Biotechnology
Biotechnology is a fast emerging sector and is expected to play a key role in the new economy. India has many comparative advantages in terms of knowledge, skills, R&D facilities and costs in the sector. The institutional infrastructure in the country provides the basic foundation for these strengths to translate into business opportunities.
Biotechnology in India can be divided into three broad areas - human and animal health care, agricultural, and industrial.
The core competence of Indian biotech industry exists in:
• Handling fermentation-based products,
• Handling of labile fermentation-based compounds efficiently in downstream processing methods,
• Use of plant and animal parts for extracting value added products of high purity,
• Use of cell/microbial culture techniques,
• Plant breeding techniques,
• Plant cell/tissue culture, etc.
• The estimated average consumption of biotech products in India during 1997 was US$ 1,798 million in value terms.
• India has an edge over other countries to set up viable and competitive biotech enterprises and the areas of core competence include :
• Capacity in bioprocess engineering;
• Skills in gene manipulation of microbes and animal cells;
• Capacity in downstream processing and isolation methods;
• Skills in extraction and isolation of plants and animal products;
• Competence in recombinant DNA technology of plants and animals;
• Excellence in traditional and molecular marker assisted breeding of plants and animals; and
• Infrastructure in fabricating bio-reactors and processing equipment.
The Biotech Market success Story
• Development and Production of indigenous recombinant Hepatitis B vaccine by a number of companies
• World Patents for a solid state fermentation called plafactor; US patents for F-virosome, Drug delivery system for gene therapy; US and European patents for refamicine shuttle vectors in E-coli; US patent in the production of hydrophilic nanoparticle for drug delivery system, etc.
• Production of indigenous HIV I&II Detection rapid Test Kit using naked eye visible agglutination of the whole blood and a confirmatory Western Blot Test Kit utilizing Indian strain; development of various other indigenous diagnostic kits and transfer to Industry.
• Introduction of transgenic Bt cotton and successful trial under contained conditions of a number of vegetable, horticulture and crop transgenics.
• Development of a number of indigenous rDNA products to be launched shortly like human insulin, growth hormone, G-CSF, Interferons (alpha 2a &2b), Erythropoetin etc.
• Initiatives for the establishment of various biotechnology parks in different States of the country, apart from establishment of biotechnology incubators, pilot plant facilities, etc. for the small entrepreneurs.


Policy Initiatives
The union government as well as the state governments have taken various initiatives to boost biotechnology in India. Several state governments including Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra and Delhi have taken initiatives to encourage entrepreneurs to set up biotech industries in their states.
Some of the key steps taken include:
• announcing a separate Biotechnology Policy for states as a recognition of the importance of the sector as a key growth area;
• setting up of exclusive Biotechnology Parks;
• instituting Task Forces with experts to guide them on policy issues.


Opportunities
• Biotechnology is expected to offer investment opportunities of US$ 500 million during 2003. The growth is expected in the following areas:
Area Growth
Agri-Biotech 60%
Diagnostic 25%
Vaccines 15%
• The Indian biotechnology market is expected to grow to US$ 204 million by 2003 and US$ 408 million by 2007.
• Many Indian companies have introduced products of original research through technology transfer from R&D institutions in India in the field of vaccines, diagnostics and reagents. Some others have teamed up with foreign companies for sourcing technologies and are experimenting with new products produced by foreign technologies, with a view to introduce them into the Indian market within the framework of Indian laws.
• Outsourcing of R&D in biotechnology represents a tremendous opportunity for Indian companies to do contract research for overseas corporations. The current global spend on outsourced R&D is approximately US$ 7 billion and is expected to grow at 30 per cent per annum for the next 5 years.
• There are around 50 R&D labs in the public sector, providing high quality R&D and over 20 conducting research in specific areas of biotechnology. In addition to these, there are companies in Bangalore with excellent technical manpower and world-renowned institutions such as the Indian Institute of Science (IISc), the National Centre for Biological Sciences (NCBS), Jawahar Lal Nehru Centre for Advanced Scientific Research (JNCASR), all of which provide high-quality R&D services to organisations worldwide.
• Global biotech majors including IBM Life Sciences, Incyte Genomics, Affymetrix and AntexBiologics have shown interest in forging partnerships with Indian companies in the biotechnology sector.
There are enormous investment opportunities in the following areas :

• Vaccines: India’s huge population makes it among the world’s largest markets for vaccines of all types. India faces a growing demand for new-generation and ‘combination’ vaccines, such as DPT with Hepatitis B, Hepatitis A and injectable polio vaccine, besides several veterinary and poultry vaccines. Apart from conventional vaccines, the rDNA and nucleic acis vaccines have further market potentials as and when approved by the regulatory authorities.

• Bioactive Therapeutic Proteins: Opportunities exist for speeding up production facilities, based on licensing and other forms of cross-border relationships for all therapeutic products approved for marketing in India, namely Insulin, Alpha, Interferon, Hepatitis B surface antigen based vaccine, Erythropoietin, Streptokinase, Chymotrypsin, PGF, GCSF, Gm-CSF, Interleukins and others, which is expected to grow to US$200 million in 2005.

• Agriculture sector: Hybrid seeds, including genetically modified seeds represent new business opportunities based on yield improvement, and development of a production base in biopesticides and biofertilisers would facilitate India’s entry into the growing organic or natural foods market. The Genetically Modified crops like corn, cotton, millet, mustard and other nutritionally improved vegetables also provide good potential in the agriculture sector.

• Contract Research: The cutting edge of the biotech sector is development of new products. Indian pharma companies possess competitive skills in chemical synthesis and process engineering, which they can leverage to develop new chemical entities, and with the application of bioinformatics tools, tap into the high-potential biogenerics segment. Under a positive IPR regime, the synergies in pharma-biotech relationships can be successfully turned into an opportunity for undertaking inernational contract research in segments of new drug discovery, clinical trials, and bioinformatics related services.

• Clinical Trials and outsourcing: A large number of new NCEs under clinical testing are all products of rDNA, most of these emanating from small and medium sized biotech companies. With clinical trials in India costing less than one-tenth of the levels in developed markets, clinical research organizations can seek research and trial projects in India from international companies, provided they are able to demonstrate practices and follow up procedures prescribed to meet international standards, especially the WHO prescribed Good Clinical Practices, and even take a lead by harnessing India’s IT strengths to generate all their research reports and documentation in electronic form as it is becoming mandatory.

• Bioinformatics: Indian bioinformatics companies can play a significant role in critical areas such as data mining, mapping and DNA sequencing, besides functional genomics, proteonics and molecule design simulation in the US$ 2 billion world market for bilinformatics services. Complex algorithm writing and the use of computational capacities to study the3D structures of proteins are the main skills brought into play in this segment. The existing infrastructure established by DBT in the form of the DICs and sub-DICs has good potential to be outsourced in the genomic and proteomic research with large pool of genetic biodiversity available within the country.

• Infrastructure Support Institutions: The growing interest in outsourced research and the emergence of start ups has led to a demand for industrial parks, containing a large number of shared facilities for research and development, most suited to start ups and contract research activities. Key facilities include clean rooms, gas pipelines, filtered air, wet labs, high-end computers for bioinformatics and protein modelling studies, besides customs clearing, patent facilitation related administrative support. Such parks also provide opportunities for international cooperation. In the coming scenario when a large number of States are going to establish biotechnology parks, the available infrastructure can be utilized to develop various biotech products.

India's biotechnology sector is several decades old, and has been nurtured since its inception by the national government. However, it is an industry still in its infancy. Currently India is making a considerable investment in both academics and the existing industry infrastructure to accelerate the sector's growth and contributions.

Government support and regulation
The government's long-standing support for scientific pursuits dates back to the 1940s, when it established the Council of Scientific and Industrial Research (CSIR), which today has a network of some 40 laboratories, 80 field stations, and 22,000 personnel.
Another key government institute — the Centre for Cellular and Molecular Biology (CCMB) - was established in 1977 solely for the advancement of biotechnology. CCMB has spawned a number of industry collaborations and technology spin-offs. It worked with the private sector to develop India's first recombinant DNA vaccine for hepatitis B. It developed protocols for CCR-based markets and therapeutic cancer treatments. Typically, private firms partner with CCMB by funding a particular research effort. The institute conducts the research and development, and the firm handles the commercialisation process. Some such collaborations include:
Developed country's first recombinant DNA-based Hepatitis-B vaccine for human use by Shantha Biotechnics (P) Ltd., Hyderabad.
Helped Dr Reddy's Research Foundation, Hyderabad through specific technology tie-ups.
Transferred a technology about RNasin to M/s Bangalore Genei (P) Ltd., Bangalore.
Helped M/s EID Parry Ltd., Chennai by developing a protocol for standardization of PCR-based markers to distinguish the parental and hybrid seed varieties of rice.
Undertook a collaborative research project with M/s Dabur Research Foundation and the IICT to develop a new therapeutic agent for the treatment of cancer.
Started a collaborative research program with M/s Biological Evans Ltd., Hyderabad to provide rapid, accurate and reliable diagnostic service based on modern molecular methods to cancer patients.
Engaged in a long-term collaboration with Satyam Computer Services Ltd (SCSL), to jointly identify business opportunities at the global level for IT-enabled services in bioinformatics and related fields.
In 1986, the government created the Department of Biotechnology and gave it a very clear mandate: to promote biotechnology throughout the country on both the local and national levels. To that end, the Department:
Collects and disseminates information
Develops bio-safety guidelines; promotes biotech education and R&D
Fosters university and industry interaction
Establishes research institutes
Approves proposed biotech projects.
In summary, the government's Department of Biotechnology is a very powerful agency. Other efforts to expand the industry include the following:
The national budget for the fiscal year 2001-02 provides a huge increase for R&D spending on biotechnology and gives biotech firms a 150 per cent tax deduction for R&D.
The government is promoting the establishment of biotechnology centres within industrial parks. Some are already established like Marine Biotech Park in Chennai; others are in the pipeline. For example at least one state - Andhra Pradesh - is collaborating with a private promoter to build a state-of-the-art biotech park. Such parks are expected to pop up across the country. Some of these projects are partly funded by the Central Government and the remaining comes from the local state government and private investors.
Loose regulation. Government protection for biotechnology innovations is very loose. India's patent act, which was passed in 1970, does not mention biotechnology or any related terms. Therefore, no living entity (plant or animal) produced by biotech processes is eligible for patent protection. However, the process itself can be patented.
Several state governments, particularly in southern India, are pursuing biotech policies of their own. In the meantime, both national and local governments are working to convince the public of biotech's great opportunities and implications. There has been a lot of recent press regarding biotechnology, and public perceptions are being favourably changed.

Access to capital
Biotechnology firms have access to capital through two avenues: private venture capital and government funding.

Venture capital limited
Venture capital (VC) funding in India is severely limited. We have six or seven prominent VC firms, including ICICI (Industrial Credit and Investment Corporation of India), and Morgan Stanley, which been fairly active here. But most VCs are unwilling to invest in biotech companies' R&D activities. Rather, they want to fund companies whose product and market are clearly identified. They want to fund the commercialisation of techniques that have already been developed. I think this mentality will change in time, but at the moment it leaves entrepreneurs feeling the pinch when it comes to conducting basic R&D. The other VC funds available include ILFS, ICF, SIDBI and CDC.

Government support
Government grants are available, but they tend to be small and typically targeted to government institutions or research bodies. There is little government support for private sector R&D outside of that available from the Technology Development Fund, which finances CSIR-approved projects. However, many state governments are setting up biotech development funds of their own and earmarking significant amounts to invest in companies located within their boundaries.

Human resources
India has a great deal of expertise in certain critical areas: microbiology, chemical synthesis, immunology, and biotech equipment manufacturing, to name a few.
Several universities and colleges have biotechnology curricula. The Indian Institute of Technology (IIT) is a premier engineering school that has launched master's and doctoral degree programs in the biosciences and biomedical engineering. Local governments are setting up institutes for bioinfomatics and applied biotechnology. As a result, the country is preparing a pool of talent for this growing industry.

Products and technology
Biotechnology promises to be an important business sector of the future. To date, however, there has been little commercialisation of Indian-developed products. Many products are imported by domestic firms as well as by foreign firms that have a presence here.
India's growing population, especially its large agriculturally based segments, stands to benefit tremendously from new technologies in agriculture, nutrition, pharmaceutical treatments, and, of course, environmental sciences.

Entrepreneurial endeavours tend to fall into the following categories:
Industrial enzymes. Currently, about 70 per cent of the total enzymes business in the Indian market is controlled by Novozymes and Genencor.
Bioinfomatics. India has proven strengths in information technology. A number of Indian entrepreneurs are looking to use these strengths as leverage for entering the field of bioinfomatics.
Bioagriculture. More than half the country's population depends on agriculture for its livelihood. Bio fertilizers and herbicides have a huge market here. As a result, bioagriculture in India has been growing at a rate of more than 70 per cent a year.
Contract research. The cost of doing research in India is relatively low, and the demand for this activity is high. Many entrepreneurs are pursuing this opportunity, despite the need to meet FDA, GMP, and ITR guidelines.

Globalisation
As India's biotech base diversifies, so does its global outreach and appeal. Our pharmaceutical sector has attracted a large number of multinational companies such as Eli Lily and SmithKline Beecham. Many of the large US and European multinationals already have a manufacturing presence here. Some are establishing partnerships with Indian firms. For example, Eli Lily has an agreement with Ranbaxy to market Monsanto's recombinant bovine growth hormones in India.

Data mining and warehousing capabilities going global. Our information technology products have found lucrative markets abroad, particularly in the United States, which accounts for between 60 and 70 per cent of India's IT exports. Now Indian IT companies are looking at leveraging the data mining and data warehousing businesses. The challenge is to convince biotech companies in the United States and Europe that it is safe to transmit their data to India. I think a business model will emerge in which Indian bioinfomatics companies set up an operation or subsidiary in the targeted foreign countries. Having a local presence in these places will nurture business relationships.
Our bioagriculture segment also consists of a mix of multinationals (e.g., Monsanto and US Agriseeds) and Indian firms (e.g., Mahyco and Proagro).
Several India companies have established a presence in the United States and Europe, and one such company i.e. Dr. Reddy's Lab is also listed on the New York Stock Exchange.
India's biotechnology market at a glance

Number of companies
Using a broad definition of ‘biotech' - which includes basic industries such as food processing and highly sophisticated ones such as recombinant medical therapies - the sector has about 800 companies. However, approximately 15 of these are engaged in sophisticated biotech businesses. Biotechnology employs about 10,000 people and generates roughly US$500m in revenue annually. That figure is expected to surpass US$2bn by the end of the year 2001.
The pharmaceutical and human health industries constitute about 60 per cent of the biotech sector, and continue to grow. Bioagriculture is the next largest component. Other important industries include industrial enzyme manufacture, bioinfomatics, and medical devices.
Most Indian companies are private. Biotechnology has had limited appeal so far on our capital markets, and we have less then a dozen biotech companies listed on the public markets.
We have had some limited IPO activity, and more is expected this year and next. Activity has been slowed by the slump in our capital markets — a situation that is occurring in markets around the world, and is heavily reflected on the NASDAQ.
Most Indian companies are not engaged in basic R&D or drug discovery. Rather, they manufacture the products of others, through the development of unique manufacturing