Biotechnology - Is it next after IT for India?
Biotechnology - Is it next after IT for India?
Monday, February 7, 2005
By Vivek Bajaj
With a compounded annual growth rate of 17.51% in the last ten years, the biotechnology industry is one of the fastest growing in the world. The opportunity for further growth abounds as clarity is emerging on the biotechnology and the application of the same on various facets of life.
Biotechnology can be defined as a collection of technologies that capitalize on the attributes of cells, such as their manufacturing capabilities, and put biological molecules, such as DNA and proteins, to work for us. Following is the broad classification of biotechnology - Biopharmaceuticals, Bioagriculture, Bioindustrial, Bioinformation, Bioservices, and Biosuppliers.
The strength of biotechnology lies in the effective diagnostic of diseases and their subsequent treatment efficaciously. Having said that, since the technology is at a very nascent stage the long-term repercussion of the applications is still unknown. With the gradual depletion of natural resources and the increasing demand of the growing as well as the aging population, the world at large is welcoming biotechnology. The very concept of a qualitative as well as a quantitative increase in production through biological means holds mass appeal to the changing demographic profile of the Globe.
The Biotech industry maybe new, but the methods adopted in biotechnology are not new to the world. The evolution of biotechnology extends over three phases - the traditional phase incorporates the blending of various crops by farmers to produce new varieties of products and the modern phase includes identification of cellular and DNA structures through genetic engineering and other technologies.
Like pharmaceutical industry, protection of rights on discovery forms an important part of the business, as is an innovation driven one. IPR clauses on pharmaceutical products are very clear, but the patenting of living organisms still remains vague. This ambiguity is even greater in countries like India, where the average spending on R&D is very little and the whole industry operates in the reverse engineering model. But 1st Jan 2005, is the date for the adaptation of product patent in India. This is supposed to boost multinational activities in the country.
Recent path-breaking successes, such as the clone Dolly, the complete mapping of the human genome, and the commercial use of genetically engineered products, have underscored biotechnology as the newly emerging 'knowledge industry'.
The international biotechnology market, which started 30 years ago with a few US start-ups to manufacture protein drugs, is now an emerging global industry with 4,300 companies in the US, Canada, Europe and Asia-Pacific. The science now caters to finding new solutions in the healthcare, agricultural and industrial disciplines. In the last ten years, the international biotech industry revenues have increased at a CAGR of 17.51 per cent, from $ 8.1 billion in 1992 to $ 41 billion in 2002. The industry has developed mainly in the US, due to the easy availability of venture funding, when it accounts for nearly 70 percent of the world market.
The Asia- Pacific region accounts for around $ 1 billion of the global biotechnology market. The productivity of US companies is higher in terms of revenue per company. This can be ascribed to the existence of a large market in the US for biotech products. Although the US market has maximum revenue per company, the loss generated per company is also the highest.
This is purely attributable to the high R&D cost incurred at the initial stage of product development. Amgen, Genentech and Biogen are some of the top-notch global players with high earnings, diversified product base and almost 30 % spending on R&D activities. Governments around the world are embracing biotechnology as the next major technological driver of economic growth, striving for an optimal balance between rewarding innovations and ensuring the broadest possible access to the benefits of biotechnology.
But while the industry has experienced an impressive growth globally, it has also sparked a number of international controversies. Since biotechnology seeks to understand and manipulate life itself at the molecular level, the field provokes far more profound ethical dilemmas than any other technology previously conceived, save perhaps nuclear technology.
Both industrialized and developing nations are facing demographic crunches that demand biotechnology solutions. The aging western population and growing population in developing countries as well as the control of endemic diseases remain the leading challenges. The biotech sector can witness a stupendous growth attributable to such spurt in technological demands.
Following the phenomenal success of its information technology industry, India is fast emerging as an important player in the biotechnology sector in the Asia-Pacific Region. The large pool of scientific talent available at a reasonable cost, a wealth of R & D Institutions, rich bio-diversity, strong IT skills and an English speaking population has placed India favorably in the global market. A few years ago, India had only 30 biotech companies worth talking about.
Today 160 companies with combined revenues of $150 million enable the Indian biotech industry to forge business links across the world (Source: Biospectrum-Able Biotech Survey, Sept 2003). In recent years, the sector has witnessed a notable growth in terms of new companies registered, larger product pipelines, increased patent filings and several product launches.
But like elsewhere, the sector in India continues to face inadequate venture funding, high cost of infrastructure etc. Having said that, the government's support to form and fund research institutes through the Department of Biotechnology, and increased allocation of funding towards the development of biotech sector in the country is noteworthy, but certainly not sufficient.
The key success factors for the development of biotechnology industry in India are - R&D capabilities, IPR strength, Capital investments, available Product portfolio and diversity of the product portfolio, marketing strength of the companies and partnership with blue chip multinational corporations for technical as well as marketing initiatives. Indian biotech industry offers a gamut of opportunities due to the inherent demographic advantages of the country.
These advantages range from the availability of low cost resources to biological diversity in the country. However, there are drawbacks, which act as major impediments in the overall growth of the industry. These blockages are - missing linkage between research and commercialization, Lack of venture capital funding, Low R&D spending, Low government support and low success in the global biotech market.
Access to capital is critical in Biotech industry due to the high cost of drug development and the length of time it takes for getting a product approved. The biotech industry developed in the US, due to the highly developed venture funding. Most firms do not have existing products in the market that generate cash flows, and are dependent on funds from venture capital firms, public equity markets, and strategic alliances for sharing development costs and spreading risk.
Biotech start-ups are usually funded through seed money provided by venture capitalists. Private investors sometimes provide additional funds, assuming that research and development (R&D) efforts show potential.
Thus, majority of funding in the US biotech industry is done through Venture Capital financing and public offering of equities. Biotechnology is still relatively new ground for the Indian venture capitalist community and this lack of understanding combined with caution following the dotcom losses is seriously limiting the availability of funding for both start-ups and established companies. As a result many companies are employing a so called 'earn as you learn' model to launch and sustain their businesses. This involves revenue-generating projects such as contract research or contract manufacturing. For established companies, Indian banks are the main source of capital.
Monday, February 7, 2005
By Vivek Bajaj
With a compounded annual growth rate of 17.51% in the last ten years, the biotechnology industry is one of the fastest growing in the world. The opportunity for further growth abounds as clarity is emerging on the biotechnology and the application of the same on various facets of life.
Biotechnology can be defined as a collection of technologies that capitalize on the attributes of cells, such as their manufacturing capabilities, and put biological molecules, such as DNA and proteins, to work for us. Following is the broad classification of biotechnology - Biopharmaceuticals, Bioagriculture, Bioindustrial, Bioinformation, Bioservices, and Biosuppliers.
The strength of biotechnology lies in the effective diagnostic of diseases and their subsequent treatment efficaciously. Having said that, since the technology is at a very nascent stage the long-term repercussion of the applications is still unknown. With the gradual depletion of natural resources and the increasing demand of the growing as well as the aging population, the world at large is welcoming biotechnology. The very concept of a qualitative as well as a quantitative increase in production through biological means holds mass appeal to the changing demographic profile of the Globe.
The Biotech industry maybe new, but the methods adopted in biotechnology are not new to the world. The evolution of biotechnology extends over three phases - the traditional phase incorporates the blending of various crops by farmers to produce new varieties of products and the modern phase includes identification of cellular and DNA structures through genetic engineering and other technologies.
Like pharmaceutical industry, protection of rights on discovery forms an important part of the business, as is an innovation driven one. IPR clauses on pharmaceutical products are very clear, but the patenting of living organisms still remains vague. This ambiguity is even greater in countries like India, where the average spending on R&D is very little and the whole industry operates in the reverse engineering model. But 1st Jan 2005, is the date for the adaptation of product patent in India. This is supposed to boost multinational activities in the country.
Recent path-breaking successes, such as the clone Dolly, the complete mapping of the human genome, and the commercial use of genetically engineered products, have underscored biotechnology as the newly emerging 'knowledge industry'.
The international biotechnology market, which started 30 years ago with a few US start-ups to manufacture protein drugs, is now an emerging global industry with 4,300 companies in the US, Canada, Europe and Asia-Pacific. The science now caters to finding new solutions in the healthcare, agricultural and industrial disciplines. In the last ten years, the international biotech industry revenues have increased at a CAGR of 17.51 per cent, from $ 8.1 billion in 1992 to $ 41 billion in 2002. The industry has developed mainly in the US, due to the easy availability of venture funding, when it accounts for nearly 70 percent of the world market.
The Asia- Pacific region accounts for around $ 1 billion of the global biotechnology market. The productivity of US companies is higher in terms of revenue per company. This can be ascribed to the existence of a large market in the US for biotech products. Although the US market has maximum revenue per company, the loss generated per company is also the highest.
This is purely attributable to the high R&D cost incurred at the initial stage of product development. Amgen, Genentech and Biogen are some of the top-notch global players with high earnings, diversified product base and almost 30 % spending on R&D activities. Governments around the world are embracing biotechnology as the next major technological driver of economic growth, striving for an optimal balance between rewarding innovations and ensuring the broadest possible access to the benefits of biotechnology.
But while the industry has experienced an impressive growth globally, it has also sparked a number of international controversies. Since biotechnology seeks to understand and manipulate life itself at the molecular level, the field provokes far more profound ethical dilemmas than any other technology previously conceived, save perhaps nuclear technology.
Both industrialized and developing nations are facing demographic crunches that demand biotechnology solutions. The aging western population and growing population in developing countries as well as the control of endemic diseases remain the leading challenges. The biotech sector can witness a stupendous growth attributable to such spurt in technological demands.
Following the phenomenal success of its information technology industry, India is fast emerging as an important player in the biotechnology sector in the Asia-Pacific Region. The large pool of scientific talent available at a reasonable cost, a wealth of R & D Institutions, rich bio-diversity, strong IT skills and an English speaking population has placed India favorably in the global market. A few years ago, India had only 30 biotech companies worth talking about.
Today 160 companies with combined revenues of $150 million enable the Indian biotech industry to forge business links across the world (Source: Biospectrum-Able Biotech Survey, Sept 2003). In recent years, the sector has witnessed a notable growth in terms of new companies registered, larger product pipelines, increased patent filings and several product launches.
But like elsewhere, the sector in India continues to face inadequate venture funding, high cost of infrastructure etc. Having said that, the government's support to form and fund research institutes through the Department of Biotechnology, and increased allocation of funding towards the development of biotech sector in the country is noteworthy, but certainly not sufficient.
The key success factors for the development of biotechnology industry in India are - R&D capabilities, IPR strength, Capital investments, available Product portfolio and diversity of the product portfolio, marketing strength of the companies and partnership with blue chip multinational corporations for technical as well as marketing initiatives. Indian biotech industry offers a gamut of opportunities due to the inherent demographic advantages of the country.
These advantages range from the availability of low cost resources to biological diversity in the country. However, there are drawbacks, which act as major impediments in the overall growth of the industry. These blockages are - missing linkage between research and commercialization, Lack of venture capital funding, Low R&D spending, Low government support and low success in the global biotech market.
Access to capital is critical in Biotech industry due to the high cost of drug development and the length of time it takes for getting a product approved. The biotech industry developed in the US, due to the highly developed venture funding. Most firms do not have existing products in the market that generate cash flows, and are dependent on funds from venture capital firms, public equity markets, and strategic alliances for sharing development costs and spreading risk.
Biotech start-ups are usually funded through seed money provided by venture capitalists. Private investors sometimes provide additional funds, assuming that research and development (R&D) efforts show potential.
Thus, majority of funding in the US biotech industry is done through Venture Capital financing and public offering of equities. Biotechnology is still relatively new ground for the Indian venture capitalist community and this lack of understanding combined with caution following the dotcom losses is seriously limiting the availability of funding for both start-ups and established companies. As a result many companies are employing a so called 'earn as you learn' model to launch and sustain their businesses. This involves revenue-generating projects such as contract research or contract manufacturing. For established companies, Indian banks are the main source of capital.
