This document discusses opportunities for investment in India's growing life sciences sector. It notes that India is transitioning from an outsourcing destination to an intellectual powerhouse. It highlights several areas poised for high growth, including clinical research and manufacturing, agribiotechnology, and addressing India's unmet medical needs. It proposes strategies for venture capitalists to enter the market, such as supporting grassroots innovation through partnerships with academic institutions and incubators. This would help nurture entrepreneurship and position the venture capitalists as thought leaders in the Indian life sciences field.

1. India: Life Sciences Investment Strategy
“Culture & Nurture”
Gaithersburg, MD
March 2007
Harshawardhan Bal, M.Pharm., PhD.
Draft

2. India is fast becoming a centerpiece of global strategy: Transition from an
outsourcing destination to an intellectual powerhouse
Outside agencies in India to foster science collaboration
• National Science Foundation (Oct 2006) - World's largest basic science funding
agency; “Nobel Prize” incubator
• World Bank’s private sector arm - International Finance Corporation - $43m in
investments in four projects in India
• The US Agency of International Development and Cornell University - supporting
research on improving the stock of major food crops - eggplant that is resistant to
shoot borers, potato resistant to blight, and drought- and salt-tolerant rice
Approach
• Focus on "increasing presence" in India
• Ensure "direct contact" with Indian scientists
• Priority areas - math, engineering, geo-sciences, life sciences and computers
• “competing through collaboration” (set up collaborative programs with Indian
scientists)

3. India’s ivy leagues set up incubators to tap emerging entrepreneurial
ecosystem
IIT Bombay - Society for Innovation (SINE)
• SINE is an investor in startups it supports (takes equity stake in funded
companies)
• Provides office space and use of its facilities at ~ 75% of market rate
• Companies must “graduate” in 3 yrs and establish own infrastructure
• SINE currently funds < 10% of the score of applications its receives
• Mix of software and non-software (earth sciences, telecommunications, etc.)
• SINE start-ups have domestic focus but international scope
IIM-A Centre for Innovation, Incubation and Entrepreneurship (CIIE, 2001)
• Established the Indian Incubator for Innovation-based Enterprises (I3E)
• Selects innovators to enter incubator through search program “Anveshan”
• Provides technical support, testing facilities, materials, prototyping facilities, legal
assistance, venture funding, patent filing, etc.
• Network partners include DST, CSIR, IITs, Wadhwani Foundation, VC firms
• Awards companies in 3 categories
– "innovation in search of an enterprise“ (commercialize technology or prototype)
– "idea in search of an innovation" (undeveloped concept or idea)
– "innovation with a business plan" (business plan around an innovative idea)
Indian incubators are becoming one-stop shops for VCs looking for smart ideas

4. Indian Government provides impetus to burgeoning Life Sciences
industry through creation of Biotechnology parks
Dept. of Biotechnology & Gov of AP set up biotechnology incubator (August 2003)
• First full-fledged biotechnology incubator in Hyderabad with investment of Rs. 27 cr.
• State has allocated three acres of land; Capital infusion by DBT Rs. 8-9 cr. (2003-04)
• Incubator will be managed by a consortium led by Indian Institute of Chemical
Technology, a part of Council of Scientific and Industrial Research
India to create 10 biotech parks by 2010 (DBT Secretary M K Bhan, Feb. 2006)
• A new Biotechnology Parks Society of India will be set up to oversee the creation and
support of at least 10 biotech parks with incubator units
• Biotech clusters are currently operational in Bangalore Hyderabad, Pune and Mumbai
• Parks will offer services like contract research, clinical trials and development of
biotechnology products
• DBT has approved a Clinical Research Trials Institute in Hyderabad to conduct large-
scale clinical trials

5. ICICI Knowledge Park Life Science Incubator: ICICI Bank Ltd. & Gov. of
Andhra Pradesh partner to facilitate business-driven R&D
Space of 3,200 sqft for 8 incubatees to encourage and nurture startup companies and
spin offs in pharmaceutical and biotechnology
Laurus Labs Private Ltd
• Focus Area : Process development and validation
• Lab Area Leased: 6.78 acres
Premium Phytoceuticals
• Focus Area : Plant based therapeutics
• Lab Area Leased: 2 Units in Life Science Incubator Lab
Regain Biotechnology
• Focus Area : Plant based therapeutics
• Lab Area Leased: 2 Units in Life Science Incubator Lab
Graduates
• Biomax Life Sciences
– Focus Area : Plant based therapeutics
– Lab Area Leased: Unit 4 Life Science Incubator Lab

6. High-growth areas which carry potential investment opportunities for VCs
Clinical & manufacturing for Biotechnology products
• Global biotech/pharma companies outsourcing > US$500 M worth of research to India
• India's revenue from the custom synthesis & manufacturing business is ~ $ 1-1.5 B
• Exports of biotech products, driven by vaccines, statins, contract research and clinical
trials, accounted for 42% of total revenues
• India’s clinical research market ($200 M in 2005), is expected to reach $1.5 B by 2010
• India's biotech industry is projected to reach $5 B in annual sales by 2009, constituting
10% of the global industry
• India has a diverse species of flora and fauna that gives the added advantage for
biotech companies to carry on their research and drug discovery effectively
India’s unmet medical needs
• 34 M diabetic patients
• 8-10 M people with HIV
• 8 M epileptic patients
• 3 M cancer patients

7. High-growth areas which carry potential investment opportunities for VCs
Agribiotechnology
• India surpasses China in number of hectares planted with genetically-modified
seeds. (3.8 M biotech hectares vs China’s 3.5 million hectares).
• Research in biotechnologically enhanced crops - a major role for the rapidly
increasing number of projects in Asia (Chairman of International Service for the
Acquisition of Agri-biotech Applications)
• Vit A enhanced rice likely next main crop to be commercialized in Asia after
cotton
• Technology related to agriculture sector is an area identified by Indian finance
minister for tax benefits

8. Potential opportunities for grassroots manpower development
Intellectual capital development through academic research
• Align with the goals of the National Biotechnology Development Policy to foster creation
of skilled biotechnology manpower
• The Biotechnology sector can achieve double-digit growth rates by overcoming skilled
manpower shortage in modern science areas (molecular biology, bioinformatics, etc.)
• India is projected to invest US$ 80 M in 2007 to develop a national network of research
laboratories
• The Department of chemicals and petrochemicals has sought Rs 5 B to establish
institutes to meet the growing demand for pharmaceutical professionals

9. “Discontinuities” in the Indian venture scenario can be exploited by VCs to
formulate market entry strategies
Lack of an entrepreneurial “Silicon valley” environment
• Social networks and clubs that nurture entrepreneur growth and facilitate
entrepreneur-investor relations are virtually non-existent
• Angel networks (often started by serial entrepreneurs themselves) that provide
budding entrepreneurs capital, advice, and mentorship are absent
Lack of research infrastructure and orientation
• Indian educational institutes provide top-quality undergraduate training but lack
depth in graduate level University research
• Most Indian universities (and students) are ill-equipped to tackle the complex,
interdisciplinary nature of modern biomedical science
• Incubators attached to Indian schools are not comparable to US counterparts
End-result
• Business plans from India lack spark and are described as “average”
• The number of good deals is far and few between
• Relationships between VCs and portfolio companies tend to be adversarial

10. VCs can build a “thought leader” image in Indian Life Sciences by
supporting grass-roots innovation - A “Culture & Nurture” approach
De novo approach
• Enter into agreements with 1 or 2 top advanced R&D institution/Universities through local
offices
• 1-2 investigators selected via a program announcement or RFA
• Agreement includes standard VC deal terms
• Fund faculty led R&D in specific areas (see slide 6 & 7) with direct commercial potential for
spinning out novel IP and technologies
• Appoint local project managers to work with department heads/ professors to identify
topics for research and commercialization
• Focus on areas that have a strong domestic market (apart from a global market)
• Develop a support structure to guide the “paper to product” transition
• Coaching and mentorship
• Consultancy/advisory/technology transfer services
• Market/customer linkages
• Access to network of experts, successful entrepreneurs & managers
• Select projects with short life cycles – 1 yr (late stage) to 3 yrs (early to medium stage) to
product launch
• Fund projects with modules of $25,000* (direct cost only), up to an upper limit (3 yrs or $
75,000*), renewable annually based on progress up to 3 yrs
*Place holders. Actual figures TBD

11. VCs can build a “thought leader” image in Indian Life Sciences by
supporting grass-roots innovation - A “Culture & Nurture” approach
Piggy-back approach
• Partner with 1-2 existing Life Sciences incubators
• Fund research activities of select incubatees
• Provide support structure as outlined in the De novo approach
• Build equity stake into start-ups (standard VC deal terms)
PR activities
• Build close private-public relationships by sponsoring focused Biotechnology events
• BioAsia - Feb. 2006 (Hyderabad)
• Bangalore Bio 2006
• Organize own entrepreneur-investor conference
Manpower development
• Culture and nurture intellectual capital through special programs
• Graduate Fellowships on special topics (e.g., Digital pathology, Bio-IT)
• 100K Entrepreneur competition
• Endowment to an institution library or research center
• Sponsor visiting faculty/expert lectures at selected Universities
• Select top graduates for internships/training at portfolio companies
• Select top talent from sponsored institutions to join portfolio companies

12. Suggested plan for project selection and management
Immediate activities
• 1-3 months
• Identify topics of commercializable potential (indigenous and global market needs)
• Shortlist institutions for funding (Research centers/Universities/ Incubators)
• Select research investigators with relevant subject matter expertise
• 3-5 months
• Formalize agreements with 1-2 institutions/investigators (define team structure)
• Create core team (project management, research oversight and governance)
• Develop road map and milestones (“Statement of Work” or “Research plan”)
• Initiate funded research and product development activities
Program management
• 6 months from start of project
• Appraisal of research activities and progress towards goals
• Project evaluation*
• 12 months from start of project
• Appraisal of research activities and progress towards goals & project evaluation*
• Funding decision (early stage projects) or “Go to market” decision (Late-stage project)
• Iterate for 18-24-30-36 months from start
*Go – No go decision, performance appraisals, recruiting decisions, course correction, etc.

13. Sampling of Life Sciences R&D and related organizations
Government Departments
– Dept of Science & Technology (DST) http://dst.gov.in/
– Dept of Biotechnology (DBT) http://dbtindia.nic.in/
– Dept of Scientific & Industrial Research (DSIR) http://dsir.nic.in/
Biotechnology research institutes
– JNU - School of Life Sciences/Biotechnology http://www.jnu.ac.in/
– National Institute of Immunology http://www.nii.res.in
– Indian Institute of Science http://www.iisc.ernet.in/
– IIT – Kanpur (Biological Sciences & Bioengg.) http://www.iitk.ac.in/bsbe/
– IIT – Mumbai (School of Biosciences & Bioengg.) http://www.btc.iitb.ac.in/
– Madurai Kamaraj University (School of Biotechnology) http://www.biotechmku.org/
– National Centre for Biological Sciences http://www.ncbs.res.in/
– National Center for Plant Genome Research http://www.ncpgr.nic.in
Biotechnology Associations, Parks and Incubators
– ICICI Knowledge Park Life Science Incubator http://www.iciciknowledgepark.com
– IIM-A CIIE http://www.ciieindia.org/
– Association of Biotechnology Led Enterprises http://www.ableindia.org/
– Golden Jubilee Biotech Park for Women Socy http://www.biotechpark.com
– International Biotechnology Park (Pune) http://www.ibpl.net/home.htm
– Biotech Park (Lucknow) http://www.biotechcitylucknow.org/index1.htm

14. Contact
Harshawardhan Bal, M.Pharm., PhD
harsh.bal@stemcellcapital.com