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 III. Strategies to improve the current Indian biotechnology industry scenario
1. Following the recent economic downturn in the private and public equity markets, many biotechnology start-ups are now under considerable pressure. In this environment, the struggling start-ups should secure financing as their valuations are being trimmed by investors. In order to survive, these firms should adjust their business models to satisfy the existing as well as future investors, enter alliances to decrease their cash burn and consolidate with external assets to build the critical mass internally.
2. The Indian biotechnology companies will need to demonstrate capabilities to generate IPR and innovative ideas along with maturity to execute them. Biotechnology firms with promising pipelines could team up with publicly traded firms with plenty of cash reserves but weaker pipelines. In other words, companies having a richer pipeline but not the cash to get any of your products to the market, should pursue long-term partnership deals with more mature biotechnology or pharma companies that have significant cash reserves and complementary clinical assets.
3. Companies need to not only generate revenues, but also monetize the assets. Companies with products reaching the clinic pursue the ‘specialty investors’ for financing against existing or future revenues associated with specific clinical development programs. Moreover, demand by the major pharma firms for the innovative technologies developed by biotechnology firms remains strong. Although not easy, reassessing the firm’s long-term objectives (business models) and planning to reposition for long-term success by refocusing both on the further development of their drug discovery platforms and on various downstream clinical development projects would be a good strategy.
4. Companies needing short-term liquidity should first seek support from existing private investors—an option that, surprisingly, companies today often overlook. Existing investors already have a stake in a firm’s future. In addition, bringing in new investors during periods of financial crisis usually comes at a comparatively high price to existing investors in terms of the dilution of their equity. Therefore, existing investors have an interest in providing short-term cash infusion to give managers time to get their act together and reposition their firms.
5. Companies should exploit the growing number of funding opportunities outside the commercial sector. Apart from enhancing your cash position and credibility in the marketplace, funding from the government or charities generally comes with the added benefit of not diluting equity. Companies should approach nonprofit foundations such as Wellcome Trust, Gates Foundation, particularly if the company’s portfolio is in a therapeutic niche area not served by the major pharmaceutical companies.
6. Indian companies can ensure greater access to US/EU markets by locating some of their research operations. Finally, the wave of consolidation (M&A), partnerships, licensing agreements etc. is might be able to weather the current economic slowdown and would face less competition in the future. In fact, these trying times would force companies to be more disciplined, strategic, and resourceful. They should also look further for financing and potential partners. The United States may no longer be the market of choice. Therefore, Indian pharma companies should be ready to grab the opportunities available in the CIS (Commonwealth of Independent States, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) markets.
7. Finally, Indian government is taking certain countermeasures to eliminate or reduce the effect of recession (economic slowdown) for a turnaround. In November, the Indian government unveiled a national strategy for biotechnology (NBDS), supported by a $1.6-billion commitment over the next five years that includes the incentives to promote R&D investment from foreign equity investments and foreign direct investments (FDI). It calls for 1/3rd of the government’s research budget to be spent on biotech—a 450% increase over the previous five years—in partnership with private sector funding. Under NBDS, the government is establishing a National Biotechnology Regulatory Authority (NBRA) - multi-regulatory structure for GM crops and human health products. It is extremely advantageous for the biotech industry to have a meaningful regulatory pathway, before product development as it would remove uncertainty in terms of both timelines to market and possibility of obtaining final product approval.
Building sustainable business models would be a key to the success of this industry.
Please feel free to post your comments or write to virenkonde at gmail dot com for your suggestions!
Part III. Strategies to improve the current Indian biotechnology industry scenario
1. Following the recent economic downturn in the private and public equity markets, many biotechnology start-ups are now under considerable pressure. In this environment, the struggling start-ups should secure financing as their valuations are being trimmed by investors. In order to survive, these firms should adjust their business models to satisfy the existing as well as future investors, enter alliances to decrease their cash burn and consolidate with external assets to build the critical mass internally.
2. The Indian biotechnology companies will need to demonstrate capabilities to generate IPR and innovative ideas along with maturity to execute them. Biotechnology firms with promising pipelines could team up with publicly traded firms with plenty of cash reserves but weaker pipelines. In other words, companies having a richer pipeline but not the cash to get any of your products to the market, should pursue long-term partnership deals with more mature biotechnology or pharma companies that have significant cash reserves and complementary clinical assets.
3. Companies need to not only generate revenues, but also monetize the assets. Companies with products reaching the clinic pursue the ‘specialty investors’ for financing against existing or future revenues associated with specific clinical development programs. Moreover, demand by the major pharma firms for the innovative technologies developed by biotechnology firms remains strong. Although not easy, reassessing the firm’s long-term objectives (business models) and planning to reposition for long-term success by refocusing both on the further development of their drug discovery platforms and on various downstream clinical development projects would be a good strategy.
4. Companies needing short-term liquidity should first seek support from existing private investors—an option that, surprisingly, companies today often overlook. Existing investors already have a stake in a firm’s future. In addition, bringing in new investors during periods of financial crisis usually comes at a comparatively high price to existing investors in terms of the dilution of their equity. Therefore, existing investors have an interest in providing short-term cash infusion to give managers time to get their act together and reposition their firms.
5. Companies should exploit the growing number of funding opportunities outside the commercial sector. Apart from enhancing your cash position and credibility in the marketplace, funding from the government or charities generally comes with the added benefit of not diluting equity. Companies should approach nonprofit foundations such as Wellcome Trust, Gates Foundation, particularly if the company’s portfolio is in a therapeutic niche area not served by the major pharmaceutical companies.
6. Indian companies can ensure greater access to US/EU markets by locating some of their research operations. Finally, the wave of consolidation (M&A), partnerships, licensing agreements etc. is might be able to weather the current economic slowdown and would face less competition in the future. In fact, these trying times would force companies to be more disciplined, strategic, and resourceful. They should also look further for financing and potential partners. The United States may no longer be the market of choice. Therefore, Indian pharma companies should be ready to grab the opportunities available in the CIS (Commonwealth of Independent States, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) markets.
7. Finally, Indian government is taking certain countermeasures to eliminate or reduce the effect of recession (economic slowdown) for a turnaround. In November, the Indian government unveiled a national strategy for biotechnology (NBDS), supported by a $1.6-billion commitment over the next five years that includes the incentives to promote R&D investment from foreign equity investments and foreign direct investments (FDI). It calls for 1/3rd of the government’s research budget to be spent on biotech—a 450% increase over the previous five years—in partnership with private sector funding. Under NBDS, the government is establishing a National Biotechnology Regulatory Authority (NBRA) - multi-regulatory structure for GM crops and human health products. It is extremely advantageous for the biotech industry to have a meaningful regulatory pathway, before product development as it would remove uncertainty in terms of both timelines to market and possibility of obtaining final product approval.
Building sustainable business models would be a key to the success of this industry.
Please feel free to post your comments or write to virenkonde at gmail dot com for your suggestions!
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