bn of biotech investment wasstriving to develop the recorded.biotechnology industry, andperceiving it as a basis for long- Growth is also being fuelled byterm development, multinational investment to, and from, emergingcompanies in the biotechnology markets. This trend is expected toarena have been actively exploring continue as emerging marketnewer markets. While the R&D countries are likely to display theiractivities of global multinationals in advantages over the developedlife sciences still remain countries, in terms of costconcentrated in the developed competitiveness and availability of Exhibit 4: NUMBER OF GREENFIELD FDI PROJECTS IN BIOTECH INDUSTRY IN THE WORLD - 2004–2009 SOURCE: World Investment Report 2009, Exim Bank Research40
  36. 36. talent pool. However, developed sales, which was much lower ascountries (especially USA) still compared to the 11.3% growthdominate the world in innovation in witnessed in 2007, and significantlythe biotech sector, and thus would lower than the industry’sremain as attractive destinations for compounded annual growth rateR&D investments. Asia-Pacific (CAGR) of about 17% during theshowed prowess as a location for period 2003-2008. This lowering ofbiotechnology investments in 2008 - the overall revenue in the US wasovertaking Western Europe to largely because of the acquisitionsbecome the number one region in the of many successful biotech firms byworld for investment projects. From companies which cannot be strictlyan Indian perspective, FDI would classified as being within the realmspave way for increased of biotech industry. Revenues alsoinfrastructure, scaling up of local diminished because of slower growthfacilities, increased market size and of a number of top firms in the US,facilitate R&D, which translates into such as Amgen, and Thousandmore “local content”. Oaks. Revenues of European biotechINDUSTRY PERFORMANCE firms increased by 13% in 2008, toMost countries today have well- touch Euro 15.3 billion as compareddeveloped biotechnology programs to the revenue level of Euro 13.5and a proactive strategic vision billion in 2007. The growth in thewhich has, to a certain extent, European biotech industry wasnegated the fall in capital funds boosted by a top-line growth induring the current times of excess of 20% by Elan (Ireland),economic meltdown. The revenues Eurofins Scientific (France), Medaof the public biotech companies (Sweden) and Qiagen (theacross the world increased from Netherlands), while SwitzerlandUS$ 84.7 bn in 2007 to US$ 89.6 based Actelion, and UK based Shirebn in 2008, an increase of 5.7%, Pharma grew by 16% in 2008. Asaccording to a report by Ernst & regards the performance of AsianYoung. It is worth noting that this (including Pacific) biotech industry isgrowth was witnessed in spite of concerned, revenues have recordedthe global financial crisis hitting a growth of 25% in 2008. This healthyeconomies across the world. growth was mainly led by strongHowever, this modest growth was growth in Australia, where revenuesunevenly distributed across the grew by 26% in 2008.globe with varying performance inregions. Total Income USA’s public biotech firms grew Despite the 5.7% surge in globalby 8.4% in 2008, in terms of product biotechnology revenues in 2008, 41
  37. 37. Exhibit 5: SHARE OF REGIONS IN GLOBAL BIOTECHNOLOGY REVENUES - 2008 (Public Company Data) SOURCE: Ernst & Young 2009 Table 1: GLOBAL BIOTECHNOLOGY DATA FOR 2007 AND 2008 Units Parameter Year % Change 2007 2008 2008 over 2007 Public Company Data USD Billion Revenue 84.7 89.6 5.7 USD Billion R&D Expense 31.8 31.7 -0.3 USD Billion Net Income (Loss) -2.6 -1.4 - 46.1 Number Employees 204930 200760 -2.0 Number Public Sector Companies 798 776 -2.8 Number Private Sector Companies 4001 3941 -1.4 Number Total Companies 4799 4717 -1.7 SOURCE: Ernst & Young 2009over the revenues generated in the in losses in 2008; the global netyear 2007, the profit remained loss that had climbed to US$ 2.6negative for the global billion in 2007 abated to US$ 1.4biotechnology industry as a whole. billion in 2008. This reduction in netHowever, there has been a decline loss in 2008, over 2007, was42
  38. 38. Table 2: REGION-WISE BIOTECHNOLOGY DATA, 2008 Units Parameter USA Europe Canada Asia-Pacific Public Company Data USD Billion Revenue 66.12 16.51 2.04 4.96 (73.7) (18.4) (2.2) (5.5) USD Billion R&D Expense 25.27 5.17 0.70 0.60 (79.7) (16.3) (2.2) (1.8) USD Billion Net Income (Loss) 0.41 -0.70 -1.14 0.01 Number Employees 128200 49060 7970 15530 (63.8) (24.4) (3.9) (7.7) Number Public Sector 371 178 72 155 Companies (47.8) (22.9) (9.2) (19.9) Number Private Sector 1383 1658 286 614 Companies (35.0) (42.0) (7.2) (15.5) Number Total Companies 1754 1836 358 769 (37.1) (38.9) (7.5) (16.3) Figures in the parantheses are share in world. SOURCE: Ernst & Young 2009helped by the reduction in net The life-science companies inlosses in Europe, and turnaround the Asia-Pacific region on an averageto profit in USA. However net loss spent 12% of their revenue, on R&Dhas grown in Canada, with the in 2008. China led the region with theindustry witnessing more than 50% average R&D spend of 19.14%. Inrise in net losses in the year 2008. China, the companies in the revenue range of US$ 1 million – US$ 5R&D Expenditure million spent almost 30% of their revenues in R&D. South KoreaThe R&D expenditure in the biotech ranked second with an average R&Dindustry, due to the financial crisis, spend of 17.8% of revenue, with theregistered a marginal decline of companies in the revenue range ofaround 0.3%, in 2008, over the US$ 1 million – US$ 5 million wereyear 2007. The R&D expenditure in spending an average of 24% onthe biotech industry was the highest R&D. India followed at the thirdin USA (accounting for a share of position with average R&D spending80%), followed by European region of 10.55%. The average R&D(16%), and Canada and Asia- spending for Taiwan, Singapore,Pacific (2% each). Malaysia and Australia was in the range on 1% - 6%. 43
  39. 39. Analysis of R&D expenditure per US$ 158,120. Interestingly, USA hademployee for the globe and across the highest R&D expenses perregions yielded interesting results. In employee, of US$ 197,110, followedthe year 2008, the R&D expenditure by Europe (US$ 105,400) andper employee for the global Canada (US$ 88,210). R&Dbiotechnology industry was expenses per employee in Exhibit 6: SHARE OF REGIONS IN GLOBAL BIOTECHNOLOGY R&D EXPENDITURE - 2008 (Public Company Data) SOURCE: Ernst & Young 2009 Exhibit 7: R&D INTENSITY (%) AND R&D EXPENSES PER EMPLOYEE (US$ 000), 2008 (Public Company Data) SOURCE: Ernst & Young 200944

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