MARKE T OPPOR TUNIT Y PROFILE | I N D I A

India’s biotechnology sector, a US$3 billion giant with an annual revenue growth rate of 18 per cent, is literally pushing this sector to the forefront of India’s economy. While growth has been driven by the rise in domestic business, and an increase in exports and new product innovations, a substantial portion of this growth comes from contract research services, early stages of drug discovery, manufacturing of clinical supplies and clinical development.

What is triggering this growth and enthusiasm?

India has built up a positive IP climate with the implementation of the Patent Act in accordance with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). It has a skilled and talented technical workforce but that is only part of the attraction. India has a population of 1.2 billion and for pharma and biotech companies looking for clinical research and trials, hospitals, medical institutions and patients in India are

more than happy to participate in collaboration.

India’s biotechnology parks are some of the best in the world and its innovations in breakthrough treatments and cures are viable collaboration vantage points.

India is also rich in natural resources and a study shows that India has about 7.6 per cent of the world’s total mammal species, 12.6 per cent of the bird species, 11.7 per cent of the fish and about 6.0 per cent of the total flowering plants. Biotech companies can use this immense biodiversity to easily find samples and conduct field research.

As a result, India’s biotechnology sector offers opportunities for British Colombia biotech companies. This in-depth report explores the sector’s potential.

BIOTECHNOLOGY

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E X E C U T I V E S U M M A RY

The world, including India itself, has awakened to India’s biotechnology sector.

The biotechnology sector, which is newer than many other industries in India, has grown three-fold in the last few years into a US$3 billion giant with the bio-agriculture, bio-industrials and bio-informatics sectors bringing nearly 90 per cent of their revenues from India.

Growing at an accelerated annual rate of 17 per cent, the world is acknowledging this industry’s incredible advantage in terms of research and development (R&D) facilities, knowledge, skills and cost-effectiveness even as India is acknowledging that the biotechnology sector is becoming its strongest global arm.

While the industry, spanning bio-pharma and agri-biotech, accounted for US$3 billion, the equipment and ancillary segment contributed around US$1 billion. Bio-pharma and bio-services sectors contributed 63 per cent and 33 per cent, respectively, to total biotech exports. India is ranked among the world’s top 12 biotech destinations and the Indian biotech sector is the third largest in the Asian region after Australia and China.

India is also gaining importance as a clinical trial destination. According to a joint study by an industry body and Ernst and Young (E&Y) released in August 2009, the industry-sponsored Phase II, Phase III clinical trial sites in India grew by 116 per cent between June 2008 and August 2009, with its ranking going from number 18 to number 12 across the 60 most active countries. India participates in seven per cent of the global Phase III trials and 3.2 per cent of Phase II trials with industry-sponsored trials having grown by 39 per cent compound annual growth rate (CAGR) during 2004-08.

India is already being globally recognized as a manufacturer of economical, high-quality bulk drugs and formulations. With a huge base of talented, skilled and cost-competitive manpower, and a well-developed scientific infrastructure, India has great potential to become a leading global biotechnology player.

According to Kiran Mazumdar Shaw, CEO of Biotechnology Company, Biocon and Chairman of the Karnataka Vision Group on Biotechnology, the next goal the domestic biotechnology sector has set for itself is to reach a turnover of US$10 billion by 2015.

Foreign companies are being attracted to India by a long list of benefits. Whether for manufacturing facilities, clinical trial and enhancement of vaccine portfolios, reliable contract research or regulatory efficiency, India is being viewed very closely.

VACCINES

Vaccines and recombinant therapeutics are driving the growth of the biotechnology Industry in India. In 2008–09, the industry recorded revenues worth US$2.67 billion (Rs121.37 billion), registering an annual growth of 18 per cent (in value) from 2007–08, with bio-pharma accounting for the majority of the biotech industry’s revenues recording sales worth US$1.73 billion in 2008–09 (Source: ABLE-Biospectrum industry survey, June 2009). India is the largest producer of recombinant Hepatitis B vaccine in the world. In addition, the Indian vaccine market, which is worth more than $100 million, is growing by more than 20 per cent annually. India’s large 1.2 billion population makes it the world’s largest vaccine market.

BIOACTIVE THERAPEUTIC PROTEINS

The production of proteins and antibodies and the fabrication of diagnostic protein chips is a promising area for investment. Stem cell research, cell engineering and cell-based therapeutics are India’s niche expertise areas. By 2016, $25 billion worth of innovator biologics are expected to lose patent protection. Many companies are looking to diversify into generics and bio-similar products and are looking to India for partners given the industry’s well-developed leadership in these segments. In the health sector, Indian firms are developing novel biotech treatments for cancer, diabetes and other conditions.

UTILIZATION FOR AGRICULTURE SECTOR

India’s population has an interesting demography that creates an almost perfect environment for biotech companies. In addition, the Indian sub-continent, which occupies just 2.4 per cent of the total global surface area, has the most varied species of flora and fauna.

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M A R K E T O V E R V I E W O P P O R T U N I T I E S

The Sanofi-Aventis and Shantha collaboration is a recent example. Shantha, based in India, develops, manufactures and markets several important vaccines with a sales revenue of $90 million (Rs 432 crore) in 2009. The company introduced Shanvac-B, the recombinant Hepatitis B vaccine — the first genetically engineered health care product in India. In 2009, French drug maker Sanofi-Aventis picked up a controlling stake in Shantha Biotechnics, making it the first big-ticket deal in the Indian biotech sector.

India has the potential to become a major producer of transgenic rice and several genetically modified (GM) or engineered vegetables by 2012.There is an increasing use of molecular markers in crop breeding and a growing realization that some of these new technologies could lead to future growth in the productivity and quality of crops such as rice, wheat, eggplant (brinjal), tomato and lady’s finger. Therefore hybrid seeds, including genetically-modified seeds represent new business opportunities in India based on yield improvement and development of a production base.

Being the second largest food producer, India offers a huge market for biotechnology products, especially agri-biotech products. Ernst & Young reported that the nutraceuticals market is currently worth about US$532-638 million and is growing.

CONTRACT RESEARCH AND CLINICAL TRIALS

Indian pharma companies possess competitive skills in chemical synthesis and process engineering, which foreign companies can leverage to develop new chemical entities, and with the application of bio-informatics tools, tap into the high-potential bio-generics segment.

India offers a suitable population for clinical trials because of its diverse gene pools covering a large number of diseases. Due to the rising costs of R&D abroad, many global companies are looking for contract research in India especially U.S. and European companies. Cost effectiveness, competition and the increased confidence in capabilities and skill sets have propelled many global pharmaceutical players to expand their own clinical research investment in India. Contract research supported by IT skills has led to promising outsourcing business in various other segments including clinical trial data management, statistical analysis and electronic data capture.

Global contract research organizations (CROs) are setting up data management units in India. There are also pharmaceutical companies setting up biometrics and data management operations solely on their own or through partnership among themselves or with CROs. McKinsey & Co forecasts the

investment by global pharma majors for clinical trials in India at $1.5 billion by 2011.

With skilled, English-speaking doctors who understand the needs of international clinical trials and a large patient population, it is easier to recruit good quality and a larger number of patients.

BIOINFORMATICS

Indian bioinformatics companies can play a significant role in critical areas such as data mining, mapping and DNA sequencing, in addition to functional genomics, proteomics and molecule design simulation in a burgeoning market estimated at US$2 billion.

India’s biotech industry has blossomed as domestic companies have grown aggressively in a liberalized intellectual property (IP) system and as companies everywhere have seized opportunities from the country’s large, skilled workforce, lower manufacturing and research costs and growing demand for health care.

Simultaneously, the Indian government has entered into a number of biotechnology co-operation agreements with various countries in an effort to foster additional growth in this sector. Several state governments such as Karnataka, Tamil Nadu, Andhra Pradesh and Maharashtra have undertaken specific policies to boost the biotechnology sector in their respective areas.

AGRICULTURAL BIOTECHNOLOGY

Under the government’s FDI scheme, a person residing outside of India, including foreign companies and non-resident Indians (NRIs)], can invest in an Indian company not engaged in agriculture including plantation by way of subscription of up to 100 per cent of its shares, without obtaining any prior approval provided that the person residing outside of India does not have a previous financial or technical collaboration in India.

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R E G U L ATO RY A N D CO M P E T I V EE N V I R O N M E N T

A study shows that India has about 7.6 per cent of the world’s total mammal species, 12.6 per cent of bird species, 11.7 per cent of the fish and roughly 6.0 per cent of total flowering plants. By moving to India, biotech companies can take advantage this immense biodiversity, can easily find samples and conduct field research much more efficiently. Adding to this, India has one of the largest agriculture sectors in the world, and varied climatic zones that can help in research and development of different agri-biotech products applicable worldwide. With its 8,000 kilometres of coastline including Andaman and Nicobar and the Lakshwadeep Islands, India has a rich aquaculture and its marine resource development holds great potential.

MEDICAL/PHARMACEUTICAL BIOTECHNOLOGY

Under the FDI plan, 100 per cent (FDI) is permitted on the automatic route in the drugs and pharmaceuticals sector provided:

• Activity does not attract compulsory licensing or involve the use of recombinant DNA technology and specific cell/tissue.

• FDI proposal for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by rDNA technology and specific cell/tissue targeted formulation will require prior government approval.

• In the case of trading companies, 100 per cent FDI is permitted with respect to medical and diagnostic items subject to the provisions of the Export Import (EXIM) Policy.

IMPORT AND SHIPMENT

All import of seeds and planting material, etc. are subject to EXIM policy and the requirement of Plant Quarantine Order 2003 (PQO), and shall require a permit granted by the Plant Protection Advisor (PPA).

Certain fiscal incentives and support measures currently available include:

1. Income-tax relief on research and development expenditure.

2. Weighted tax deduction for sponsored research and in-house research and development expenditure.

3. Customs duty exemption on capital equipment, spares, accessories and consumables imported for research and development by approved institutions/SIROs.

4. An excise duty waiver on indigenous items purchased by approved institutions/SIROs for research and development.

5. A 10-year tax holiday for commercial research and development companies.

6. An excise duty waiver for three years on goods produced based on indigenously developed technologies and duly patented in any two of the following countries: India, European Union (one country), U.S. and Japan.

7. Accelerated depreciation allowance on plant and machinery setup based on indigenous technology.

8. Customs duty exemption on imports for research and development projects supported by government intellectual property rights and biotechnology.

1. B.C.’s biopharmaceutical sector is anchored by three of the world’s first profitable biopharmaceutical companies: QLT, Angiotech and Aspreva (now Vifor Pharma). The University of British Columbia has generated 120 spin-off companies, of which 71 are still active and provide employment for approximately 2,000 people. Half of these companies are in the life sciences sector. B.C. companies can partner with India at the drug discovery stage of research, and use Indian companies for contract research and manufacturing. This is because an increasing number of large pharmaceutical companies are finding it difficult to conduct the entire drug discovery process in-house. India on the other hand provides a cost-effective, skilled workforce and infrastructure. A collaborative atmosphere between the two countries can result in cost-effective sharing of resources, technology, skill sets and best practices.

2. There are tremendous opportunities in India for data mining, gene annotation and the development of software interfaces that can take advantage of India’s superior computing power. B.C. companies may form joint ventures with Indian companies or enter into technology transfer agreements or strategic research partnerships with key research institutions.

3. British Columbia is positioning itself to attract a greater portion of the more than half a billion dollars spent per year on clinical trials in Canada. In 2008, an estimated $540 million was invested in clinical research activity in Canada, but almost 89 per cent of this research and development spending was in Ontario and Quebec. Where B.C. has the opportunity, India has the masses. Creating a collaborative atmosphere for transferring clinical research to India would help to firm its position as a leader in this space by creating a collaborative global workforce.

4. Small to medium-sized companies (SMEs) comprise a significant part of the international life sciences industry, particularly in Canada and India. The convergence of technologies and increasingly multidisciplinary R&D landscape, combined with the need to source niche global expertise, secure investment and access to new markets in the wake of an economic downturn, are creating new challenges for many of these companies. As such, Canadian SMEs (including those in life sciences) are increasingly open to commercializing new products in markets outside North America, and the demand and need for strategic R&D and business co-operation has never been greater. Through strategic B2B partnerships, SMEs can compete more aggressively with multinational corporations in foreign markets. They can help these companies increase their R&D capabilities and capacity, extend their market reach and exploit lucrative market opportunities. By 2013, the value of the global biotechnology market is forecast to exceed $305 billion, while the global pharmaceutical market is expected to expand to $975 billion. This creates significant opportunity for Canadian and Indian life science SMEs. By applying technology matchmaking services SMEs in these countries

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M A R K E T E N T RY S T R AT E G Y

can leverage their complementary strengths and pursue greater R&D co-operation, business partnerships and joint ventures.

5. The Indian market provides opportunities to produce and sell vaccines and therapeutics that respond to the needs of India’s masses.

POTENTIAL MARKET ENTRY ROUTES

Appointing a distributor as an entry strategy makes sense since this does not require a lot of resources, however, selecting the right distributor is essential. For most industrial products, one exclusive indenting agent or distributor is the most common arrangement.

It is also a good idea to open a liaison office in India. However, a liaison office is not allowed to transact any business — it can only undertake market development activities. Expenses for this type of office must be met through inward remittances from the head office abroad. The Reserve Bank of India (RBI) grants approval for the opening of such offices.

A branch office may render technical support and professional consultancy services but it is not allowed to undertake manufacturing activities. Permission from the RBI is required to set up this type of office.

Joint venture/wholly owned subsidiary: A foreign company can commence operations in India through incorporation of a company under the provisions of the Indian Companies Act (1956).

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Academic and industry scientists in Canada and India are teaming up to establish a new research consortium focused on developing new types of drugs for malaria. Funded by the International Science and Technology Partnerships Canada and the Indian government’s department of biotechnology, the consortium is working on new anti-malarial approaches including slow-release therapies and drug and delivery combination approaches that specifically target a form of malaria that can lay dormant in the liver. Tackling problems of drug resistance will be another major goal.

Participating organizations include: the University Health Network/University of Toronto (which will lead the Canadian side of the consortium), Therapure Biopharma, Lifecare Innovations, the International Centre for Genetic Engineering and Biotechnology (consortium lead in India) and the Birla Institute of Technology and Science.

Current projects will include developing drugs against three malaria targets on which extensive research has already been carried out by participating academic groups, according to the consortium. Continuing work will combine expertise in computer modelling, medicinal chemistry and drug delivery to progress candidates in the clinic.

“In addition to developing new therapeutics, we are also bringing together existing technologies developed by the partners and combining them in new ways,” says Lakshmi P. Kotra, PhD, Director, Centre for Molecular

“It was a fascinating process to see different organizations with deep knowledge in their individual fields coming together and combining this knowledge to create innovative and new approaches to the treatment of this disease,” says Virander Chauhan, PhD, Director, Centre for Genetic Engineering and Biotechnology, New Delhi.

C A S E S T U DY

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DISCLAIMER:This report has been prepared for the Government of British Columbia, Canada based on primary and secondary sources of information. Readers should take note that neither the author nor the Government of British Columbia guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations mentioned within. Readers should independently verify the accuracy and reliability of the information before making any decisions related to their business.

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