Biocon Case Study Advantages and disadvantages of starting and operating a pharmaceutical firm in India Indian CRO market

1. Biocon Case Study
1)What are the advantages and disadvantages of starting and operating a pharmaceutical firm
in India?
Ans.
Advantages
1. High quality work force: Large pool of English-speaking scientists and professionals who
were well-educated and well-trained. India having a large no. of scientists and professionals
having great skills and knowledge. They were also cheap (Ph.D.’s salary in India Vs USA).
Many pharma institutions.
2. Genetically Diverse Population for clinical studies: Easily accessible ethnic genetic structures
and a well-balanced group from which to recruit for clinical studies
3. Low Cost: Cost of setting up a fully FDA-inspected plant in India is on average 50% less
when compared to the developed countries. The production and operation costs have been
found to be 40-70% lower when compared to the developed nations. Labour costs in India are
on average 60-70% less than those in developed nations. Cheap labour, affordable equipment,
competitive property rates and low-cost utilities.
4. Large Domestic Market
5. Upgraded Manufacturing Plants: The FDA has so far approved about 600 facilities through its
two local assessment offices.
6. Indian patent laws: DPCO and IPA are also helpful for growth of Indian Pharma companies.
7. Global pharmaceutical industry’s trend toward outsourced research, development, and
manufacturing making India an ideal hub
8. Established pharmaceutical industry: This growth has been attributed to the enhanced medical
infrastructure in the country, creation of new markets, increased chronic disease diagnosis and
the launch of patented products. The Indian pharma industry ranks 3rd in the world terms of
volume and 14th in terms of value.
9. Policy support by Indian government: Both internal and external supports is extended to
encourage the industry’s growth. Federal government created the Department of
Biotechnology within the Ministry of Science and Technology that is building facilities for
research and development, business incubation centres. ‘Startup India’and ‘Make in India’.
Disadvantages
1. Government policies are not allowing the collaboration of global companies with India
companies which lead to lower growth rate of Indian companies.
2. Indian biotech and pharmaceutical firm counted on organic growth or acquisition, notcoutside
funding, to fuel any expansion
3. Weak patent laws: The product patent laws apply for a limited period of time, after which the
products come in the generic domain.
4. Ethical issues in clinical trials: Use of illiterate and arguably ill-paid subjects raised questions
of patient consent and abuse. Improper systems and issues complicate conducting clinical
trials scope in India.
5. Entry of international players: Entry of foreign players (well-equipped technology-based
products) into the Indian market
6. High competition: Majority of companies lack the ability to compete with MNCs for New
Drug Discovery, Research of molecules on a worldwide basis due to lack of resources

2. Biocon Case Study
7. Drug Price Control Order puts unrealistic on product prices and profitability. Stringent pricing
regulations affecting the profitability of pharma companies
2. Is the Indian CRO market attractive?
● Contract research organizations (CROs) were emerging as the key players in this market.
Lotus Labs, for instance, was growing at a rate of 100% per year, and one study predicted that
Indian CROs would grow from 0.7% of the global market in 2002 to 20% in 2010.13 Within
India, CROs based in Bangalore accounted for 2% to 3% of the total CRO activity in India,
which was estimated at Rs. 250 crores in 2000, and were expected to continue to grow over
the next few years.
● Indian CROs were focused primarily on serving the need for BE/BA studies in the market,
and although a few were beginning to offer services in clinical trials.
● Biocon India group are the first one for the establishment of CRO in India named Syngene
provide its clients with bulk volumes of target molecules, reagents, and custom molecules for
early-stage drug discovery and development. This high growth potential represents significant
opportunity for Indian CRO players like syngene and clinigene.
● The reason for the lucrativeness of CROs in India was that the outsourcing of critical R&D
tasks to CROs based here was low cost, work produced was of high quality, the workers
spoke fluent English & easily accessible ethnic genetic structures and a well-balanced group
from which to recruit for clinical studies.
3. What is the best way for Biocon India Group to expand?
Clinigene was making money, attracting clients, and filling gaps in the Biocon India Group value
chain.
It increased the company’s risks, risks not just of embarrassment or failure but of dangerously swift
success and loosing core culture
Biocon India Group were to grow, then it needed to expand hence push Clinigene to get all the
business
Biocon India lacked presence only in the animal studies and clinical trials segments of the typical
drug development and discovery value chain.
The senior board was on the look for more opportunities to expand, preferably in line with their
philosophy of “earn as you learn”, with the ultimate goal of making Biocon a fully integrated drug
discovery and development company.
Short term:
● Clinigene only took business for services that were relatively safe, albeit lower-value, and
waited to run clinical trials
● Clinigene’s current capabilities positioned it in the low- to medium-value segment of the
value chain
● Simplest & expensive approach- acquisition: buy a budding clinical services CRO to add
expertise and client relationships and will neither disrupt Biocon culture

3. Biocon Case Study
● Other: Add subsidiary passive- aggressive expansion can disrupt the organistion cuture and
take toll on employees
Long term:
● Syngene was ready to test its own original molecules
● Moving up the value chain might be more profitable in the long run
● Accomplish vision: to become a fully integrated drug discovery and development company
and launch their own product by innovation
● Look out for Strategic Partners in developed countries to boost the revenues, by breaching
untapped international markets
● Build positive image in front of media and build a brand
● Partnering with incubators, research centers & hospitals
Passive-aggressive expansion of Clinigene, with carefully crafted plans to take care of all
contingencies, seemed to be the way forward for Biocon.