The analysis of Indian Bio-Scenario in the current economic downturn is based on the opinion of industry experts, analysts, and market news and it is divided into three parts. Part I discusses about the current investment trends in the Indian biotechnology sector; Part II talks about the current business trends of the Indian biotechnology industry; and Part III provides strategies to improve the current Indian biotechnology scenario.
Part II. Business trends of the Indian biotechnology firms today
1. Spinning-off R&D or bio-services sector into a separate entity
Major biotechnology and pharma companies are spinning-off their R&D into new companies to drive contract research, which analysts say can help attract investors into the low cost drug development and delivery sector. The current financial crisis has not had much effect on major biotechnology companies like Biocon, which plans to increase its investment in R&D in the next fiscal year to keep pace with increased orders from multinational firms. Biocon is spinning off its R&D division into a separate company. Currently, Biocon is getting the formulation done on contract basis but looks forward to set up a dedicated greenfield facility to manufacture tablet formulations. Formulations are a growing business and thus investing in it. This segment accounts for about 10 per cent of Biocon’s revenues but could yield up to $20M. Ranbaxy recently announced plans to spin off its R&D unit. Pharma majors, including Sun Pharma, Wockhardt, Orchid Research, Glenmark Pharmaceuticals, and Nicholas Piramal have all announced similar plans. India is betting its lower costs and talent pool will give it a leg up in the global pharmaceutical market in the coming years. Merck turns to Ranbaxy for $100M R&D effort, five-year pact to develop new anti-infectives. This new deal signals an ongoing effort by big pharma companies to reduce their expenses by shifting development programs into China and India. Eli Lilly has also aggressively pursued an Asian strategy for its R&D work as well. Genzyme to set up R&D centres in India. The company currently markets two drugs in India while some others are being examined for regulatory approval. Although the company’s drugs are not patented in India, the company says it will not have competition in India since their products are highly complex biotech drugs which will not be easy for generic companies to develop.
2. Consolidations (Mergers, Acquisitions), Agreements, and Partnerships on the rise
The industry is also grappling with global meltdown, where it has paved way for a lot of joint ventures and collaboration in the sector. The mergers & acquisitions, licensing agreements and partnerships by Indian companies are on some reasonably attractive terms: Indian companies are looking to acquire a few overseas companies with good marketing, manufacturing, distribution, and clinical trial capabilities or to enter into US market, companies merging with equals and keeping products that sell and getting rid of products that don't make sense, major companies buying big and small companies, and consolidation amongst small and medium sized firms. The collaborations are being looked upon as means to bring down the cost of developing products to make the entire process quite affordable. The scenario looks favorable for the Indian biotechnology firms as industry experts say, they should focus on acquiring biotechnology units in foreign countries like the US, where global meltdown has led to fall in their valuations. Moreover, competition is tightening, meaning consolidation is inevitable. There might be more acquisitions as the industry has begun consolidating. Many biotechnology companies started during or after the dotcom doldrums are now in merger and acquisition mode to either exit or build on existing expertise. The future looks bright for the industry and industry experts feel that Indian firms must focus on buying overseas biotechnology units in countries like the US, which are seeing plunging valuations due to the global meltdown. Major pharma companies have traditionally been cash-rich and therefore relatively debt-free over the years. Therefore, the smaller biotechnology firms with lower valuations are now good acquisition targets for these major pharma companies – even in the current recessionary period.
Major pharma companies like Ranbaxy, Cadila Healthcare, Lupin, Wockhardt, Dr. Reddy’s and Intas etc., are diversifying into biotech, But because India’s track record is in generics, many firms lack the experience of taking a new biological entity all the way to regulatory approval. Now, to remain in high gear as well as move higher up the innovation food chain, companies are turning to strategic growth. The Indian life sciences industry gained technology largely through acquiring western companies and joint ventures with these companies. Acquisitions represent a long-term strategy for companies wanting to break in to new markets, add new technologies and skills, and gain size and scale. Besides hiving off their R&D arms into separate entities to de-risk research, Indian pharma companies are interested in acquiring good biotech products and business models to spruce up their pipeline.
India seems to be taking the necessary steps to lay a fertile field for increased global biotech activity. Indian biotech companies are also growing by looking further a field through acquisitions, joint ventures and collaborations. Biocon establishes EU presence with acquisition of marketing & distribution co. AxiCorp GmbH (Ger). Dr. Reddy's will acquire a portion of Dowpharma Small Molecules UK business. Avesthagen has made four strategic acquisitions, largely to ramp up its manufacturing and marketing capabilities. Ocimum Biosolutions, a life sciences R&D enabling company, bought Maryland-based Gene Logic for $10 million. Serum Institute Ltd., picked up a 14% stake in Lipoxen PLC, a biopharmaceutical company specializing in the development of differentiated biologicals, vaccines and oncology drugs. Lipoxen has raised £2.6 million in new funds from the Serum Institute through a subscription agreement and associated warrant agreement. Intas Biopharma acquires Biologics Process Development (US) to facilitate entry to US market. RFCL Limited acquired Wipro Biomed, a division of the software major Wipro Technologies to propel it into the fast-growing in vivo diagnostics market, fully automated clinical chemistry, and hematology sectors. Ranbaxy Laboratories, aquired Hyderabad-based Zenotech Labs since Zenotech has a strong pipeline of biotech and specialty drugs, whereas Ranbaxy rules the market in generics.
Ranbaxy signs licensing agreement with Debiopharm, a Swiss biopharma co., to market its New Chemical Entity (NCE). Wockhardt takes huge strides towards In-licensing and collaborative agreements with UK based Sinclair Pharma to market a range of dermatology and dental products. Foreign companies entering Indian market through acquisitions or licensing agreements. Advinus Therapeutics Partnership with Genzyme (US): Collaboration to develop oral compounds to treat malaria in at-risk populations. Panacea Biotech Ltd -Alliance -PharmAthene, Inc (US): Strategic alliance for vaccine development & commercialization; Panacea takes equity stake in PharAthene. Jubilant -Joint Venture -Eli Lilly & Co (US): JV pharma/CRO collaboration for drug discovery.
3. Strategic alliances to allow foreign companies to enter Indian biotechnology market
From the perspective of western firms, the implementation of TRIPS in India (a shift from Process Patents regime to Product Patents regime; Patents [Amendment] Act, 2005) may encourage them to introduce new brand drugs because such products can establish monopoly under the patent protection - a situation not possible since 1970. This does not mean, however, that high-priced, western-manufactured products can be directly shoehorned into the Indian market. Though TRIPS gives exclusive rights to Western companies to market their brand products in India - eliminating competition from local companies that copy inventions - these multinationals are unlikely to benefit from selling their products at high prices because Indian consumers simply cannot afford the high costs of drugs developed and manufactured abroad. Therefore, it will be necessary for Western and Indian companies to enter into strategic alliances so that novel drugs can be manufactured under license for local consumption. Such alliances will lead to a win-win situation for all, both biotech companies and the public. Thus, the impact of TRIPS on either the commercial strategies of foreign companies or their strategic alliances with Indian companies will be used in making foreign investment decisions.
In an ideal situation, this would motivate Indian firms to invest in the creation of innovations and become primary innovators and would be less inclined to invest in the re-engineering and marketing of drugs already protected by pre-existing foreign patents. The Indian government’s substantial investment in patent infrastructure, together with recent modifications to Indian patent laws, reflects the country’s commitment to adhering to the principles laid down by the World Trade Organization’s (WTO, Geneva) agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). For India’s biotech sector, however, a stronger patent system is unlikely to be sufficient to spark a boom of innovation. Indian companies simply cannot compete with the financial resources at the disposal of their Western counterparts. TRIPS implementation essentially signals the initiation of a race that is unfair.
A potential best-case strategy is evident from the Daiichi-Ranbaxy, transformational deal. To enter the Indian biopharmaceutical market or strengthening a current presence is to merge with one of the larger Indian generics companies, thus entering the Indian market from the low end and high end simultaneously. This approach removes a significant generic competitor for newly launched products in the Indian market, provides entry into all tiers of Indian healthcare, and, depending on the company size, and offers worldwide generic distribution and access to highly qualified, cost-effective Indian R&D staff. As a first test of this model, future results of the recent acquisition of Ranbaxy by Daiichi Sankyo, Japan will provide insight into possible success.
4. All-time-good domestic-demand-driven biotechnology market opportunity
However, even as global markets are non-growing for many Indian players, domestic healthcare markets prove to be an anchor with steady growth at a volatile time. Domestic market proved to be an anchor for Indian Pharma in a time of a global slowdown. The companies like Piramal, Lupin, Cipla, and Ranbaxy are strongly focused on local segments and managed to stay firm in the falling markets. Therapeutics remain the thrust in Indian R&D, with human insulin being the most common area of research. Plasma proteins are 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. 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.
Please feel free to post your comments or write to virenkonde at gmail dot com for your suggestions!
Part II. Business trends of the Indian biotechnology firms today
1. Spinning-off R&D or bio-services sector into a separate entity
Major biotechnology and pharma companies are spinning-off their R&D into new companies to drive contract research, which analysts say can help attract investors into the low cost drug development and delivery sector. The current financial crisis has not had much effect on major biotechnology companies like Biocon, which plans to increase its investment in R&D in the next fiscal year to keep pace with increased orders from multinational firms. Biocon is spinning off its R&D division into a separate company. Currently, Biocon is getting the formulation done on contract basis but looks forward to set up a dedicated greenfield facility to manufacture tablet formulations. Formulations are a growing business and thus investing in it. This segment accounts for about 10 per cent of Biocon’s revenues but could yield up to $20M. Ranbaxy recently announced plans to spin off its R&D unit. Pharma majors, including Sun Pharma, Wockhardt, Orchid Research, Glenmark Pharmaceuticals, and Nicholas Piramal have all announced similar plans. India is betting its lower costs and talent pool will give it a leg up in the global pharmaceutical market in the coming years. Merck turns to Ranbaxy for $100M R&D effort, five-year pact to develop new anti-infectives. This new deal signals an ongoing effort by big pharma companies to reduce their expenses by shifting development programs into China and India. Eli Lilly has also aggressively pursued an Asian strategy for its R&D work as well. Genzyme to set up R&D centres in India. The company currently markets two drugs in India while some others are being examined for regulatory approval. Although the company’s drugs are not patented in India, the company says it will not have competition in India since their products are highly complex biotech drugs which will not be easy for generic companies to develop.
2. Consolidations (Mergers, Acquisitions), Agreements, and Partnerships on the rise
The industry is also grappling with global meltdown, where it has paved way for a lot of joint ventures and collaboration in the sector. The mergers & acquisitions, licensing agreements and partnerships by Indian companies are on some reasonably attractive terms: Indian companies are looking to acquire a few overseas companies with good marketing, manufacturing, distribution, and clinical trial capabilities or to enter into US market, companies merging with equals and keeping products that sell and getting rid of products that don't make sense, major companies buying big and small companies, and consolidation amongst small and medium sized firms. The collaborations are being looked upon as means to bring down the cost of developing products to make the entire process quite affordable. The scenario looks favorable for the Indian biotechnology firms as industry experts say, they should focus on acquiring biotechnology units in foreign countries like the US, where global meltdown has led to fall in their valuations. Moreover, competition is tightening, meaning consolidation is inevitable. There might be more acquisitions as the industry has begun consolidating. Many biotechnology companies started during or after the dotcom doldrums are now in merger and acquisition mode to either exit or build on existing expertise. The future looks bright for the industry and industry experts feel that Indian firms must focus on buying overseas biotechnology units in countries like the US, which are seeing plunging valuations due to the global meltdown. Major pharma companies have traditionally been cash-rich and therefore relatively debt-free over the years. Therefore, the smaller biotechnology firms with lower valuations are now good acquisition targets for these major pharma companies – even in the current recessionary period.
Major pharma companies like Ranbaxy, Cadila Healthcare, Lupin, Wockhardt, Dr. Reddy’s and Intas etc., are diversifying into biotech, But because India’s track record is in generics, many firms lack the experience of taking a new biological entity all the way to regulatory approval. Now, to remain in high gear as well as move higher up the innovation food chain, companies are turning to strategic growth. The Indian life sciences industry gained technology largely through acquiring western companies and joint ventures with these companies. Acquisitions represent a long-term strategy for companies wanting to break in to new markets, add new technologies and skills, and gain size and scale. Besides hiving off their R&D arms into separate entities to de-risk research, Indian pharma companies are interested in acquiring good biotech products and business models to spruce up their pipeline.
India seems to be taking the necessary steps to lay a fertile field for increased global biotech activity. Indian biotech companies are also growing by looking further a field through acquisitions, joint ventures and collaborations. Biocon establishes EU presence with acquisition of marketing & distribution co. AxiCorp GmbH (Ger). Dr. Reddy's will acquire a portion of Dowpharma Small Molecules UK business. Avesthagen has made four strategic acquisitions, largely to ramp up its manufacturing and marketing capabilities. Ocimum Biosolutions, a life sciences R&D enabling company, bought Maryland-based Gene Logic for $10 million. Serum Institute Ltd., picked up a 14% stake in Lipoxen PLC, a biopharmaceutical company specializing in the development of differentiated biologicals, vaccines and oncology drugs. Lipoxen has raised £2.6 million in new funds from the Serum Institute through a subscription agreement and associated warrant agreement. Intas Biopharma acquires Biologics Process Development (US) to facilitate entry to US market. RFCL Limited acquired Wipro Biomed, a division of the software major Wipro Technologies to propel it into the fast-growing in vivo diagnostics market, fully automated clinical chemistry, and hematology sectors. Ranbaxy Laboratories, aquired Hyderabad-based Zenotech Labs since Zenotech has a strong pipeline of biotech and specialty drugs, whereas Ranbaxy rules the market in generics.
Ranbaxy signs licensing agreement with Debiopharm, a Swiss biopharma co., to market its New Chemical Entity (NCE). Wockhardt takes huge strides towards In-licensing and collaborative agreements with UK based Sinclair Pharma to market a range of dermatology and dental products. Foreign companies entering Indian market through acquisitions or licensing agreements. Advinus Therapeutics Partnership with Genzyme (US): Collaboration to develop oral compounds to treat malaria in at-risk populations. Panacea Biotech Ltd -Alliance -PharmAthene, Inc (US): Strategic alliance for vaccine development & commercialization; Panacea takes equity stake in PharAthene. Jubilant -Joint Venture -Eli Lilly & Co (US): JV pharma/CRO collaboration for drug discovery.
3. Strategic alliances to allow foreign companies to enter Indian biotechnology market
From the perspective of western firms, the implementation of TRIPS in India (a shift from Process Patents regime to Product Patents regime; Patents [Amendment] Act, 2005) may encourage them to introduce new brand drugs because such products can establish monopoly under the patent protection - a situation not possible since 1970. This does not mean, however, that high-priced, western-manufactured products can be directly shoehorned into the Indian market. Though TRIPS gives exclusive rights to Western companies to market their brand products in India - eliminating competition from local companies that copy inventions - these multinationals are unlikely to benefit from selling their products at high prices because Indian consumers simply cannot afford the high costs of drugs developed and manufactured abroad. Therefore, it will be necessary for Western and Indian companies to enter into strategic alliances so that novel drugs can be manufactured under license for local consumption. Such alliances will lead to a win-win situation for all, both biotech companies and the public. Thus, the impact of TRIPS on either the commercial strategies of foreign companies or their strategic alliances with Indian companies will be used in making foreign investment decisions.
In an ideal situation, this would motivate Indian firms to invest in the creation of innovations and become primary innovators and would be less inclined to invest in the re-engineering and marketing of drugs already protected by pre-existing foreign patents. The Indian government’s substantial investment in patent infrastructure, together with recent modifications to Indian patent laws, reflects the country’s commitment to adhering to the principles laid down by the World Trade Organization’s (WTO, Geneva) agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). For India’s biotech sector, however, a stronger patent system is unlikely to be sufficient to spark a boom of innovation. Indian companies simply cannot compete with the financial resources at the disposal of their Western counterparts. TRIPS implementation essentially signals the initiation of a race that is unfair.
A potential best-case strategy is evident from the Daiichi-Ranbaxy, transformational deal. To enter the Indian biopharmaceutical market or strengthening a current presence is to merge with one of the larger Indian generics companies, thus entering the Indian market from the low end and high end simultaneously. This approach removes a significant generic competitor for newly launched products in the Indian market, provides entry into all tiers of Indian healthcare, and, depending on the company size, and offers worldwide generic distribution and access to highly qualified, cost-effective Indian R&D staff. As a first test of this model, future results of the recent acquisition of Ranbaxy by Daiichi Sankyo, Japan will provide insight into possible success.
4. All-time-good domestic-demand-driven biotechnology market opportunity
However, even as global markets are non-growing for many Indian players, domestic healthcare markets prove to be an anchor with steady growth at a volatile time. Domestic market proved to be an anchor for Indian Pharma in a time of a global slowdown. The companies like Piramal, Lupin, Cipla, and Ranbaxy are strongly focused on local segments and managed to stay firm in the falling markets. Therapeutics remain the thrust in Indian R&D, with human insulin being the most common area of research. Plasma proteins are 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. 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.
Please feel free to post your comments or write to virenkonde at gmail dot com for your suggestions!
No comments:
Post a Comment