Shaping the Indian biotech sector
India has the potential to become a biotech hub but it requires a lot of mentoring. Neesha Patel takes a look at the biotech initiatives undertaken by various companies and analyses the steps to be taken by Indian biotech sector
Biotechnology is called the “technology of hope” owing to its revolutionary promises in agriculture, healthcare, industrial processing and environmental sustainability. The technology offers so much hope that trade groups and governments are trying to make environments conducive to the emergence of this technology.
Fuelled by aspirations of self-reliance and pressured to cope with poverty and underdevelopment, Indian Government is focusing on education and infrastructure to establish strong biotechnology capabilities. An Ernst & Young report identified 96 exclusive enterprises as biotechnology companies, making Indian biotech sector third largest in the Asian region after Australia and China. Though India is yet to introduce a novel biotechnology product, it has a strong science and the potential to generate a revenue of $5 billion and a million jobs by 2010.
Over the last two decades, the Indian biotech sector has witnessed a number of scattered and sporadic initiatives in the academic and industrial front. Currently, several Indian companies are entering the market of biogenerics, with the view of becoming competitive providers for the global market, an ambition comforted by the current commercial success of Indian generic drugs. In an attempt to emulate the IT sector’s model of international outsourcing, companies are developing business models with the ambition of offering an attractive cost advantage at various stages of drug development. However, new models are required to exploit the full potential of the country in this sector.
The need for an integrated biotech policy with concurrent attention to education, social mobilisation and regulation is an essential pre-requisite for the progress of the Indian biotech sector. The National Science and Technology Policy of the Government and the Vision Statement on Biotechnology issued by the Department of Biotechnology (DBT) provide a framework and give strategic direction to different sectors to accelerate the pace of development of biotechnology in India over the next ten years. Further, the policy has directed notable interventions in the public and private sectors, the key being a quadrilateral agreement between academia, industry, lab, and the state. These interventions were initiated recently and the industry is in a phase where new models of organisation are emerging. These models refer to the position of Indian companies in value chains targeting the domestic market as well as foreign partners.
National Biotechnology Development Policy
Both national and state governments have made substantial investments in biomedical research. This has fostered the growth of well developed academic and research institutions, which in turn support the private sector. A comparison of India’s health biotechnology publications in international peer-reviewed journals, and patents granted by the United States Patent and Trademark Office between 1991 and 2002, provides further evidence of the commercial potential in the field.
Learning from global biotech
Despite more advanced biomedical research base in the 1960’s and a larger number of European biotech companies, major developments have occurred in the US because of strong and persistent government funding, favourable policies, availability of venture capital and an entrepreneurial workforce.
The US Government established the National Institute of Health (NIH) as the primary funding agency and on an operational premise, it is decentralised and enabling. Approximately 52 percent of US R&D expenditure is borne by the government, which contributes a further 25-75 percent of the cost of a grant as an ‘overhead’. Similar to the policy adopted by India, a percentage of the NIH budget is set aside for Small Business Innovation Research (SBIR) grants, to fund small business development of biomedical discoveries. In addition, the government also permits local units like universities and institutes to develop independently. The Bayh Dole Act states that institutions receiving US research grants may own the intellectual property generated from such research. Local ownership fosters entrepreneurship as well as a strong incentive for university-industry research collaborations.
The United States maintains the oldest and most dominant position worldwide in venture capital. A Global Insight study showed that the small company share of biotech research expanded from three percent in 1984 to 40 percent in 2003. Based on the recognised need for venture capital in India, the first national VC fund for biotechnology was initiated as a joint venture between Dynam Ventureast Group and Andhra Pradesh Industrial Development Corporation. It provided funds worth $17.7 million to Indian biotech firms. In addition, the Government of India established the Pharmaceutical Research and Development Support Fund (PRDSF) and the Drug Development Promotion Board (DDPB), with an initial corpus of Rs 150 crores.
On the other hand, European biotech and life science research suffer from insufficient resources and economic fragmentation. National and regional research programmes are insufficiently funded and cross-border co-operation between universities and industry is not widespread. The European industry is plagued by insufficient mobility, low investment in R&D, fragmentation of research efforts and lagging transformation of research results into products.
UK offers some advantages over other European countries such as R&D tax credits (40-50 percent of costs are returned in cost credits). The government often matches angel investors and encourages universities to commercialise research and has more flexible employment regulations.
The Swiss Government takes a more hands-off approach to biotech development, as the law states that the government cannot directly invest in companies. Despite common clinical trial parameters and an established framework for IPR, European countries still do not have a common market, and investors tend to focus on short-term advantage, making it harder to raise money.
Among the Asian countries, Japan has the most developed biotech sector followed by Singapore, Taiwan, China, India and Australia. To overcome the initial disadvantage of being a latecomer, the Economic Development Board (EDB) of Singapore spearheaded the development of its biotechnology sector. Similar to NIH, EDB offers over $100 million to its biotechnology sector by funding the Institute of Molecular and Cell Biology. To grow and attract a pool of scientific talent the government established the Agency for Science Technology And Research (A*STAR), which helps organise and fund biomedical research. EDB helps local companies develop plans and policies to attract multinational pharmaceutical companies. EDB’s investment arm, Bio*One, supplies equity capital. EDB administers various tax incentives offered to viable projects, allowing them to maximise profits and return on investments. Prepared industrial lands, ready-built factories, R&D facilities and business parks in Singapore count among the world’s best. The ability to start up rapidly is another reason that companies choose to locate themselves in Singapore.
However, Singapore cannot support a large academic infrastructure like the US or India, as it has only three universities that provide undergraduate and post-graduate training in biosciences.
With the aim of attracting research talent, the government is investing more than $2 billion, promising foreign scientists first-class laboratories, state of the art equipment and grants to pursue research that is not fundable or too controversial back home. Currently, a third of 4000 science PhD’s conducting research in Singapore, are foreigners. With excellent business infrastructure, long term commitment to developing world-class R&D capabilities, hard working and highly educated workforce and stable government, Singapore is well positioned to become the regional hub for biotechnology R&D and manufacturing.
The Asian clusters can compete regionally as close proximity makes clinical development cost effective
The biotechnology industry has achieved significant milestones. However, none of the Asian clusters will immediately challenge European hubs, given the difference in size and period of activity or US. The Asian clusters may be able to compete regionally, in addition to attracting companies specialising in stem cell research or diseases more prevalent in the region, as close proximity makes clinical development cost effective. Although India has the core ingredients for a successful innovation system, to maintain development of its biotech sector, progress is warranted in several areas. In the words of Dr Bhan, “The biotech policy of India is continuously evolving but its basic concepts have been settled for creating a vibrant industry, wealth generation and for whatever biotechnology has to offer the country. The whole policy framework has been structured around how to use biotechnology in a pragmatic and sensible way for the betterment of the masses.”