Keep an Eye on Indian Biotech

When MVA visited India last week together with the Danish Prime Minister, Anders Fogh Rasmussen, we were able to see clear differences between India and Medicon Valley in terms of the origins and growth of new biotech companies. The Indian biotech sector has many strong competitive advantages, but also offers great business opportunities for Medicon Valley companies and research organisations. If one finds the right partners, there is a huge potential for new collaborations and knowledge creation.

Last week the Danish Prime Minister, Mr. Anders Fogh Rasmussen, visited India to initiative closer relations between Denmark and India. The two sectors in focus were biotech and information technology and Medicon Valley Alliance had the privilege of being invited to join the delegation. Five other life science Executives from Medicon Valley joined the trip: Claus Brædstrup, CEO of H. Lundbeck, Philip Just Larsen, CEO of Rheoscience, Søren Brunak, Centre Director of the Technical University of Denmark, Jesper Højland, CVP of Novo Nordisk, and Anders Hedegaard, CEO of Bavarian Nordic. The delegation visited India's largest and most successful biotech company, BIOCON, based in Bangalore, and later the Institute of Immunology in New Delhi. Here the delegation met with State Secretary Dr. Bahn, who is responsible for the implementation of the Indian government's very ambitious plans for the future development of the Indian biotech sector.

1 billion USD in annual revenues

With a biotech sector that has passed 1 billion USD in annual revenues, India is the world leader in the production of human vaccines and generic drugs. The size of the Indian biotech sector counts between 400 to 800 biotech companies, depending on which definition of biotechnology is used. The largest estimate (800) accounts for both traditional biotech, CRO's and CMO's in the biotech service segment, together with herbal medicine companies. The majority of the Indian companies are based around the regional clusters in Bangalore, Mumbai and Hyderabad where the IT sector is also predominant.

A different origin for new company formation

The economic drivers behind the creation of most Indian biotech companies appear to be very different from those found in Europe or the US. Commercialised public research from universities or spin off from pharmaceutical research, seldom play a role in the formation of new companies and attraction of venture capital. The low availability of local risk capital makes these routes even more remote.

The Indian biotech sector has two main sources of biotech company formation. Firstly, generic drug manufacturers or larger CROs and CMOs typically create new innovative biotech divisions, thereby providing the required risk capital for biotech R&D. As a consequence of this financing model, most Indian biotech companies remain privately owned by entrepreneurs.

Secondly, India has a huge domestic market with approximately 200 million people with a buying power almost equivalent to that of industrialised countries. This coupled together with an enormous need for higher efficiency in the agricultural sector in order to feed the huge and increasing population, have been the drivers fueling the rapid growth and development of the Indian biotech sector.

Synergies between biotech and IT creates growth

A unique growth driver in the sector has been the proximity between biotech companies and fast growing IT start-ups within the same regional clusters, ie. Bangalore, Mumbai and Hyderabad. Bioinformatics, where frontline information and communication technologies are utilised to process huge amount of biological data, is one of the core competences of the Indian biotech sector.

Another catalyst behind the recent expansion of the industry has been India's decision in 2005 to join the World Trade Organisation and to comply with the TRIP portion of the General Agreement on Tariffs and Trade (GATT), which introduced product patent protection in India. Previously, companies in India could only hold process patents as intellectual property, which allowed for the establishment of a large generic drug industry. Today, the implementation of these legislative initiatives is still far from perfect, but the government is committed enforcing these rules more efficiently in the future.

India's competitive advantage

The visit to India clearly illustrated to me that India definitely will become one of the most important players in the biotech industry's future. The sector is estimated to grow to more than 5 billion USD in revenues and to occupy almost 1 million scientists before 2010.

Before doing business in India one has to be aware of the characteristics that give India a competitive advantage:

• A huge domestic demand for new therapies and drugs, which provides an excellent platform for future growth. The Indian biotech market is ranked second in terms of annual growth rates, only surpassed by China.
• A large and cost competitive workforce of scientists with excellent English language skills. The average salary cost for a Ph.D. in India, is about 60 % of the US salary cost.
• A very large patient population available for fast recruitment for clinical trials. Many Indian patients are therapeutic naive and very easy to recruit for clinical trials.
• An impressive science base and knowledge creation. India has 300 life science colleges, 120 medical colleges and 100 teaching hospitals that together produce 800.000 new life science graduates per year. A clear indication of the strength of India's research infrastructure is that among developing countries, India ranks number one in terms of patents issued and third in terms of the number of life science publications in international scientific journals 

Conclusion: Put India on your strategic agenda

In conclusion, the Indian biotech sector is not only born, but also developing and improving quickly. It has a huge growth potential and a lot of economic factors that work in the sector's favour. The Indian biotech sector is, however, still in its infancy, but within the next 5-10 years it will definitely be a very important player on the international scene along with its Chinese competitor. So the message to Danish and Swedish biotech companies is: Put India on your strategic agenda and start planning for business development in that region. If one finds the right partners, there is a huge potential for new collaborations, knowledge creation and product development.

Kind regards,

Stig Jørgensen
CEO, Medicon Valley Alliance
sj@mva.org