indian biotechnology industry - portfolio analysis

7/29/2019 Indian Biotechnology Industry - Portfolio Analysis

1/15

Submitted by Group 9

Group member Roll number

Bhavna Sharma 2011PGP593

Debojyoti Burman 2011PGP615Himanshu Agarwal 2011PGP649

Mudit Kalra 2011PGP732

Nitin Kumar 2011PGP758

Saindani Pranit 2011PGP844

Suchit Singh 2011PGP899

Indian Biotechnology

Industry

Portfolio Analysis


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TABLE OF CONTENTSBiotechnology Industry in India .................................................................................................................... 3

Introduction .................................................................................................................................................. 3

The Indian Advantage ............................................................................................................................... 3

Firms reviewed: ............................................................................................................................................. 5

1. Bio-pharma sector................................................................................................................................. 5

1.2 Serum Institute of India Pvt. Ltd. ....................................................................................................... 5

2. Bioinformatics Sector: ........................................................................................................................... 5

2.1 Ocimum Biosolutions .................................................................................................................... 5

2.2 Strand Life Sciences ...................................................................................................................... 6

3. Bio-Industry Sector: .............................................................................................................................. 6

3.1 Novozymes .................................................................................................................................... 63.2 Advanced Enzymes ....................................................................................................................... 7

4. Bio-Services Sector: ............................................................................................................................... 7

4.1 TransAsia ....................................................................................................................................... 7

4.2 Quintiles ........................................................................................................................................ 8

5. Bio-Agri Sector: ..................................................................................................................................... 8

5.1 Rasi Seeds ...................................................................................................................................... 8

5.2 Monsanto India Ltd. ...................................................................................................................... 8

Plotting the GE/McKinsey Matrix: The Approach ......................................................................................... 8

Analysis of GE matrix: ................................................................................................................................. 11

Budget 2012: Implications .......................................................................................................................... 11

Appendix ..................................................................................................................................................... 12

List of References ........................................................................................................................................ 15


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Biotechnology Industry in India

IntroductionIndia is emerging as a significant player in the global biotech industry. Biotechnology is deemed as a

revolution throughout the world. Scientists, through Research and Development (R&D) are continuing to

develop cures for diseases that have affected people since time immemorial. With its large population

of over a billion people India creates almost a perfect environment for biotech companies to shift bases

here. In addition, the Indian sub-continent, which occupies only 2.4% of the total surface area on earth,

has the most diverse species of flora and fauna. Also increasing prosperity raises the demand for

healthcare services.

The Indian Advantage

Promising potential to be a global player in the arena of biotechnology Innovation opportunities: Public funding for product innovation and research in the biotech

sector and focused R&D activities by private biotech firms.

The sector has experienced significant growth in government spending since 1985 withconstantly increasing budgetary allocations to the biotech sector

FDI investment up to 100 per cent is permitted via the automatic route Large pool of skilled and cost competitive manpower Well developed and integrated scientific infrastructure Advanced chemical synthesis technologies Manufacturing practices conforming to US and EU norms Diverse biological resources Globally recognized as a producer of low cost, high quality bulk drugs and formulations.

In the year 2010-11, this industry

earned revenues to the tune of US$

3927.6 million growing 21.5 percent

over the last years revenue of US$

3233.2 million. The emphasis

between exports and domestic sales

has also witnessed minor shifts

ranging between two-to-five

percent. The exports across

segment made up 51 percent of the

overall revenue contributing a total

of US$ 2015.7 million. The ratio

between exports and domestic sales

stands at 51:49, which is a sign of a robust industry.

1

1.4

1.82.1

2.5

3

3.6

0

0.5

1

1.5

2

2.5

3

3.5

4

2005 2006 2007 2008 2009 2010 2011

CAGR~23.8%


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The biotechnology sector can be divided into 5 sub-sectors namely:

Bio-Pharma Sector: It is comprised of 130 companies involved mainly in the production ofvaccines, therapeutic drugs and diagnostics. The Indian bio-pharma sector is export-driven, with

exports accounting for more than 58% of revenue.

Bio-Services Sector: A number of global companies are now looking at India to conduct largescale global trials. While low costs and large patient pool still remain the crucial deciding factors

for attracting these companies, skilled investigators and emphasis on quality are some of the

rising factors contributing to the segments growth. The bio-services sector contributes a total of

22% to Indian Biotech sector and it widely consists of clinical research, contract manufacturing,

contract research and consultancy.

Bio-Industrial Sector: The modern use and application of biotechnology for the sustainableproduction of industrially useful products like bio chemicals, biomaterials and bio-fuels from

renewable resources, using living cells and/or their enzymes. This results generally in cleanerprocesses with minimum waste generation and energy use. Enzymes which constitute a major

segment of this sector, are used in industrial processing of starch, distilleries, alcohol, textile &

garments, leather processing as well as for supplementing healthcare products.

Bio-Informatics Sector: Bioinformatics is the field of science in which biology, computer science,and information technology merge to form a single discipline. Bio-informatics deal with the

creation and maintenance of extensive electronic databases on various biological systems; it is

the smallest part of the current domestic biotechnology industry.It can play important role in

critical areas such as data mining, mapping and DNA sequencing. There is also opportunity in

functional genomics, proteomics and molecule design simulation. Major Products and Services

include Database Services, Integrated research application software, Biotech software services.

Bio-Agri Sector: BioAgri is the biotechnology applied to agriculture. It is the use of organisms orparts of organisms to improve the agricultural products and processes. Selection of desired

characteristics, domestication of plant species, and mechanics of cell biology come under this

sector. In India, BioAgri is further classified into hybrid seeds, transgenic crops, bio-pesticides

and bio-fertilizers.

For further insight into the market breakup of the sub-sectors refer appendix at the end of report.


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Firms reviewed:

1. Bio-pharma sector1.1 Panacea Biotech: It is the second

largest vaccine producer in India.

Major products offered include

Vaccines, Diabetes Management

Products, Anti pyretic, Anti renal

management drugs. Revenues

totaling $20 million were recorded in

FY 2011 with a growth of 32%. The

firm has been in news for the losses of

INR72 crores after its vaccine

pentavalent was delisted by WHO. It

heavily invests in its R&D facilities and expects to enter branded generics in emerging markets

like Africa and Eastern Europe. The sales figures for 2008-11 are as shown.

1.2 Serum Institute of India Pvt. Ltd.

It is the worlds largest producer of Measles and DTP

vaccines. Major products offered are various anti-

viral and anti-bacterial vaccines like NASOVAC,

Tubervac, Anti-cancer and Hormonal products. It

amassedrevenues of $216 million in FY11 with agrowth of 16%. Its efforts have been constantly

lauded by WHO for its efforts in research in this area.

The adjoining graph displays its sales figures.

2.

Bioinformatics Sector:2.1 Ocimum Biosolutions

It is the leading global genomics firm

providing information solutions. Important

products and services include Microarray

services, Comprehensive genomic reference

databases, life science lab information

0

200

400

600

800

1000

1200

FY08 FY09 FY10 FY11

Sales (INR)

Sales (INR)

0

10

20

30

40

50

FY09 FY08 FY07 FY06

Sales(INR)

INR Sales

65

41.447.57

65 60

0

20

40

60

80

2010-11 2009-10 2008-09 2007-08 2006-07

Revenues of OCIMUM

BIOSOLN


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management, other research consumables. In 2011 the company recorded revenues of $13 million.

It has witnessed low growth. The firm manages worlds largest gene expression databases.

2.2 Strand Life SciencesThe firm is a pioneer in discovery research

informatics. Core strengths of the firm includedata mining, predictive modeling, bioinformatics

and computational chemistry. The revenues of

$10 million in FY11 and it witnessed a record

growth of 40% in last five years. Clients include 5

out of top 10 pharmaceutical companies of the

world.

3. Bio-Industry Sector:

3.1 NovozymesIt is the largest supplier firm of industrial

enzymes and microorganisms in India

specializing in enzymes and microbes for

manufacturing of detergents, food, feed,

textiles, leathers, oil, alcoholic beverages

and bio-fuels. Revenues to the tune of

$230 million were earned in FY2011 due

to a growth of 16%. The firm recently

acquired Biocons enzyme business for

$155 million.

42

35 35

20

10

0

10

20

30

40

50

2010-11 2009-10 2008-09 2007-08 2006-07

Revenues of STRANDLIFE SCIENCES

0

100

200

300

2010-112009-102008-092007-082006-07

NovoZymes SouthAsia

Revenues


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3.2 Advanced EnzymesIt is the pioneer in plant, animal and microbial

based enzymes like human healthcareenzymes, animal healthcare, food processing

and industrial processing enzymes. The

company recorded revenues of $154 million in

FY11 and saw a record growth of 26% in last

five years. The company caters to worldwide

markets and has 50% export share just from US

markets.

4. Bio-Services Sector:4.1 TransAsia

The company is recognized as a leading player in the diagnostic world. It provides Diagnostic

Services and Biochemistry Analyzers for hospitals. Revenues of $20 million were recorded in FY 2011

with a growth of

32%. McEvoy

and Farmerreport on IVD

industry in India

(2006) ranks

Transasia as the

# 1 Company in

the Indian

Diagnostic

Industry. It has

the largest Sales

and Installation

base with over

20,000installations all

over the country.

0

50

100

150

200

2010-112009-102008-092007-082006-07

Advanced Enzymes

Revenues

0

100

200

300

400

500

600

Transasia Biomed Tulip Quintiles India

2010-11

2009-10

2008-09


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4.2 QuintilesThe firm is a global pioneer in pharmaceutical services like Biostatistics, Central Laboratory Servies,

Clinical monitoring, Data management offering a functional service provider. The company revenues

equaled $99 million in FY11 and it registered a growth of 23%. The only global CRO with its presence

in India verified by US FDA

5. Bio-Agri Sector:5.1 Rasi Seeds

The company is one of the leaders in cotton hybrids and maker of one of the most successful BT

cotton varieties, cotton hybrids, maize hybrids, pearl millets and vegetables. The company amassed

revenues of $74 million in FY 2011.

The firm is known for heavily

investing in its R&D facilities in the

recent past. The firm has been innews recently for a Rs.10 crore

outlay in Attur for R&D in virus

resistant and transgenic seeds.

5.2 Monsanto India Ltd.The firm is a pioneer in chemical

weed control and is a market leader

in rice herbicides, weed herbicides like Roundup, Maize seed hybrids like Dekalb. The company

earnedrevenues of $75 million in FY11 and witnessed a record growth of 106% in last FY.Firm has

made some aggressive acquisitions in past and plans to establish many more breeding stations andlaboratories. Recently in news for opposition to its melon patent which violated patent laws.

Plotting the GE/McKinsey Matrix: The Approach

The GE/McKinsey Matrix identifies the optimum business portfolio as one that fits perfectly to the

company's strengths and helps to exploit the most attractive industry sectors or markets.

Thus, the objective of the analysis is to position each SBU on the chart depending on the SBU's

Strength and the Attractiveness of the Industry Sector or Market on which it is focused. Each axis is

divided into Low, Medium and High, giving the nine-cell matrix. The following methodology has

been adopted to calculate various parameters.

0

200

400

600

800

2007 2008 2009 2010 2011

Revenues(in Rs. Crores)

Revenues(i

n Rs.

Crores)


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Business Strength Methodology followed

Market Share Ratio of revenue to total market size of the

sector

Profit Margins Ratio of Net Profit to Sales

D/E ratio Ratio of total debt/ Total Shareholder's

Equity

Percentage of expenses

on R&D

Percentage of expenses that were spent on

research

Cost of capital Taken as weighted average cost of capital

Brand Awareness (1 to

10)

Subjectively calculated based on secondary

research

Product Quality (1 to 10) Subjectively calculated based on secondary

research

Industry Attractiveness Methodology followed

Market Growth CAGR in last 5 years

Market Size Total Business done by the sector as a whole

Profit Margins of top 5 players Average profit margins of the top 5 players

Competitiveness HHL Index has been used to calculate

competitiveness of the sector

Calculated using sum of s^2 for top 3 firms

where s is share of that firm

Growth in Exports CAGR of export revenues of the sector in last

5 years

Regulatory Regime (1-10) Subjectively calculated based on secondary

research on support given to the industry

Ease of entry (1-10) Subjectively calculated based on secondary

research


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The following table shows the calculation of the indices used in the plotting of the matrix.

Sector Company Name Business Strength Industry Attractiveness Size (Revenues)

Bio Agri Rasi Seeds 1.627204074 78.351 370

Monsanto India Ltd. 1.8 78.351 369.56

Bio Pharma Panacea Biotech 1.66938 180.609 967

Serum 1.9 180.609 1080

Bio Industry Novozyme 1.68736 19.368 254

Advanced Enzyme 2.33643 19.368 154

Bio Services Quintiles 1.1 111.596 476

Transasia 1.23 111.596 364.5

Bio Informatics Ocimum Biosoltions 0.877676667 11.505 65

Strand Life Sciences 1.26969 11.505 42

The GE matrix was plotted as shown below:

Rasi Seeds

Monsanto

India

SerumPanacea

Novozyme AdvancedEnzyme

Quintiles Transasia

Ocimum

Strand Life

Science

IndustryAttractiveness

Business Strength

Bio Agri

Bio Pharma

Bio Industry

Bio Service

Bio Informatics


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Analysis of GE matrix:

Bio-Pharma:This sector dominates the biotech sector. Industry attractiveness is high andbusiness strength is

moderate to high. Launch of many similar products is expected in two years. It is expected togrow at 25%.

Bio-Agri:This segment is one of the fastest growing segments. In last 5 years its market share increased

from 5% to 14%. It has revolutionized the farming space with the launch of Bt Rice, Bt maize, Bt

Tomato and Bt Cauliflower. The sector needs more investments in R&D and acceptance of

products among farmers.

Bio-Informatics:This is the smallest segment of biotech industry. It barely has 2% of market share in overall

industry. Most of the companies in this segment are small scale. Many big companies like TCS

and HCL have forayed in this segment. Indian companies need to establish a good reputation to

protect client data.

Bio-Industry:This segment has slowest growth rate of 12%. Most of the Indian companies do not have their

own R&D division. They are importing the enzyme and selling in India. This sector needs more

investment in order to strive for high growth

Bio-services:This segment is growing at a rate of 20% and is expected to continue the same growth rate in

future. The segment is facing competition from small home grown companies. Mandatory

registration of all clinical trials in India will lead to a rise in the number of global companies

outsourcing clinical trials to India.

Budget 2012: Implications

Following is an analysis to see the impact of the latest budget on the biotechnology sector. Considering

the significance of this constantly growing sector on the Indian economy it is only sensible to analyze the

effect of the policy changes.

Expectations of the Industry:

Reduction of Excise duty from the present level of 10% to 4% Reduction of services tax by 5% from existing 10.30% Non inclusion of agrochemicals in the list of Free Trade Agreements (FTAs) Permit tax free import of R&D equipments to the tune of 25% of export earnings


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States should be prevailed upon not to levy VAT on agrochemicalsBudget Outcome:

Basic customs duty is being reduced from 10% to 5% on probiotics (cost-effective means ofcombating bacterial infections)

This year it has been decided to make common infrastructure in agriculture markets, soil testinglaboratories and capital investment in fertilizer sector eligible for Viability Gap Funding under

the Scheme to support PPP in infrastructure

Increase in the allocation for the initiative of Bringing Green Revolution to Eastern India (BGREI)scheme from 400 crore in 2011-12 to 1000 crore in 2012-13

Agriculture Credit: The target for agricultural credit in 2012-13 has been raised to 5,75,000 crorewhich represents an increase of 1,00,000 crore over the target for the current year

Sum of 200 crore for incentivizing research with rewards, both for institutions and the researchteam responsible for such scientific breakthroughs

Appendix

The appendix has been included to offer additional insight into the sector breakup into the 5 subsectors.

Bio-Pharmaceutical sector

accounted for the largest

chunk with 61.7% share. Bio-

Services and Bio-Agri

followed with a share of 18.8

and 14.4% shares

respectivelyBio-Informatics has the least

share but its one of the most

rapidly rising sectors owing

to Indian IT expertiseFigure 1: Market break-up by revenues 2010-11

61.70%

18.80%

14.40%

3.60%1.50%

Bio-Pharma

Bio-Services

Bio-Agri

Bio-IndustrialBio-Informatics


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Bio-Pharma contributes most

to exports followed by bio-

services. Outsourcing has

opened up further avenues ofgrowth for biotech. India is a

good base outsourcing because

of its cost effectiveness.

Expertise in bioinformatics can

play a significant role in critical

areas like data mining and

mapping

Figure 2: Export share among sub-sectors 2010-11

Figure 3: Exports of biotechnology products in $ billion

Revenues from biotech exports valued at $1.8 billion in FY2011, constituting 52% of biotechindustrys revenue. As shown we can see an annual growth of 18.7% over 2007-2010 in export

driven revenues.

0

0.5

1

1.5

2

2.5

3

3.5

4

2008 2009 2010 2011

CAGR~18.7%

62.50%

33.70%

0.80%1.70% 1.20%

Bio-PharmaBio-Services

Bio-Agri

Bio-Industrial

Bio-Informatics


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Figure 4: Domestic business growth of biotech industry, FY11

In domestic sector, India offers a suitable population for clinical trials because of its diverse gene

pool, which covers a large number of diseases. Owing to a huge agricultural economy, India has a

huge opportunity in the agri-seeds and agri-chemicals. Lifestyle diseases are set to account for a

greater part of health care market. Rising per capita income and middle class population is yet

another contributor to growth.

Figure 5: Export business growth of biotech industry, FY11

25.80%

96.80%

28.10%

8.10%

-6.80%-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Bio-Pharma Bio-Services Bio-Agri Bio-Industrial Bio-Informatics

21.10%

16.10%19.10%

28.10%

43.40%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Bio-Pharma Bio-Services Bio-Agri Bio-Industrial Bio-Informatics


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List of References

http://biospectrumindia.ciol.com/content/BioServices/11106141.asp

http://biospectrumindia.ciol.com/content/CoverStory/71106091.asp

http://biospectrumindia.ciol.com/cgi-bin/printer.asp?id=127792

http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/Biotechnology1.htm

http://www.ableindia.in/pdf/eighth_biospectrum_June_10.pdf

http://www.ibef.org/

http://biospectrumindia.ciol.com/

http://www.rasiseeds.com/profile.html

http://www.monsantoindia.com/

http://tutor2u.net/business/strategy/ge_matrix.htm

http://www.business-tools-

templates.com/U_GuidesPDF/General%20Electric%20GE%20McKinsey%20Matrix%20User%20Guide.pdf

http://articles.timesofindia.indiatimes.com/2012-03-17/union-budget/31204496_1_weighted-

deduction-excise-duty-small-biotech-firms

http://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-

2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-

sector/articleshow/12303122.cms
http://biospectrumindia.ciol.com/content/BioServices/11106141.asphttp://biospectrumindia.ciol.com/content/CoverStory/71106091.asphttp://biospectrumindia.ciol.com/cgi-bin/printer.asp?id=127792http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/Biotechnology1.htmhttp://www.ableindia.in/pdf/eighth_biospectrum_June_10.pdfhttp://www.ibef.org/http://biospectrumindia.ciol.com/http://www.rasiseeds.com/profile.htmlhttp://www.monsantoindia.com/http://tutor2u.net/business/strategy/ge_matrix.htmhttp://www.business-tools-templates.com/U_GuidesPDF/General%20Electric%20GE%20McKinsey%20Matrix%20User%20Guide.pdfhttp://www.business-tools-templates.com/U_GuidesPDF/General%20Electric%20GE%20McKinsey%20Matrix%20User%20Guide.pdfhttp://articles.timesofindia.indiatimes.com/2012-03-17/union-budget/31204496_1_weighted-deduction-excise-duty-small-biotech-firmshttp://articles.timesofindia.indiatimes.com/2012-03-17/union-budget/31204496_1_weighted-deduction-excise-duty-small-biotech-firmshttp://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-sector/articleshow/12303122.cmshttp://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-sector/articleshow/12303122.cmshttp://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-sector/articleshow/12303122.cmshttp://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-sector/articleshow/12303122.cmshttp://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-sector/articleshow/12303122.cmshttp://economictimes.indiatimes.com/news/news-by-industry/healthcare/biotech/biotech/budget-2012-pranab-mukherjee-fails-to-address-the-wish-list-of-biotechnology-sector/articleshow/12303122.cmshttp://articles.timesofindia.indiatimes.com/2012-03-17/union-budget/31204496_1_weighted-deduction-excise-duty-small-biotech-firmshttp://articles.timesofindia.indiatimes.com/2012-03-17/union-budget/31204496_1_weighted-deduction-excise-duty-small-biotech-firmshttp://www.business-tools-templates.com/U_GuidesPDF/General%20Electric%20GE%20McKinsey%20Matrix%20User%20Guide.pdfhttp://www.business-tools-templates.com/U_GuidesPDF/General%20Electric%20GE%20McKinsey%20Matrix%20User%20Guide.pdfhttp://tutor2u.net/business/strategy/ge_matrix.htmhttp://www.monsantoindia.com/http://www.rasiseeds.com/profile.htmlhttp://biospectrumindia.ciol.com/http://www.ibef.org/http://www.ableindia.in/pdf/eighth_biospectrum_June_10.pdfhttp://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/Biotechnology1.htmhttp://biospectrumindia.ciol.com/cgi-bin/printer.asp?id=127792http://biospectrumindia.ciol.com/content/CoverStory/71106091.asphttp://biospectrumindia.ciol.com/content/BioServices/11106141.asp

indian biotechnology industry - portfolio analysis

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