PROJECT REPORT

ON

INDIAN BIOTECHNOLOGY MARKET

Submitted By:

Sushant Bharagava (sushant.bharagava85@gmail.com)

Mohd. Shadab Khan (sbk1584@gmail.com)

Jamia Hamdard, FMIT

MBA (Pharma Management)

INDIAN BIOTECHNOLOGY MARKET

(A Report)

1). Contents:

1). Introduction

2). Market Growth & Potential

3). Key Players

4). Opportunities

5). Why India?

6). Competitive Analysis (Swine flu)

7). Challenges & Future Strategies

1). Introduction:

The division between biotechnology and pharmaceuticals is fairly defined in India. Biotech still plays the role of pharma’s little sister, but many outsiders have high expectations for the future. India is accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the world in number of biotech’s. In 2004 & 2005, the Indian biotech industry saw its revenues grow 37% to $1.1 billion. The Indian biotech market is dominated by biopharmaceuticals; 75% of 2004-5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of sales.

The Indian biotech sector is similar to U.S. in many ways:

� Both are filled with small start-ups while the majority of the market is controlled by a few powerful companies

� Both are dependent upon government grants and venture capitalists for funding because neither will be commercially viable for years

� Pharmaceutical companies in both countries have recognized the potential effect that biotechnology could have on their pipelines and have responded by either investing in existing start-ups or venturing into the field themselves

� In both India and the U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential

The Indian government has been very supportive. It established the Department of Biotechnology in 1986 under the Ministry of Science and Technology. Since then, there have been a number of dispensations offered by both the central government and various states to encourage the growth of the industry. India’s science minister launched a program that provides tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010.

Previously limited to rodents, animal testing was expanded to include large animals as part of the minister’s initiative. States have started to vie with one another for biotech business, and they are offering such goodies as exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities.

2). Market Growth & Potential:

1). Revenue:

Most of companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in revenues. When last count there was 265 firms registered in India, over 75% of which were incorporated in the last five years. The newness of the companies explains the industry’s high consolidation in both physical and financial terms. Almost 50% of all biotech’s are in or around Bangalore, and the top ten companies capture 47% of the market.

The top five companies were homegrown, Indian firms account for 62% of the biopharma sector and 52% of the industry as a whole. Indian biotechnology industry has been growing at a CAGR of 31.5% during the period 2001-02 and 2008-09, to reach the level of Rs. 12137 crores. In dollar terms, the revenue of the Indian biotechnology industry is estimated to be over US$ 2.6 billion, a share of around 3% in global biotech revenues. In terms of number of biotech firms,

with about 325 firms engaged in this industry, India ranks 11th

in the world, and 4th

in Asia-Pacific.

The domestic biotechnology market clocked revenues of Rs 4,985 crore, registering a 10% growth in rupee terms, accounting for a share of 41%. Biopharmaceuticals sector accounted for the largest chunk of the Indian biotech industry, having a share of 65% in total revenues. The BioServices and the BioAgriculture segments followed the Biopharmaceutical segment with a share of 16.9% and 12.3%, respectively in 2008-09. Segments like BioIndustrial and BioInformatics garnered a share of 3.9% and 1.8%, respectively, of the total revenue in 2008-09. The very nature of the Indian biotech industry is export-driven. Exports in the year 2008-09 were valued at Rs. 7152 crores, a growth of 25% over the previous year, and accounting for 59% of the total business in 2008-09. Segments like BioPharma and BioServices have had a majority of their revenues coming from exports.

Indian Biotechnology Industry – Revenue by Segments (Current Status) SEGMENTS 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

BioPharma 1790 2752 3570 4708 5973 6899 7883

BioServices 135 275 425 720 1102 1572 2062

BioAgriculture 110 130 330 598 926 1201 1494

BioIndustrial 235 238 320 375 395 410 478

BioInformatics 75 80 100 120 145 190 220

Total 2345 3475 4745 6521 8541 10272 12137

2). Market Overview:

� Indian biotech industry contributes to two per cent of the global biotech industry � The sector grew at a healthy 20 per cent in 2007-2008 � The industry in 2007-2008 clocked US$ 2.5 billion registering a 30.98 per cent growth � Growth has been mainly fuelled by rise in domestic business, exports, M&A and, new

product innovations

Share of companies involved in each biotech segment 2006-2007

� The sector employs approximately 20,000 scientists, and over 325 companies drive it towards further growth

� India is among top 12 biotech markets globally � India ranks third in the Asia-Pacific, after Japan and Korea � Indian market is expected to touch US$ 25 billion by 2015

3). Export:

� Biotech exports alone generated US$ 1.2 billion, i.e., 58 per cent of total biotech revenues

� Bio-pharma exports accounted for over 70 per cent of the total industry, while bio-services sector had 26 per cent share in exports

Share of different segments in export and domestic sales 2007-2008

4). Biotech clusters: India’s main bio-clusters are located in Bangalore, Hyderabad, Pune, Mumbai and Ahmedabad, Vadodara. As these cities comprises of southern and western regions of India so taking an broad view we can see that biotech clusters are divided into two main regions:

1). Biotechnology Revenues by Regions:

Region 2006-07 (US $ million)

Share

South 831 40%

West 998 48%

Total 1829 88%

A). Western Region:

� Comprises the Pune-Mumbai and Ahmedabad- Vadodara clusters � Accounted for 48 per cent of India’s biotech business with revenues of US$ 998 million � 44 per cent of companies are involved in bio-pharma, 31 per cent involved in bio-agri

sectors B). Southern Region:

� Comprises of the Bangalore and Hyderabad clusters � Karnataka generated revenues of US$ 488 million, showing with a 35 per cent growth � Hyderabad’s Genome Valley comprises of the Shapoorji Pallonji Biotech Park and ICICI

Knowledge Park

BIOTECH CLUSTERS

WESTERN REGION

SOUTHERN REGION

3). Key Players: Although we know that there are few biotech giants in India but still they are the key player’s internationally. According to the Indian biotech companies database these are the Leading Indian biotech companies: 1). Serum Institute of India Ltd:

Serum Institute of India Ltd Fact File - Segment: Bio -pharma - Start-up year: 1966 - Biotech Revenue 2006-2007: US$ 231 million - Leader in Vaccines market - Launched HIB vaccine - Involved with global organizations in conducting clinical trials for Meningitis vaccine - Bought stakes in UK-based Lipoxen - Entered into agreement US-based Akom

Serum, with record sales of around US$ 231 million in 2006-07 and a growth of 35 per cent, continued to be the leading vaccine company and largest biotech company in India. At 80 per cent, Serum’s overseas sales hold the key to its growth. The company supplies vacancies to over 130 countries and is an Indian leader for MMR and Hep B vaccines. Serum’s subsidiary company, Serum International rapid revenues of about US$ 10 million in 2006-07with a growth of 16 per cent, making the entire Serum group’s revenues touch almost US$ 242 million. The year 2006-07 was a significant one for Serum with the launching of its indigenously developed HIB vaccine (also available in the market as SiiHIB Pro vaccine). The company is currently the only indigenous manufacturer of HIB vaccine in India. Serum is able to produce over 100 million doses of the vaccine and plans to supply this vaccine to the Global Alliance for Vaccines and Immunization (GAVI), Pan American Health Organization (PAHO) and UNICEF at prices lower than those quoted by MNCs. Furthermore, Serum bought a 14 per cent stake in Lipoxen PLC, a bio-pharma company specializing in the development of oncology drugs, differentiated biologicals, and vaccines. This has allowed Lipoxen to raise US$ 5 million in funds from Serum and in return, Serum will have access to some of Lipoxen’s technology. Serum has also collaborated with Akorn, an US-based company giving Akorn the rights for exclusive distribution of rabies monoclonal antibodies. In return, Akorn is to help fund Serum’s product development through milestone payments including the successful completion of Phase I, Phase II, and Phase III clinical trials, and receipt of CBER approval for a Biological License Applications (BLA) license (expected to occur in 2012). Serum has also offered Akorn the first option to obtain exclusive marketing rights in the entire Americas for Anti-D human monoclonal antibody. Akorn also has the first option right to expand marketing into Europe. Serum Institute is also actively involved in the development of vaccines for the world’s poorest countries where vaccines are in critical shortage. Serum’s involvement in the Meningitis Vaccine Project (MVP), a partnership between Seattle-based non-profit PATH and the WHO, has spurred the company to complete Phase I trials of a new conjugate vaccine against serogroup A meningococcal disease. The vaccine will now be tested in Africa in order to make it a part of the public health vaccine collection. The vaccine can also be used in India during the sporadic occurrences of the disease. The Serum Institute has also set up the first biotech SEZ, known as Serum Bio Pharma Park, in Pune at the beginning of 2006. The multi-phase project will require a total investment of approximately US$ 292 million, with the first phase requiring a minimum US$ 122 million that will be covered by the company. About one billion doses of various vaccines are expected to be made per year from this SEZ alone.

2). Biocon Ltd:

Biocon Fact Fil e - Segment: Bio -pharma/Bio -industrial/Bio -services - Start-up year: 1978 - Biotech Revenue 2006-07: US$ 200 million - Strong in stains, immunosuppressants, and recombi nant insulin - Wide range of products across key therapeutic segme nts: diabetology, cardiology, and oncology - Syngene entered into research partnership with Br istol-Myers Squibb - Developing Nasulin with Bentley - Signed a MoU with Abu Dbai’s NMC Group - Launched BIOMAb-EGFR for head/neck tumors - Established a partnership with Ferozsons Laborato ries in Pakistan - Launched a comprehensive portfolio of renal thera py products

Biocon reported revenues of about US$ 200 million in 2006-07 from the sale of bio-pharma and industrial enzyme products. This amount accounted for 83 per cent of the total operating revenues for Biocon, It showed an almost 20 per cent growth from the previous year’s revenues of around US$ 167 million. Research services and licensing accounted for the remaining 17 per cent of the operating revenues, jumping from US$ 24 million in 2005-06 to almost US$ 40 million in 2007-08 (growth rate of 63 per cent). As a group, Biocon ended the financial year with revenues of about US$ 241 million. The Biocon Group consists of Biocon Ltd. (focused on bio-pharma), Syngene International, Clinigene, and Biocon Biopharmaceuticals. Syngene does custom research work (bio-services) while Clinigene is involved in clinical research work. Syngene is the leading company for bio-services in India. Biocon Biopharmaceuticals focuses on new molecule developments. Its bio-pharma capabilities are strongest in the areas of statins, immunosuppressants, and recombinant insulin. The company has an extensive product range in the areas of diabetology, cardiology, and oncology, amongst others. Having begun with a focus on fermentation derived microbial enzymes in 1984; Biocon has extended its activities into new domain areas such as bioprocess development, gene expression technologies, proteomics, bioconversions, and secondary metabolites. Biocon’s strong R&D and engineering skills can be seen with the invention of PlaFractor- a tool that is able to present novel production processes for therapeutic molecules. Nasulin, an intra-nasal insulin spray being developed by Biocon, has been approved by the Drug Controller General of India (DCGI) for Phase II trials on type-2 diabetic patients. Bentley Pharmaceuticals has conducted the pharmacokinetic clinical studies with the drug in India and is planning to complete the majority of the US clinical Phase II trials soon. IN105 is yet another non-injectable Insulin product that Biocon is working on simultaneously with Nasulin. Both Nasulin and IN105 are expected to hit the market in about three to four years. It is also planning to manufacture and market an array of bio-pharma products in a joint venture with Abu Dhabi’s NMC Group. An MoU has been signed for the venture and the products will be made available to the Gulf Cooperation Council (GCC) - the region’s first initiative to develop and market bio-pharmaceuticals. The set of drugs will cover Biocon’s specialty therapeutic segments such as cardiology, diabetology and oncology- and will contribute to GCC’s US$ 5 billion pharmaceutical market. BioMAb-EGFR, a therapeutic monoclonal antibody based drug for treating tumors of epithelial origin was launched in India by Biocon and is the first of its kind to be clinically developed in the country. The product has shown positive results in trials initiated in various countries and is being studied overseas for its potential use in treatments for lung, colorectal, glioma, and pancreatic cancers. Biocon also launched a complete portfolio of renal therapy products priced 35 per cent cheaper than current products.

3). Panacea Biotec:

Panacea Biotec Fact File - Segment: Bio -pharma - Start-up year: 1984 - Biotech Revenue 2006-07 : US$ 146 million - Product pipeline includes Hep B vaccine, and othe r vaccines for renal disease, neuropathy, cough and cold, and pain manag ement among others - Received first supply order from WHO in 2007 - Many new drugs added to product list in the formu lations segment - Entered into collaboration with Netherlands Vacci nes Institute for IPV vaccine in 2006 - Acquired a 10 per cent stake in Cambridge Biostab ility - Planned joint venture with Novartis Vaccines - Planning launch of Polprotec in India and oversea s

2006-07 was a significant year for Panacea Biotech with yearend revenues of almost US$ 148 million and a growth rate of a little over 37 per cent from 2005-06. Vaccines accounted for over US$ 115 million and formulations accounted for around US$ 32 million. Panacea Biotec, one of the first companies to have introduced the Hep B vaccine received its first supply order from WHO for Hep B vaccine in 2007. The estimated market demands for Hep B vaccine in 2007 and 2008 are 163 million and 198 million respectively. Panacea will also be supplying Hep B Combos vaccines to UNICEF, and anti-TB and ARV vaccines to WHO/UNICEF. Panacea has also added various new drugs to its profile in 2006 for areas including renal disease management, pain management, neuropathy, diabetes, and cough. The company entered into a partnership with the Netherlands Vaccine Institute for IPV vaccine and PT Bio Pharma, Indonesia for measles vaccine in 2006. In addition to these, Panacea also bought a 10 per cent stake in Cambridge Biostability by investing around US$ 6.5 million. Panacea already has four state-of-the-art research facilities in progress, and further infrastructural expansion is being undertaken currently. The company is planning to increase its visibility in the private market through a joint venture with Novartis Vaccines and the launch of one of its products, Polprotec, in India and other countries. It is expected that in approximately four years, the company will be ready to launch a set of thermo stable vaccines, along with JE and dengue vaccines. Panacea plans to out-license some of its patented products in Europe and the US in the coming years.

4). Novo Nordisk India:

Novo Nordisk India Fact File - Segment: Bio -pharma - Start-up year: 1984 - Biotech Revenue 2006-07 : US$ 146 million - Product pipeline includes Hep B vaccine, and othe r vaccines for renal disease, neuropathy, cough and cold, and pain manag ement among others - Received first supply order from WHO in 2007 - Many new drugs added to product list in the formu lations segment - Entered into collaboration with Netherlands Vacci nes Institute for IPV vaccine in 2006 - Acquired a 10 per cent stake in Cambridge Biostab ility - Planned joint venture with Novartis Vaccines - Planning launch of Polprotec in India and oversea s

Novo Nordisk India, the Indian subsidiary of Novo Nordisk, is a world leader in diabetes care. The company generated revenues valued at US$ 54 million in 2006-07 rendering an almost 27 per cent growth from the previous year. It has launched Levemir, an insulin analogue that is delivered through a pen-like device and works on prolonging action, in India around mid-2006. The pen-like device is called Flex Pen and Levemire is imported from Denmark. The company’s service and product portfolio contains diabetes products, human growth hormone and haemostasis management. Torrent Pharma manufactures insulin formulations for Novo Nordisk as part of an exclusive agreement. The agreement has been in action for over 15 years with a manufacturing facility that has often been quoted as the best maintained site of Novo Nordisk globally. It also has an agreement with TCS for offshore clinical operations service. Where TCS provides a range of data management services for trials that are run by Novo Nordisk globally.

5). GlaxoSmithKline (India):

GlaxoSmithKline (India) Fact File - Segment : Bio -pharma - Start-up year : 2001 - Biotech Revenue 2006-07 : US$ 29 million - Leader for vaccines among MNCs in India - Has promoted awareness on the use of vaccines in In dia - Has set up vaccines facility in Nasik - About to launch a cardiovascular drug - In discussions with Japanese and American compani es for laughing of other products - Has identified 6 oncology centers for conducting clinical trials

GlaxoSmithKline (GSK) grew by approximately 27 per cent with its US$ 29 million biotech sales in 2006-07 as opposed to the US$ 23 million revenues generated in 2005-06. The company is the leader for vaccines among MNCs in India and continues to propel its growth by encouraging awareness regarding vaccine use in India through dynamic initiatives. GSK in India, an affiliate of GSK Biologicals, is currently involved in the marketing of 13 vaccine products. The company is a leader in the Indian market for vericella, haemophilus conjugate, hepatitis A, diphtheria, and typhoid vaccines. GSK has set up a state-of-the-art vaccines filling facility in Nasik that conforms to cGMP norms. GSK is about to launch a cardiovascular drug called Carvedilol from Roche. Among the products launched two were pediatric vaccines, Boosterix and Infanrix and one was an anti-asthmatic drug co-developed by Zydus Cadila. The company is currently considering other such licensing deals with companies in Japan and USA. Like in the case of Novo Nordisk, GSK has established partnership with TCS for clinical data management where all of GSK’s data worldwide would be managed by TCS. Having recognized India as a prime center for clinical research in various areas such as oncology, psychiatry and infectious diseases, GSK has aggressively pursued the trials avenue in order to achieve company growth. The company has selected six oncology centers to conduct early phase clinical trials in India. These centers are being developed by the Institute of Cancer Medicine, University of Oxford. GSK India was involved in more than 15 global clinical trials investigating six therapy areas and 200 patients in 2006.

6). Quintiles Spectral India:

Quintiles Fact File - Segment : Bio -Services - Start-up year : 1997 - Biotech Revenue 2006-07 : US$ 34 million - Ranked second in Indian bio-services - One of the leading CROs in India - Has done studies in various therapeutic areas - Has clinical research collaborations with Manipal Group Alliance

Quintiles India is a subsidiary of Quintiles Transnational is the second largest provider of bio-services in India. The company generated revenues of US$ 34 million in 2006-07 with a growth rate of almost 65 per cent. It was the first foreign CRO to establish its operations in India in 1997. The Company chose the Joint Venture route to enter India however soon bought out its partner’s stake to become a 100 per cent subsidiary of Quintiles Transnational. Quintiles Spectral (India) Pvt Ltd has a strong presence in the Indian clinical research industry. Quintiles India now offers full portfolio of services for Phase I-IV clinical studies in various therapeutic areas. Many of the top global companies have worked with Quintiles in India. The company has so far undertaken numerous international studies in India involving a large number of patients and covering a wide range of therapeutic areas including oncology, psychiatry, neurology, anti-infectives gastroenterology, ophthalmology, endocrinology and cardiology. It has completed many oncology studies as part of multi-country programs for regulatory submissions. Quintiles India has also conducted a number of parasitological trials, bacterial keratitis studies and a large anti-diarrheal study for its European clients. Significantly, it has completed a diabetes study for a European sponsor. It has also conducted pivotal studies on bipolar disorder and the drug has been approved based on the data generated in India. Pivotal Phase III study in bacterial conjunctivitis was completed and the drug was approved by USFDA based on the Indian data. Quintiles India has also undertaken a study in chronic spinal cord injury under a US FDA fast track approval. Using India’s IT expertise, Quintiles assembled a team in Bangalore that is trained and skilled in offering data management services in Clintrial, Oracle Clinical and various Electronic Data Capture platforms. The unit provides customized solutions including Case Report Forms (CRFs) design, database design, query management, double data entry, coding and quality control as per the global standards and at highly competitive prices. The company follows globally accepted Standard Operating Procedures (SOPs) and ICH guidelines. Quintiles India is backed by a large team of clinical researchers, ITES professionals and also regulatory staff who have built their credibility with investigators and regulatory authorities. Quintiles entered into an agreement with the Manipal Group, whereby the Manipal Group will be the preferred research partner for Quintiles in India, Nepal and South East Asia for clinical trials. The Manipal Group has the largest teaching hospital network in India and has built an reputation for high-quality patient care through its super specialty hospital in Bangalore and its network of teaching hospitals across its campuses.

7). Rasi Seeds:

Rasi Seeds Fact file - Segment : Bio -agri - Start-up year : 1973 - Biotech Revenue 2006-07 : US$ 81million - Leading seed company - Company provides seeds of various crops - Has undertaken field trials and large scale trial s of Bt cotton - Top notch marketing network all over India and tw o production centers - Entered contract farming with an ELS cotton hybri d

Rasi Seeds is the leading seed company in India. The company generated revenues of US$ 77.5 million in 2006-07, and US$ 72 million during 2005-06. Rasi Seeds sells quality seeds of various crops to farmers all over India. In 2006, the company accounted for 29 per cent of the total Bt cotton seeds sold in India. The company has been using Bollgard technology developed by Monsanto. Rasi Seeds R&D center has been recognized by the Department of Scientific and Industrial Research (DSIR) and the company’s product coverage measures an impressive ten million acres in the past decade. Apart from cotton, Rasi Seeds has also been focusing its R&D efforts into other crops. Among these, the company has made promising progress in hybrid maize, sunflower, lady finger, bottle gourd, ribbed gourd, bitter gourd, tomato and chili. Current R&D projects have been focusing on using recombinant DNA technology, in vitro plant tissue culture, molecular biology, and molecular breeding in crops in order to address natural weaknesses in the crops. Rasi Seeds has established a highly sophisticated biotech laboratory with facilities for research on DNA finger-printing, DNA-based genetic purity test, and tissue culture and transformation of different crops. Other facilities include a modern high through-put biotech facility for breeding of transgenic crop production. Rasi Seeds has entered into contract farming with An Extra Long Staple (ELS) cotton hybrid with the idea of “Breeding to Branding”- the first of its kind in the world. The company has also been taking initiatives to outsource technologies-especially those for drought, improving fertilizer use efficiency for viruses in different crops-from Technology providers around the world.

2). Top Twenty Biotech Companies:

COMPANY REVENUE (US $ million)

2006-2007

CHANGE FROM 2005-06

Serum Institute of India Ltd

231.4 35.27%

Biocon 200.2 19.62%

Panacea Biotec 145.9 37.04%

Rasi Seeds 81.1 7.70%

Nuziveedu Seeds 55.1 262.16%

Novo Nordisk 54.0 26.86%

Venkates hwara Hatcheries

46.4 N/A

Indian Immunologicals 38.4 54.50% Mahyco Monsanto Biotech

36.6 - 61.58%

GlaxoSmithKline 29.2 27.66%

Aventis Pharma 29.1 4.50%

Shantha Biotechnics 28.0 39.90%

Eli Lilly and company 27.3 31.76%

Mahyco 26.9 - 6.00%

Bharat ser ums 26.4 39.00%

Novozymes South Asia

24.3 20.48%

Intervet India 19.6 22.99%

Bharat Biotech International

17.0 45.53%

Ankur Seeds 16.9 N/A

Advanced Enzymes Technologies

16.9 23.75%

3). International Market: 1). Foreign Players:

A). Novo Nordisk

B). GlaxoSmithKline

C). Novozymes South Asia 2). Domestic players:

A). Serum Institute

B). Biocon

C). Panacea Biotec

4). Highlights of 2008:

1). Collaborations and acquisitions:

� Biocon acquired 70 per cent stake in German pharmaceutical company, AxiCorp for approximately US$ 43.5 million.

� Albany Molecular Research Inc. (AMRI) bought FineKem Laboratories, a manufacturing facility located in Aurangabad.

� Ocimum Biosolutions announced an equity investment of up to US$ 17 million for the acquisition of the genomics division of Gene Logic

2). Union budget 2008-2009:

� Reduction of cenvat to 8.24 per cent � 12.5 per cent weighted deduction to outsourced research � Reduction in customs duty on raw materials for ELISA kits to 18.72 per cent, selects

vaccines, and select biotherapeutics to 9.36 per cent. � Allocation of US$ 242 million for the National AIDS programme. � Excise duty rate reduced to eight per cent.

4). Opportunities: The leveraging opportunities in the sector of biotechnology in India can be understood on the basis of two major points

1). Government policy: 1). Regulatory framework: The biotech regulatory structure in India comprises several administrative bodies in order to accommodate the cross-sectional reach of the industry. In order to ensure human and environmental safety, the Government has established a multi-regulatory structure for the approval of GM crops and biotech products for human health. The key body under the Ministry of Science and Technology is the Department of Biotechnology (DBT). DBT is responsible for approvals for investments and technology-related activities in biotechnology. Drug Controller General of India (DCGI) is responsible for the approval of pharmaceutical products including those that are recombinant in nature.

OPPORTUNITIES

GOVERNMENT POLICY

SEGMENTATION

Government of India

Department of Biotechnology

Ministry of Environment

Recombinant DNA Appraisal Committee (RDAC)

Regulatory Committee on Genetic Manipulation

(RCGM)

Genetic Engineering Approval Committee (GEAC)

Institutional Safety Committee (ISC)

2). National Biotechnology Policy: Having recognized rapid growth that Indian biotech industry is undergoing and the vast potential the industry has in India, the Indian Government has adopted various measures in an attempt to ensure further growth. Among these is the National Biotechnology Development Strategy (NBDS) by the DBT. The NBDS is a compilation of what Indian. Biotech has accomplished to date and the framework for the future within which strategies and specific actions to achieve further growth can be taken. The NBDS assimilates the opinions of various stakeholders of the industry-scientists, educationalists, regulators, representatives of society and others. The ten-year strategy addresses various issues such as human resource development, academic-industry interface, infrastructure development, laboratory and manufacturing, promotion of industry and trade, biotechnology parks and incubators, regulatory mechanisms, public education and awareness building. The most prominent features of the NBDS have been outlined below:

� The Government will focus on increasing the number of PhD programs in the biosciences and biotechnology in India since academic leaders are critical for innovation. A National Task Force will be created to establish model undergraduate and postgraduate curricula, attract talent to the life sciences and enable working conditions for scientists to undertake industry oriented research

� Proven technologies such as diagnostics and vaccines will be scaled up and

infrastructure for biotechnology R&D (especially for molecular modeling, protein engineering, and drug designing and immunological studies) will be further expanded. DBT plans to establish a Single Window Clearance mechanism in an effort to make approval of biotech plants simpler and also encourage private players to contribute to the infrastructure development for Indian biotech

� In order to increase the value from R&D investment and IPR generation, the

Government will provide active support through incubator funds and provision of various incentives. In addition to these the Government will also focus on innovation capacity and the ability to maintain a continuous pipeline of products. The Government will establish policies for promotion of innovation and commercialization of knowledge so that the industry can grow.

� Government support in the form of fiscal incentives and tax benefits will be provided to

the biotech sector since it is a research-intensive industry and has companies that invest about 20 to 30 per cent of their operating costs on R&D or technology outsourcing. In addition, in order to sustain innovation, the Government will financially support early phase product development and small/medium enterprises, as they will eventually play a major role in sustaining innovation

� DBT is creating the Small Business Innovation Research Initiative (SBIRI) as a means to

support small and medium sized enterprises through grants and loans. The initiative will enable the support of pre-proof concepts, early stage innovation research, and provide mentorship

� Various biotech parks are being set up across India in an effort to facilitate the transfer of

technology by serving as a platform for entrepreneurship through partnerships among investors from academia, R&D institutions, and the industry

� The National Biotechnology Regulatory Authority will be established to meet the need for

a scientific, rigorous, transparent, efficient, and consistent regulatory mechanism for bio-safety evaluation

3). National Biotechnology Regulatory Authority: The National Biotechnology Regulatory Authority (NBRA), being established by DBT, is expected to be fully operational in about two years. Although it will be administered by the DBT, the NBRA will remain an independent science-based body that is completely separate from the bureaucracy and will be headed by a renowned scientist. The Indian Government is working closely with US regulatory bodies such as the FDA, US Environmental Protection Agency (EPA), and United States Department of Agriculture (USDA) to create a robust science-based regulatory structure that would allow for faster application of biotech methods in agriculture, veterinary and medical sectors within a framework that meets global standards. In order to keep regulators and scientists up to date with the changes the biotech industry faces on a regular basis, an advanced school of learning will be a part of the regulatory body. 4). Other Recent Policy Initiatives/Developments:

The DBT, in collaboration with the Department of Science and Technology is currently planning to set up a mission mode program in biomaterial and medical devices to promote R&D and industrial activity. The Departments are also setting up various institutions for research to help the biotech sector pick up momentum in India. DBT also invited project proposals from Indian scientists (as individuals or interdisciplinary groups) in mid-2006 for initiating R&D projects in the area of vaccine development, formulation and evaluation. DBT proposed to provide competitive financial support to applicants having proven track records. The Government has been actively spreading awareness of the growing potential of biotechnology in India. It has also made many provisions, both fiscal and non-fiscal, in order to encourage the growth of the industry. By collaborating within the public system and with the private sector as well, the Indian Government has been working towards a strong, integrated, and sustainable base for the rapidly growing biotech industry. 5). State-led initiatives: After having studied other countries, the Indian Government has recognized that cluster formation leads to dynamic growth of the life sciences industry globally. Therefore the State Governments in India have been aggressively promoting biotechnology through the formation of biotech clusters, i.e., biotech parks. By offering fiscal incentives in addition to basic infrastructure, many states in India have adopted a public-private-partnership model to develop biotech parks in India. These parks not only attract tenant companies and institutions because of the fiscal benefits, but also because of the ease of both industry and industry academia collaborations which promotes faster growth and progress. In addition to facilitating biotech parks, State Governments in India have also been establishing biotech policies at the state level. For example, the Government of Goa announced that it will be establishing a State Level Implementation Committee (SLIC) to ensure the smooth implementation of its Biotechnology Policy 2006. The policy has been formed in an attempt to increase biotech research and industry in the state of Goa. Under the policy, the Government promotes R&D through financial and infrastructural support and also encourages public-private partnerships.

In a similar move, the Government of Gujarat announced a five-year biotechnology policy to accelerate biotech growth in the state. The Biotechnology Policy (BT) Policy 2007- 2012 has been created as an attempt to increase biotech business by five times. Under the policy, the State Government will provide incentives and concessions as well as support in the form of infrastructure, training, accreditation etc. The Government has also decided to fund new biotech research projects to some extent in order to jump start the industry’s progress. Karnataka has decided to address the shortage of trained manpower by establishing a Finishing School in Biotechnology in July, 2007. Various industry experts are working in collaboration to design the course content and duration. The Finishing School is intended to prepare graduates for the skill sets that are required in the industry. It is expected that the training offered by the Finishing School will cover many skill aspects that biotech companies spend much time and money to cover in their in-house trainings. The Syndicate Bank has agreed to start an education loan for the program. 6). Biotech Parks in India:

Park Operating Model Area Occupied (Approx)

Facilities

S.P. Biotech Park, Hyderabad

- Public-Private (Private player Shapoorji Pallonji Group)

- Phase I - 145 acres (100% Occupied) - Phase II - 162 acres (75% Booked) - Phase III – Proposed

- Land plots of varying sizes. - Basic infrastructure like quality roads, continuous water supply and uninterrupted power.

ICICI Knowledge Park, Hyderabad

- Public-Private (Private Player - ICICI Bank)

- 200 acres - (Innovation corridor I (Phase 1 & phase 2, 100% Booked and Occupied, Phase III) - Under Construction, (Innovation Corridor III 100% Booked)

- Ready to use modular laboratory - Developed plots - Virtual information System - Shared facilities like NMR, etc. - Dedicated electric substation, Sound telecom connectivity, Water & sewage treatment plants, etc.

TICEL Bio Park, Chennai

- Govt. of Tamil Nadu - 5 acres (Expected complete occupancy by 2006)

- Wet Laboratories - Transgenic Greenhouse - Training Center - Bioinformatics infrastructure

International Biotech Park, Pune

- Public-Private (Private player- The Chattered Group (TCG) - Developments India Pvt. Ltd.)

- 110 acres (Under Construction)

- Independent plots - 10 Laboratory modules

KINFRA Biotech Park, Kochi

- Public-Private (Private Player- TCG)

- 50 acres (Proposed) - N.A

7). Budget 2007-08: The Union Budget proposals for 2007-08 are expected to provide the much needed support to sustain the biotech industry’s growth. The Association of Biotechnology Led Enterprises (ABLE) had presented a set of recommendations to the Finance Minister as part of the pre-budget exercise. Of these, one of the key demands of these recommendations that were met by the Government was the removal of clinical services and drug development research from the realm of service tax levy, thereby making clinical services more competitive in the global market. Additionally, the incentive on R&D expenditure spend has been given a five-year extension on 150 percent weighted average tax deduction. Also, excise duty has been removed for life saving vaccines and received focus HIV detection and control has by the Government. Biotechnology has received a boost through excise duty and sales tax exemption. Bio-pharma also benefited from the 2007-08 Budget as manufacturing and specific equipment (including medical equipment) was awarded duty reduction. The Budget also provides tax benefits to VCs investing in biotechnology, thereby creating a positive business environment for the Indian market. 2). Segmentation:

BIOTECHNOLOGY SEGMENTATION

Bio-Pharmaceuticals

Bio-Services

Bio-Agri

Bio-Industrial

Bio-informatics

1). Bio-Pharmaceuticals: The Bio-pharma sector, comprising vaccines, therapeutics and diagnostics, generated revenues of around US$ 1.45 billion in 2006-07, with a growth of almost 27 per cent over the previous year. Among the top ten bio-pharma companies in India, seven were vaccine manufacturers the top five companies accounted for approximately 45 per cent of the entire bio-pharma segment and contributed a total of about US$ 626 million in terms of revenues. Indian bio-pharma is export-driven, with 61 per cent of revenues coming from exports.

Bio-Pharma Sector-wise Revenues

Sector 2006 (US$ m)

2005 (US$ m)

Change Share in 2006

Vaccines 743 570 30.41% 51%

Diagno stics 231 220 4.97% 16%

Therapeutics 176 156 13.28% 12%

Others 303 200 51.46% 21%

Total Bio-pharma Revenues

1,453 1,146 26.87% 100%

Top 5 Bio-Pharma Companies 2006

Company Revenue (US$ million 2006)

Per cent change from 2005

Serum Institute of India

231 35.27

Biocon 177 20.73

Panacea Biotec 146 37.04

NovoNordisk 54 26.86

Venkateshwara Hatcheries

46 N/A

1). Vaccines: At US$ 743 million in revenues, vaccines accounted for 51 per cent of the bio-pharma market in 2006 (accounting for both human and animal healthcare). Serum Institute was the leader among vaccine players with a turnover of US$ 231 million.

Top 5 Vaccine Companies 2006

Company Revenue (US$ million 2006)

Serum Institute of India 231

Panacea Biotec 146

Venkateshwara Hatcheries 46

Indian Immunologicals 38

GlaxoSmithKline 29

Total Vaccines Market 743

� Vaccines account for 51 per cent of the bio-pharma market with revenues of US$ 743 million

� Serum Institute is India’s leading vaccine company with revenues of US$ 231 million � India is one of the largest producers of traditional vaccines, considered the “vaccine

capital” of the world � Hepatitis B vaccine market continues to exhibit robust growth � Indian companies have also been focusing on under-served markets like HIV, and

Japanese Encephalitis and high-value combination vaccines

Vaccine Indian Collaborations

Indian Company Alliance Partner Description

Bharat Biotech International Limited

Acambis plc (UK) Manufacturing & marketing agreement for Acambis

investigational vaccine against Japanese Encephalitis

Panacea Biotec Chiron Vaccine (USA) To provide breakthrough combination vaccines to the

Indian market

Panacea Biotec Cambridge Biostability (UK) In-licensing of CBL’s stable, liquid vaccine technology

Ranbaxy Sanofi Pasteur Marketing of Vaxigrip, a global preventive

vaccine against Influenza

2). Diagnostics: The diagnostics segment at US$ 231 million, constituted 16 per cent of the Indian bio-pharma market during 2006-07. The diagnostics market showed a relatively low growth rate of about 5 per cent, mainly due to the stiff competition existing in the Indian market. There are over 50 companies including MNCs involved in the diagnostics market in India. The top companies have consolidated their market presence and are growing between 15 to 20 percent.

Top 5 Diagnostics Companies 2006-07

Company Revenue (US$ million 2006-07)

Tulip 40 Trans Asia Biomedical 37

Bayer 18 Span Diagnostics 13

Becon Diagnostics 5 Others 118

Total Revenues 231 The leading Indian diagnostics company is Tulip with a turnover of about US$ 40 million in 2006-07. With the spread of health consciousness and increasing awareness among Indians about diseases such as AIDS, Hepatitis, etc on one hand and active steps taken by the Government on the other in promoting community health, such as compulsory testing by blood banks for AIDS and Hepatitis, the potential of the diagnostic industry is very promising. Large players from across the world have found the Indian market very attractive and set up their operations in India. Many of the diagnostic products are being imported; however, an increasing number of local players and an expanding customer base have made the market competitive in the recent past. 3). Therapeutics:

� Therapeutics generated revenues of US$ 176 million showing a growth of 13 per cent � Therapeutics remain the thrust in Indian R&D, with human insulin being the most

common area of research � Huge biosimilars opportunity opening up for Indian companies with regulatory approval

pathways in Europe and the US becoming clearer � Therapeutic segments of biopharmaceuticals majorly comprise of three major sub

categories they are: 1). Human Insulin:

� Largest contributor to the therapeutics market with revenues of US$ 88 million � Large opportunity for insulin manufacturers � Over 37.5 million people suffer from diabetes in India, thereby creating a huge prospect � MNCs such as Novo Nordisk, Eli Lilly and Aventis Pasteur currently dominate the market � Novo Nordisk is the market leader with revenues of US$ 54 million

2). Plasma Proteins: � Plasma proteins is an emerging market in India � Over 100,000 people in India suffer from haemophilia (25 per cent of the world’s

haemophiliac population) � India has been sourcing plasma proteins from MNCs such as Baxter � There is Market potential for manufacturing plasma proteins locally and indigenously � Reliance Life Sciences is the first company to tap into the plasma protein market

3). Monoclonal Antibodies (mAbs): � mAbs is a fast-growing market-especially in oncology and auto-immune diseases � India has 3 million cancer patients and 700,000 new cases every year � Biocon has an international collaboration on anti- EGFR mAbs for head and neck cancer � Serum Institute has tied up with US-based Akorn for development and exclusive

distribution rights for a rabies mAbs

2). Bio-Services: Bio-services in India includes Clinical Research and Contract Research Organizations (CROs) and Custom Manufacturing.

Top 5 Bio-services Companies 2006-07

Company Revenue (US$ million 2006-07)

Syngen e 38.0 Quintiles 36.0 Lambda 15.0

Vimta Labs 13.9 Veeda 13.8 Others 152.0

Total Revenues 268.0

� Bio-Services are the second largest contributor to the industry with 15 per cent share of the industry

� It accounts for 26 per cent share of the total exports � Syngene is a leading company with revenues of US$ 38 million and an impressive

growth of 71 per cent � More than 70 companies in India are involved in bio-services � Global companies find India as the imperative destination for outsourcing services � India offers a US$ 1 billion opportunity in clinical trials alone

Examples of Outsourcing Deals in Bio-services

GlaxoSmithKline - Tata Consultancy Services

GSK signed a multi -million dollar contract with TCS to establish an R& D Support center in Mumbai

Brist ol -Myers Squibb - Syngene

A research collaboration agreement has been signed to enhance capabilities and service offerings

Acunova Life Sciences - Kiecana Clinical Research

KCR (Poland -based) formed a strategic regional alliance with Ac unova Life Scie nces for leveraging operations in South Asia, Europe and Lat in America

GVK Biosciences - Drug Development Solutions

Drug Development Solutions (UK -based) has signed a major long term agreement with GVK Bio for providing clinical data management serv ices for clinical trails

3). Bio-Agri: Bio-agri is the third largest contributor to Indian biotech industry during 2006-07 with a turnover of US$ 225 million, accounting for almost 11 per cent of the biotech pie. However, its growth rate of almost 55 per cent is the highest among all the biotech segments. The top three companies in the sector, Rasi Seeds, Nuziveedu Seeds, and Mahyco generated over 72 per cent of the segment’s total revenues.

Top 5 Bio-agri Companies 2006-07

Company Revenue (US$ million 2006-07)

Rasi Seeds 81 Nuziveedu Seeds 55

Mahyco 27 Ankur Seeds 17

Biotech International 6 Others 39

Total Revenues 225

� Bio-agri generated revenues of US$ 280 million, and grew at the rate of 30 per cent. � Top three companies (Rasi Seeds, Nuziveedu Seeds and Mahyco) account for 72 per

cent of the segment’s total revenues � Bio-agri is driven primarily by Bt cotton seeds; Bt cotton seeds market alone was

estimated to be worth US$ 203 million � India overtook China in total area under Bt cotton cultivation, i.e., 3.8 million hectares as

opposed to China’s 3.5 million hectares in 2006-07 � 62 Bt cotton hybrids were approved for planting in 2006 and 111 Bt cotton hybrids were

approved for commercial cultivation by May 2007 � About 15 GM crop products are under development by both the public and private

sectors � Bio-Agri is sub categorized into three category they are as follows

1). Bio-diesel:

� Bio-fuels in India are still in their infancy - about 66 million gallons of ethanol is utilized in 10 Indian states

� Domestic and foreign collaborations are expected to boost India’s bio-diesel production to 1 million tons per year in the next 2-3 years

� India has developed high-yielding varieties of jatropha seeds � Government has been testing bio-diesel in public transport locomotives and buses � Commercial bio-diesel production units have been set up by Southern Online

Biotechnologies and Natural Bioenergy Ltd.

� Bio-diesel companies have collaborations with companies in the US and Europe

2). Bio-pesticides & Bio-fertilizers: � Bio-pesticides and bio-fertilizers estimated to have a combined market value of US$

19.5 million in India � Phosphate-solubilising micro-organisms market witnessed the most growth among

biofertilizers � Leading players include Biotech International, Excel, and Multiplex � Many research universities and institutes pursuing research in bio-fertilizers, eg.

University of Hyderabad, National Research Center for Plant Biotechnology etc 4). Bio-informatics: India’s Bioinformatics sector is at a relatively early stage; however dynamic activity in the segment indicates exponential growth in the near future. India’s long-existing IT expertise has contributed immensely to the bioinformatics segment in the country, giving it a strong base for growth. Though Bioinformatics has at present a small share of the total biotech pie at US$ 35 million, it has seen considerable activity in 2006-07, and has witnessed launching of new tools, overseas expansion, acquisitions and funding. Financial institutions are giving closer attention to the potential of the bioinformatics sector. For example, Kotak Mahindra Bank, one of India’s premier banks has invested in Pune-based V Life Sciences. Besides, the International Finance Corporation (IFC), an arm of the World Bank, announced its intention of investing US$ 6.5 million of equity for a minority stake and debt in Ocimum Biosolutions. Ocimum Biosolutions also acquired Netherlands- based Isogen Life Science, and set up its German subsidiary with the intention of expanding its presence in the European market. 1). the major points of this segment are:

� Bioinformatics is a US$ 35 million opportunity in India and is rapidly growing � Increasing number of investors are funding bioinformatics in India, eg. Kotak Mahindra

Bank, International Financial Corporation (IFC) etc � Department of Biotechnology (DBT) has taken initiatives to link 63 bioinformatics centers

in India to promote networking of information resources 2). Globalized view:

� International client base for Indian bioinformatics companies has expanded rapidly � Indian companies cater to the National Institute of Health (NIH), National Institute for

Cellular Biology (Dublin), David Eisenberg’s research lab at DOE Institute for Genomics and Proteomics, UCLA etc.

� Pure play bioinformatics companies in India include players such as Strand Life Sciences, Ocimum Biosolutions, Molecular Connections, Mascon Life Sciences, etc.

� Three main areas of opportunity are: integrated research application service providers, providers of database services and discovery software providers, and the software requirements of the biotech industry

3). DNA Chips:

� DNA chips market is valued at US$ one million, and will grow by 50 per cent by 2008. � Leading companies include Agilent Technologies, Affymetrix and Ocimum Biosolutions

5). Bio-industrial: The bio-industrial sector in terms of venue touched almost US$ 96 million with a growth rate of 5.33 per cent in 2006-07. Despite its modest growth, the volume of the sector has been on a healthy rise and the application spectrum of industrial enzymes has been increasing. The top five companies in the bio-industrial sector contributed 87 per cent to the sector’s total market value. Novozymes and Biocon, with revenues US$ 24 million and at US$ 23 million respectively, are the largest players in the sector followed by Advanced Enzymes, Rossari Biotech and Zytex. Novozymes and Biocon account for almost 50 per cent of the sector’s value. About 15 companies in India are involved in the enzymes business with some into manufacturing and others into marketing. Traditionally industrial biotech companies have focused on chemicals, textiles, breweries and tanneries for applications of their products. However, existing companies are now looking closely into new areas of application such as food processing, agriculture, animal nutrition, dairy, aquaculture, and marine products. Textile processing has shown a growing demand for enzymes, so in order to meet this demand, Rossari Biotech imports enzymes from the US and supplies formulations to the Indian companies.

Top 5 Bio-services Companies 2006-07

Company Revenue (US$ million 2006-07)

Novozymes 24 Biocon 23

Advanced Enzymes 17 Rossari Biotech 16

Zytex 4 Others 12

Total Revenues 96 1). Potential in exports of enzymes: Many opportunities exist in the manufacturing of industrial enzymes for export purposes. The Government of India has also supported this sector by funding many projects related to industrial enzymes, thus helping the industry to grow and compete with global players. Some companies such as Biocon and Rossari are already involved in exporting enzymes.

5). Why India? Why India? It is big question to be answered by every person who is directly or indirectly connected with biotechnology and answer to this very complicated question is simple. I.e. Advantage!!! Now what is this advantage practically means? 1). Advantage India: Infrastructure and skilled labor, cornerstones of any venture, ware available in India at significantly lower costs. In addition to these, favorable patent regulations, have served to catapult the Indian biotechnology sector onto the global radar. This comes at an opportune time, with global companies scouting for strategies to maintain costs, while simultaneously retaining quality. With the public and private sector’s growing focus on ramping up the industry to global standards and beyond more and more overseas biotech markets are viewing India as an excellent choice of partner to enhance their operational range and productivity. Points which decides advantage for India are: A). Low Cost Operations in India: R&D costs in India are significantly lower than those in the developed world. Outsourcing part of a drug discovery chain to an Indian company can save up to US$ 200 million on development costs. The low cost of operations is attributed to availability of skilled manpower and infrastructure at comparatively lower rates. Salaries for R&D personnel are significantly lower in India compared to Europe or USA. The cost of clinical trials is 50 per cent lower in Phase-I, and 60 per cent lower in Phase-II in India when compared to the global clinical trials market. Also, the time taken to conduct a clinical trial is considerably lesser in India due to the availability of a large patient pool and faster enrollment rates. B). Large human resource pool: With the distinction of being ranked as the number one reservoir of scientific manpower, ahead of countries like Philippines, China, Australia, and Japan, as well as home to a legacy in higher education in the sciences, easily justifies why companies are coming to India to fuel their growth. There are 40 national research laboratories in the country, employing 15,000 scientists; there are more than 346 universities and 16,500 colleges with about 9.5 million students enrolled. India produces about 350,000 graduates in biosciences and about 172,000 post-graduates. Furthermore there are more than 5,000 PhDs and 1,000 post-docs in the bioscience-related fields in India. Established names in life science education and research include the Indian Institute of Science (IISc), Tata Institute of Fundamental Research (TIFR), National Center for Biological Sciences (NCBS), and the Centre for Cellular & Molecular Biology (CCMB) to name a few. The large proportion of English speaking manpower is also a big advantage for India. The biotech parks across the country that offer various cost-benefit incentives and allow for easy industry-industry and industry-academia synergies also play a big role in making India an attractive biotech destination. C). Favorable IP climate: Adherence to the TRIPS agreement with regard to the Patent Protection Act implemented in 2005 has been key to the renewed interest in Indian biotech. This move has increased the confidence of innovator companies in India, spurred the steady inflow of investment and collaborations. Areas related to data exclusivity, patentability rules and compulsory licensing are in the process of being strengthened.

Some Bioscience-related Indian Institutions

Institut ion Name Area of focus

National Center for Biological Sciences Biochemistry, Bioinformatics & Genetics

Jawaharlal Nehru Institute for advanced Scientific Research

Molecular and Chemical Biology & Genetics

National Institute of Immunology Immunology

Institute of Genomics & Integrative Biology Genomics, Genome Informatics and Proteomics

International Centre for Genetic Engineering and Biotechnology

Molecular Biology & Biotechnology

Centre for Cellular & Molecular Biology Bioinformatics & Genetics

Centr e for DNA Fingerprinting & Diagnostics

Computational Biology and Bioinformatics

Central Drug Research Institute Drug Discovery & Regulatory studies

6). Competitive Analysis (Swine flu): Competitive analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. Keeping this definition in mind we can understand this concept in the context of biotechnology even better by the following case study over ‘swine flu’ 1). what is Swine Flu?

In general it is a respiratory disease caused by SIV strain influenza A subtype H1N1, H1N2, H3N1. WHO says it is caused by influenza type A which infects swine, or pigs. The infection is undergoing constant mutation or change and there are several types of swine flu

As the global economy is about to come out of the hazard of depression it is now being hit with a progression of swine flu cases that is yet to be contained. The epidemic has the started from Mexico where about more than 100 people has lost their lives. In India till now 63 cases of H1N1 flu were reported

2). How does the swine flu spread?

The flu spread most likely through coughing or sneezing. The symptoms are quite like that of any other flu. These include fever, cough, sore throat, body ache, chill and fatigue. Treatment for swine flu. Till now there is no vaccine for the treatment of swine flu. Oseltamivir and Tamiflu are the generic drugs that can be used for the treatment

3). Symptoms of swine flu:

1). Typical Symptoms

A sudden fever (a high body temperature of 38°C/100 .4°F or above) a sudden cough.

2). Other Symptoms

� Headache � Tiredness � Chills and aching muscles � Limb or joint pain, loss of Appetite � Diarrhea or Stomach upset � Runny nose, sneezing

4). EFFECT OF SWINE FLU ON INDIAN ECONOMY:

Worries that an epidemic of swine flu might happen to a pandemic fetch a new-fangled hazard to the global economy. Swine Flu will show its genuine force from October onwards due to winter and from subsequently month onwards if there is continuation in monsoons. As common, stock markets studded with tremendous liquidity is underrate the authentic brunt of weak monsoons and swine flu impact.

The main effects are;

1. the most important outburst of swine flu might be mounting the cash impoverished Indian government thereby escalating the fiscal deficit 2. FII outflow will bring the stock market down 3. Due to the enormous capital outflow rupee is likely to depreciate further 4. Industries could be affected as it will disrupt the supply chain 5. GDP is expected to take hit due to decline in economic activity 6. It will reduce the consumption power of people as people generally spend less in times of Pandemics. It is a severe blow to consumption related stocks which are already reeling under the impact of poor monsoons 7. Consumption is generally high during festival season and high hopes of companies on festival sales will be severely impacted in September-October season 8. Pandemics typically diminish GDP growth rates by 0.5-2% according to viciousness. Swine Flu and monsoons will effect in 1% lower GDP growth rate and Indian GDP growth rate will be relegated to 5.8-6.2% 9. Stock markets for perpetuity move on reaction. It is delicate to estimate the brunt of Swine Flu on Indian stock markets when 1 crore Indians will be embroidered by Swine Flu (as anticipated) in the next 4-5 months 10. If Swine Flu grounds increase, FIIs will make gigantic way out due to poor representation on Indian health standards

5). SWINE FLU in India:

1). Region Wise Distribution of Reported Cases:

2). Region Wise Distribution of Reported Deaths:

0%0%

0%

5%

31%

64%

Region Wise Death

North

South

West

East

North East

3). State Wise Distribution of Reported Deaths:

4). Analysis:

� Total confirmed cases in India 4885 � Total deaths due to swine flu 134

5). Role of Pharmaceutical Company:

� A crucial role has to be played by pharmaceutical companies in India � Following facts can be concluded from above data:

� Change in marketing strategy � Economic to Socio-Economic � Change in market segmentation � Focusing chronic disease rather than acute

� This fact can be more clear from following chart:

6). Name of the Company:

1). Hetero Healthcare Limited v/s Cipla

1). Introduction:

� First to launch anti swine flu drug in India by the name “FLUVIR” � Purchased licensing rights of “Tamiflu” from Hoffmann-La Roche Ltd � Production capacity from 100-200 million capsules per month exclusively � Supplying anti swine flu drug to other underdeveloped & developed countries & Indian

government

2). Marketing Strategies:

A). Marketing Mix:

� Product: � FLUVIR (75mg) 10 capsules strip (Hetero) � Oseltamivir (75mg) 10 capsules strip (Cipla)

� Place: � Supplied to100 developing & underdeveloped countries (Hetero) � Available in 480 different designated medical shops in India � Supplied to 49 developing countries (Cipla)

� Price: � Cost of Hetero’s FLUVIR (75 mg) 10 capsules strip Rs. 450 � Which means Low Price/High Quality � Cost of Cipla’s Oseltamivir (75 mg) 10 capsules strip Rs. 1000 � Which means High Price/High Quality

� Promotion: � Use of TV, Print media, Internet � TV – news channels such as Zee news, NDTV, BBC, CNBC � Print – Times Of India, Hindustan Times � Internet – companies website, www.msnbc.msn.com, www.swinefluindia.com

B). Pull & Push Strategy:

� As “FLUVIR” is in its introductory phase so the promotional strategy used in this case is PUSH

� Reasons: � Building strong customer base � Focusing more on dealer sales promotion � Focusing more on market penetration

C). Channel Management:

� Retailers used for product sales & promotion are hobbyist stores � 480 medical shops have been selected for retailing (wholesalers & Retailers) � Including both 28 states & 7 union territories � All the shops are registered and designated under schedule X license � Some of the names are given below

D). Conclusion:

� Change in market segmentation � Targeting majorly middle & lower level segment � Changed from economic to socio-economic development � Having good market penetration power because of Indian government support

7) Challenges & Future strategies:

1). Key Challenges:

A). Skill Development:

Despite mushrooming educational institutions, offering a range of courses in biotechnology, gap between the needs of the industry and skills taught at these institutions still remain, though the gap is being narrowed down. It has also been mentioned that most of these institutions have limited ability to provide the right pedagogy, or the requisite infrastructure. The challenge of bridging the gap between the needs of the industry and the curricula taught at various institutions should be collectively addressed by the Government, industry and academia.

B). Government Health Expenditure:

Most Governments in developing countries usually finance programmes that support child immunization against various diseases as part of the basic public health package. Though India too has such immunization programme, because of relatively high birthrate and population, the share of Government health budget in total healthcare expenditure is relatively low (at 25%), according to the World Development Indicators – 2009. In comparison, other developing countries like Brazil, Russia, China and South Africa portrays better ranking in Government healthcare system. It may also be noted that as a percentage of the GDP, the total health expenditure in India is around 3.6%, far below than that of other emerging economies.

C). Basic Education & Health System:

Amongst the most critical building blocks for biotechnology development and its success are good education and health system. India fares low in terms of both these measures as reflected by the UN Human Development Index. India’s ranking is 132 out of a total of 153 countries, and is also one of the lowest as compared to other competing countries in this sector.

D). Funding:

The inherent characteristics of the biotechnology make the industry a high investment one with a long gestation period. Thus, funding plays a key role in ensuring the concept to develop into a product. Global financial crisis has affected the funding prospects of biotech companies, as risk aversion increased among the venture capitalists, angel investors as also financing institutions

E). Ethical Issues in Genetic Research:

Biotechnology has been confronting the world with some ethical issues, which have raised numerous challenges with no definite solutions. Genetic research and its applications like genetic engineering, manipulation, testing, therapy, eugenics, selective abortion, GMOs, stem cell research, and cloning, opened significant ethical and consumer issues, the potential risks that may be impacting the environment. The issue of a genetically modified food appears to be of particular concern. A challenge for the Indian biotechnology industry will be to work and liaise widely with the community and earn its confidence and investors.

D). Concentration of IPRs:

Intellectual property rights are intended to promote research and development by allowing researchers to generate revenue to meet the development costs. However, there are concerns that the current level of biotechnology IPRs are concentrated mainly at the hands of private sector. It is reported that, globally, few companies are responsible for the vast majority of agri-biotech research. These companies have focused on crops and traits (such as herbicide resistance) that are having commercial significance, and thus may not be willing to transfer to others. Globally, trends in mergers & acquisitions, among biotechnology companies, have also been on similar lines, encouraging the concentration of IPRs, which may affect the ability of developing countries, like India, to negotiate for access to proprietary technologies at a reasonable price.

E). Biosecurity:

Biosecurity is another challenge with growing debate and discussions among the academic and policy spheres, with bioterrorism, biosafety, and emergence and re-emergence of infectious diseases as concerns to the society as a whole. The threats associated with misuse of biotechnology including proliferation of bio-weapons, affect the growth prospects of this sector, which otherwise present potential benefits for global priorities such as health, food and environment.

F). Bio-hacking:

With the fall in the cost of equipments capable of manipulating DNA, the threat of growing number of bio-hackers is significant. The work raises fears that people could create a deadly microbe on purpose, just as computer hackers have unleashed crippling viruses or hacking into various websites. Such a scenario may lead to “bio-spam, bio-spyware, bio-adware” and other bio-nuisances.

2). Futuristic vision:

The overall size of the Indian market is expected to touch US$ 5 billion by the end of this decade, and US$ 25 billion by 2015. There are almost 17 recombinant products, which have been approved for marketing in India as of today, compared to the 12 products present in 2005-06. It is expected that this number will move up to approximately 100 biotech products. (Both domestic and imported) The industry has tremendous employment potential and about 50,000 scientists are working in Indian biotechnology labs in 2010.

3). Strategies: A). Public-Private Partnerships: Public-Private Partnership may be encouraged and supported in areas that are vital to the national development, from a scientific, economic or social perspective, and focused on technology and product development. India has a wide network of universities, departments and specialized institutions that have been promoted by various authorities providing numerous specialized science degrees at the post-graduate level. These institutions also provide an effective network of research laboratories. Efforts should be made to bring in a seamless transfer of knowledge and people among these universities, institutes, and corporate for a better coordination among themselves, and to share their research-based information on a continuous basis. B). Need for enhancing Venture Capital funding in I ndia: One of the biggest challenges for the Indian biotech industry is attracting investment through venture capital mode. With the corporate sector being risk averse to investing in biotechnology projects, especially in their gestation and early phases, the need of VC funding becomes critical for the growth of the biotech sector in India. Venture capital firms typically source majority of their funding from large investment institutions such as pension funds and financial institutions, who like to invest long term only with assurance of high returns. Thus, venture capitalists make careful investment decisions, which leads to high risk aversion rate. Instead, India may consider promoting venture capital investment on the lines of Russian model. Russia has been boosting venture capital sector from scratch by seeding funds with Government support, through the Russian Venture Company (RVC). Israel has also adopted similar approach of state-backed venture capital model to boost the investments in knowledge based industry. C). Strategy to Move to a Higher Value Chain: Indian biotechnology industry, over the years, has developed a number of biotech products, but has been found to perform tremendously well in the vaccine segment. The players in this industry as well as the research institutions should increasingly focus upon moving up the value chain by enhancing strengths in new products and applications, and by offering R&D solutions in drug discovery and validation based on genomics, proteomics, pathway analysis (determining how toxic or radioactive substances reach humans), and clinical trials on humans. Drug discovery and innovations in drug delivery, especially in areas like diabetes, cancer, and inflammatory ailments could take the industry into greater heights. Indian biotech industry should also look forward to moving up the value chain in terms of geographies so that India is present in more premium markets. D). Enhancing Biotech Applications: Modern research finds application of biotechnology in various economic segments, and thereby add value to the products and processes of such segments, including agriculture, forestry, marine resources, environmental management, pest management, and management of human and animal healthcare. To capitalize on the potential benefits and to ensure international competitiveness, it is important to promote speedy and widespread diffusion of biotechnology applications to the broader economic community, while maintaining responsible and sustainable use.

E). Lucrative Domestic Market: The domestic biotech market is expected to post robust growth with rising income levels, improving living standards, improved medical infrastructure, and growing health-insurance penetration, enabling regulatory framework and institutional infrastructure, and the growing number of organized pharma-retail chains. For example, in a country like India it is certain to find a market for products like insulin or drug delivery solutions to combat diabetes. With more and more people leading a sedentary lifestyle, there may be opportunities for the Indian biotech industry. F). Biotech Skill Development: Biotechnology industry is highly R&D intensive. In order to remain globally competitive, the industry requires a pool of highly skilled manpower. India has already made its mark in scientific research in the world, with a large pool of scientific manpower. However, with the changing composition of economic growth there is an emerging trend of students not preferring science stream for career opportunities. This may lead to shortage of qualified manpower in highly research oriented activities such as biotechnology. Thus, it is important to devise policies that would attract more students to the science stream G). Reversing Brain Drain: Shortage of manpower due to brain-drain is another challenge faced by the Indian biotech industry. The shortage of scientists / skilled professionals in OECD countries may enhance the brain-drain from India in the coming years unless suitable policy measures are taken to reverse the trend. There is an urgent need to expand the current research programmes with attractive compensation package in order to attract world-class talent. Through the Ramalingaswamy Fellowship Programme, the Government of India is attempting to attract Indian scientific talent back into the country; but the scheme appears to be less attractive. In this context, it may be mentioned that China Academy of Sciences (CAS) has established programmes, such as, Specially Hired Foreign Research Fellows, and Young Foreign Scientist Project, through which the country would attract over 600 Chinese scientists working abroad, annually; each returning scientist would receive yearly funding of around US $ 300,000 per annum. Corporate entities too may get involved by providing adequate exposure to the budding talents through training and placements. This would also provide the Indian biotechnology industry a tremendous competitive manpower advantage over its competitors. H). Symbiotic Relationship between Pharmaceutical a nd Biotech Sectors: Use of organisms for the improvement of biotech processes constitutes one of the major business segments of the biotechnology industry. This provides significant opportunities for pharmaceutical firms also. In general, biotech firms would concentrate their business models in covering a part of the product development value chain. Since, the biotech firms are not often engaged in entire product development value chain, due to shortage of funds and necessary know-how, pharmaceutical firms could complement the biotech players through their knowledge and financial power. I). Strengthening North-South Collaborations: Many Indian firms use services contracts with foreign firms to fund their operations, develop commercialization capabilities and access valuable international technology and expertise. Services provided include R&D, clinical trials and manufacturing. MNCs are increasingly conducting clinical trials in India and rely on Indian contract research organizations to manage these trials. It will be vital for the Indian biotech firms to expand their capabilities in clinical trial management, and pay close attention not only to good clinical practice guidelines, but also to bioethical principles, to provide a high level of care, and assure protection of patent rights.

J). Encouragement to Innovative Funding Models: Encouraging innovative funding models in the biotech industry is essential given the financial constraints of the industry. For example, pharma/biotech firms may set up Special Purpose Vehicles, which shall be contracted by the parent firms for product development work, which may have high initial product development costs, and which are non-infringing process, based on regulatory compliances. Such funding models may not stretch the balance sheets of the parent companies, nor equity dilution. An agreed percentage of revenues from the SPV funded projects could be returned back to the parent company or funding bank towards the investment. In the case of institutional financing, once the funding bank recovers its investment or IRR, the ownership of the products would flow back to the company without any complications what so ever. K). Emerging Biosimilars Market: Biotechnology industry in India has a well-developed foundation with strong pharmaceutical and bio-supplier sectors. The global market for generics are expected to grow significantly in the next few years as several ‘blockbuster’ drugs lose patent protection. A record number of drug patents expire over the next few years, which should lead to stiff competition from generics, and significant fall in prices. In such a situation Indian companies appear to be well positioned to leverage upon their cost-effective manufacturing capabilities to compete on a global scale and garner some of this market. In the context of patent expiry on Biopharmaceuticals, it may be noted that USA would emerge as one of the largest bio-similar markets after approval of Waxman Biosimilars Bill, providing opportunities for Indian firms. According to industry sources, there are at least 75 proteins and peptide therapeutics identified in the US as potential profitable targets for new products. Most of these were approved as New Drug Applications to facilitate BioPharma companies to develop biosimilars products. L). Leveraging International Partnerships: Biotechnology requires strong international partnership, both at the levels of research institutions, and at corporate front. International cooperation can be leveraged to achieve global best practices in the country’s science and technological efforts, for joint intellectual property generation, harmonization of regulatory processes, smooth cross border movement of biological materials, and access to global markets for the country’s products and processes. Such an approach would not only bring in better technical know-how but would also help in enhancing India’s research and development resulting in quicker and faster outcomes. M). Biotechnology Usage in Biofuels: Biotechnology could also be one of the most effective and innovative tools to make sustainable use of Biofuels, reducing the adverse environmental impacts of GHG emissions, and limiting the diversion of land from food crops to fuel crops. N). Emerging areas: stem cells and nanotechnology

� Significant investments have been made in stem cell research � The Center for Cellular and Molecular Biology (CCMB) has collaborations with Deccan

Medical College (DMC) and Japan based Nichi-in Center � DBT is setting up a Center for Stem Cells, has been approved by the Indian Council to

conduct India’s first ever multi-centric clinical trials with stem cells � Dabur Pharma developed the country’s first indigenously developed nanotech-based

chemotherapy agent, the first of its kind outside of USA