Hand in hand

Hand in hand

A recent report shows a slowdown in the growth rate of the Indian biotechnology industry in the last fiscal. This is however only a temporary dip before the next growth spurt

Usha SharmaMumbai

A recent survey conducted by the Association of Biotechnology Led Entrepreneurs (ABLE), has proved to be dampener for the usually gung-ho Indian biotechnology industry. As per figures collated, compared to last year, the growth rate of the Indian biotech industry has slipped down, primarily due to the appreciation of the rupee and the unsteady US economy. Because of these two adverse reasons, it has recoded 20 percent growth rate from as against 30-35 percent in a similar period of last year. At present very few Indian players are dominating this segment. As per industry observers, the big players continue to be Serum Institute of India and Biocon. Currently, there are 20-25 biotech products in the market and it is targeted that there will be two to three new products introduced each year.

As per projection, it notches $ 2.5 billion in revenues, recording 20 percent growth, the lowest annual increase in the last five years. The industry has grown at a Compound Annual Growth Rate (CAGR) of 34 percent since 2003 and the 20 percent growth this year appears to be a pause before the next level of growth.

Shrikumar Suryanarayan, Director General, ABLE says, “Biotech is a means to an end. As India’s population is growing, the endless demand for (services and products) of the healthcare industry is expanding aggressively. Biotech products have huge potential for applications in the transformation of biofuels as well the bioethanol industry. At present the products which have their own therapeutic niche in the market are cancer followed by diabetes and cardiovascular which have 20-25 products and we are targeting that five to nine years down the line, biotech will boost Indian economy and it will become a major developed industry as against the pharmaceutical industry. In the future pharma and biotech industry will go ‘hand in hand’. Major Indian pharma players like Glenmark Pharmaceuticals, Dr Reddy’s Laboratories etc are investing heavily in biotech segment and it is expected that these companies will launch their own R&D products in the Indian market.”

To promote the Indian biotech sector Department of Science and Technology (DST) has taken quantum initiatives through its nodal Department of the Ministry of Science and Technology, which has allocated crores of rupees for the further improvement of infrastructure and skilled manpower activities.

The report shows that the biopharma segment continues to be the largest contributor to revenues of the biotech industry. During 2007-08, it recorded sales in excess of $1.72 billion (Rs 6,899 crore) and accounted for 67 percent of the total industry revenues, registering a 16 percent growth.

Biotech exports grew to Rs 5,733.7 crore, with the share of exports in the total biotech pie close to 56 percent. Exports from biopharma alone accounted for over 70 percent of the total industry, while the bioservices sector had a 26 percent share (Rs 1,502 crore) registering a 53 percent growth.

The bioagri sector grew 30 percent to Rs 1,202 crore, the bioindustrial sector by four percent to Rs 410 crore, and the bioinformatics sector by 31 percent to clock Rs 190 crore in revenues. In 2007-08, investments touched Rs 2,750 crore, up by over 21 percent compared to the previous fiscal. Based on the current trends and the new progressive biotech policy in place, the forecast for 2015 is that the Indian biotech industry would clock revenues of about $13-16 billion.

The big picture

Biopharma drugs (or biologics) have outperformed the pharma market as a whole largely due to two factors: they address areas of clinical need that are unmanageable with conventional therapeutics (including many cancers and genetic diseases) and they are able to command a premium price. At some point the patents protecting the successful biologic will expire and the potential of a sizeable market will attract generic companies. However, the process to develop a biosimilar essentially generic version of biopharmaceuticals—is more complex than that of developing a generic copy of a chemical-based compound.

The regulatory pathway is not completely finalised, whilst the European Medicines Agency (EMEA) approved the first biosimilar (Sandoz’s Omnitrope (somatropin; somatrophin) in April 2006, the US Food and Drug Administration (FDA) has not yet approved any. Nevertheless, the biosimilars markets in Europe and the USA have the potential to generate sales of $16.4 billion by 2011.

According to the report, to make the most of the opportunity, generic companies will have to change their business model. The current model consists of launching new generic products regularly to maintain growth. Entry barriers are relatively low and there tends to be severe price competition from several generic competitors reducing sales significantly after the first year on the market. It is not clear if there will be enough biologic candidates for a company that is focused on launching biosimilars to sustain growth There are not enough possible biosimilars for a company to rely on these alone to launch a new product every year.

The report recommends that companies likely to succeed in the biosimilar market need to have an appropriate marketing structure as well as the financial resources to develop the products and to accept higher upfront risks in development, commercialisation and capital investment. Biosimilar players will therefore need to adopt different business models and skill sets from those of conventional generics companies. This is new territory for most generic players and there are likely to be fewer players in biosimilars than in traditional generics. In the short-term at least, the commercial benefits from entering most biosimilars markets are likely to be small.

Giving the global picture, a recent Datamonitor report forecasted growth in biopharma at 11 percent a year between 2004 and 2010 compared to 3.4 percent annually for the total pharma market. Currently, the USA accounts for 55 percent of the biopharma market. By 2010, analysts expect biologic sales in the USA to reach nearly $60 billion and account for a quarter of overall drug sales. Many commercially important biopharmaceuticals, including monoclonal antibodies (MAbs) such as Herceptin (trastuzumab), Rituxan (rituximab) and Humira (adalimumab), were launched fairly recently and will not be open to generic competition for many years and many are protected by a complex series of patents that even the biggest, most experienced generics companies find impenetrable.