The Indian biotech industry comprises home-grown companies, contract researchers and manufacturers, and global biopharmas. [© Anna Polishchuk - Fotolia.com]
India’s biotechnology industry just finished its best year in the last five, with revenues leaping 21.5% over 2010 to Rs. 172.49 billion (roughly $3.9 billion) for the 12 months ending March 31, according to a recently released survey from the 9th Annual BioSpectrum-Association of Biotechnology Led Enterprises (ABLE). Add in life science education activity, and you have what the survey pegged as an economic sector of Rs. 18,399.34 crore (about $4.2 billion).
Yet India is not living up to its potential when it comes to attracting into its borders R&D activity generated by the world’s largest biotech and pharmaceutical companies, according to a report recently issued by The Boston Consulting Group (BCG) and commissioned by the USA-India Chamber of Commerce (USAIC). “Life Sciences R&D: Changing the Innovation Equation in India” noted that U.S. biopharma companies invested $500 million in R&D in India.
While that’s 10 times the investment level of 2002, it’s also a measly 1% of the total amount of overseas R&D investments made by American biopharmas. Overseas spending rose between 2002 and 2009 from 17% to 24% of total R&D budgets of U.S. biopharmas. India’s share doesn’t differ much from China’s, but it’s still much smaller than the approximately 8% share invested in Eastern Europe and the roughly 4% invested in Latin America.
The report did, however, contain some encouraging signs for India’s ability to attract biotech R&D. Of the 40 biopharma R&D executives in India, Europe, and the U.S. surveyed, more than 70% said they were satisfied with their R&D alliances in India and 75% said they expected to increase their R&D activities in India.
“What we were trying to do in this paper was understand what is India’s potential and what would it take to unleash it,” Simon Goodall, partner and managing director with BCG, told GEN. “What would it take for India to move beyond being a labor cost arbitrage and actually on its way to becoming India thought of in the same way that people think about Cambridge, Massachusetts, South San Francisco, or San Diego—as a hub for innovation and development of a new generation of molecules for future needs.”
BCG’s report pointed out that biopharma firms can contain costs by working with India’s research sector to generate greater value through entering strategic partnerships, expanding their scope of sourcing, and establishing clinical hubs. To gain the most from India’s R&D, the report recommended that companies develop drugs to treat diseases affecting smaller populations and look for opportunities in emerging technologies such as nanobiotechnology. Ultimately, India’s academic, government, and industry sectors will have to join with global academia to build the nation’s biotech R&D base.
The Indian biotech industry comprises three key segments, one being home-grown drug developers such as Jubilant Life Sciences and Biocon. Like their U.S. counterparts they have cut costs by scaling back on R&D, accounting for the growth of the second segment, consisting of contract researchers and manufacturers. Global pharma giants that have looked to India for lower-cost R&D and manufacturing comprise the third segment.
The growth of all three has touched off a war for talent, as has the fact that India’s biotech infrastructure is scattered across several major cities and regions. Where U.S. biotech has formed a few dense regional clusters, BCG’s report noted that biotech activity in India is spread out across Baroda, Bengaluru, Chandigarh, Chennai, Delhi, Hyderabad, Kolkata, Lucknow, and Pune.
“What you don’t have in India is what you have in the United States, which is a tradition of academia setting up or being involved with biotech spinouts to bring their ideas forward,” Goodall pointed out. Absent this model, Goodall wondered what other ways there might be of helping academia understand that the innovations they come up with are only truly valuable when they’re translated into products in the clinic and ultimately products that are brought to market.
The limited reach of the academic branch of the biotech industry explains two significant findings in the BCG report. One is the fairly flat revenues for academia from commercializing their discoveries. In 2007–2008, the latest time period studied, India’s tech transfer agency, National Research Development, generated $0.9 million in royalties and licensing fees, the same as the previous year. Royalties and license fees fluctuated between $0.7 million and $0.8 million the prior three years.
There is a relatively low presence by Indian academic and research institutions on the patent front. During 2007–2008, Indian academic and research institutions held a 2% share of drug patents granted compared with 5% for their U.S. counterparts, and 15% for their Chinese counterparts. As the report also noted, though, India’s share of patents granted climbed to 6% in 2009–2010. In India as in China the shares were expected to be higher given lower levels of R&D spending by industry and more government support for academic institutions.
An encouraging sign, however, was the growing number of published scientific documents by Indian researchers in pharmacology, toxicology, and pharmaceuticals over the past decade: 4,642 documents, according to SCImago, placing India third in the world behind China (5,720) and the U.S. (13,314). Back in 2000, India racked up just 695 documents, good for 10th place, SCImago data showed.
With a Little Help from the Gov't
Despite its support for academic institutions, India’s government can also frustrate biotech entrepreneurs since oversight for biotech development falls between several agencies. India’s life science industry group ABLE publicly criticized the government for not offering additional incentives for growing India’s biotech sector. “A key concern that we have highlighted, and which is playing out, is the fragmentation of resources across multiple government and decision-making bodies,” Bart Janssens, partner, managing director, and leader of BCG’s health care practice in India, told GEN.
Yet a look at some statistics in the report shows that over the past decade, India’s government has ramped up spending for biotech. During 2009–2010, some $700 million was spent on major life science agencies such as the Department of Biotechnology, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, and the Department of Science and Technology. This is 3.7 times the level of 2000–2001. Under India’s 11th and current Five-Year Plan (2007–2012), government spending for total science and technology activity is projected to reach about $16 billion, 5.6 times the roughly $3 billion spent during the 1997–2002 plan.
“There is pressure for the government to do more; that is clear,” Janssens told GEN, admitting that “some government agencies are very active. I would argue that the Department of Biotechnology is one of the most proactive ones, with the deployment of funds being good versus what is allocated to them.”
Indian biotech companies are generally satisfied with some government programs such as the tax credit totaling 150% of R&D expenses, Janssens told GEN. “An area for improvement that the industry often refers to is to allow more private sector investments in higher education, given that talent bottlenecks exist,” he said.
Government incentives play less of a role in drawing companies to India than in the U.S. and many other nations, Goodall added: “Global pharma companies have chosen to partner with, or to source activities, or to create captive centers in India basically because the capabilities and the proven talent is there, not because there was an incentive to do that.
“From our point of view, incentives are better directed toward improving the collaboration between academia and industry, both globally and locally, than to attracting industry, which is already going there,” he added.
Companies with the greatest chance of success in India, Goodall said, aren’t those intent on duplicating the success they had developing traditional blockbuster drugs in the U.S. or Europe. Rather, they are companies focused on what the report calls “nichebusters”—a drug for a disease that strikes the developing world or a niche product that requires an innovative and potentially low-cost development pathway. For those companies, “collaborating with an Indian partner may in fact be a great way of bringing that product to market.”
Competition from the East
BCG’s findings offer a helpful roadmap for India to build a significant R&D segment within its biotech industry by leveraging its greatest assets—its talented biotech workforce, growing home-grown companies, their big pharma partners, and a government more interested in the sector as a whole than a decade ago.
Yet India faces a tough challenge if it seeks to be the Asia-Pacific region’s biotech leader: As the BioSpectrum-ABLE survey also showed, India’s 28.66% share of Asia’s biotech industry is a clear second to China’s 44.39% share. China has five publicly traded biotech companies with more than $1 billion in revenues, compared to two for India. China, like India, has also shown interest in growing innovation as well as simply manufacturing drugs cheaply: As reported here last month, China’s number of patent applications escalated 54% in 2009 from the previous year.
An India that can successfully build its R&D capabilities and promote greater commercialization of academic discoveries will no doubt help grow its biotechnology industry. Whether it can mature enough to challenge China’s increasing leadership in the field remains to be seen.