While enrolling as a PhD student, Nidhi Adlaka had never thought
of an entrepreneurial career. The traditional route for her
would
have been a PhD, some postdoctoral re-search, and then an
academic career or a job in the biotech industry. As a PhD student
at the International Centre for Genetic Engineering and
Biotechnology in Delhi, she stumbled upon a unique set of bacteria
in insect guts that can make a chemical called 2,3-butanediol. It
is a valuable industrial compound normally synthesised using
chemicals. When she and her colleague won the second prize in a
national challenge for new technology ideas, a thought struck her.
If this work is good enough to win a challenge, why not use it to
start a company?
It would not have been an easy path even two years before, but
the biotech environment in the country is com-pletely different
now. Adlaka and her batchmate Neha Munjal got help from the
department of biotechnology (DBT), which had started a few schemes
pre-cisely to help entrepreneurs like them. They nished their PhDs
in 2013, and formed a company immediately. It was incubated inside
Delhi University, got a grant of `50 lakh from DBT, and set to work
on proving the commercial worth of their idea to make
2,3-butanediol from agricultural waste. The Indian biotech system
has become so friendly over the years that any individual with an
innovative idea can now start a com-pany, says Nidhi.
The DBT set up the Biotechnology Industry Research Assistance
Council three years ago. Its Biotech Ignition Grant scheme now
provides entrepre-neurs `50 lakh and mentorship over 18 months to
prove technology ideas be-fore seeking angel investment.
Since its formation, 140 entrepreneurs have taken this grant,
creating a spurt in life sciences entrepreneurship in the country.
It has also come up at a time when incubators, accelerators and
an-gel investors are helping entrepreneurs bold enough to start
life sciences and medical companies.
In 2014, life sciences and medical companies bagged 12% of
venture in-vestment, as compared to negligible amounts just three
years ago. There has been a big change for life sciences startups
in the past three years, says Deepanwita Chattopadhyay, CEO of IKP
Knowledge Park in Hyderabad. The energy in the system has gone up
signi cantly.
In its 15-year history, IKP Knowledge Park has incubated or
provided re-search grants to 150 companies. Some of them have gone
on to become large companies. Laurus Labs is now a `1,000-crore
company. GVK Bio and Sai Life Sciences are also large companies.
But all three have come with a pedigree that has a long history in
the country: generics or services.
A life sciences or medical product company is yet to make it big
anywhere in India, despite a startup culture that is 15 years old.
But industry observers sense a change in the air. This is a
crit-ical period for the biotech industry, says Ramaswamy
Subramanian, biolo-gist and CEO of the incubator C-Camp in
Bangalore. If there are some big exits one after another in the
next few years, nothing can stop this industry.
Subramanian thinks that repeated exits are necessary to interest
the venture capi-tal community in the countrys biotech and
diagnostics industry. So far exits and deals have been few and far
between.
The French rm Sano bought Hy-derabad-based Shantha Biotech in
2009 for $783 million. Another French rm, bioMerieux, acquired a
60% stake in the Hyderabad-based rm RAS Life Sciences for 1.6
million in 2012. A few licensing deals have also happened in recent
times from Connexios, Aurigene and Curadev.
Such deals have not come frequently enough to be considered the
norm, and so the big VCs are reluctant to invest in life sciences.
Entrepreneurs have strug-gled to go from angel investment or rst
round of VC funding to the second and third rounds.
However, lack of VC money is not stop-ping entrepreneurs from
setting up companies around the country, even in risky areas like
drug discovery. Many en-trepreneurs know that money is scarce, and
have business plans that assume dif culties in raising money beyond
the rst round of VC funding. Entrepre-neurs in India know that they
may not get funded for a long time, says Rajeev Maliwal, founder
and managing part-ner of Sabre Partners, which has two funds
dedicated to life sciences and health-care. Companies work on a
shoestring budget, supporting their angel investment with
government and other foundation grants and, sometimes,
services.
Curadev was started by Arjun Surya, a biologist with over two
decades of expe-rience in Indian and overseas pharma companies.
Curadev focuses on cancer and in ammation, and has ve mol-ecules in
development, four of them for cancer. It received `5 crore in
equity from family and friends and another `5 crore from ICICI
through a World Bank programme as a technology de-velopment soft
loan.
Curadev was also forced to change its original business model
and do some research services to generate rev-enues. It searched
hard in India and abroad for funding, was offered a few deals by
private equity companies, but on terms that were not acceptable to
the management.
Finally, early this month, it signed an agreement with Roche
that put it on a healthy nancial footing: $25 million in upfront
payments and $530 million for future milestones in research
collab-
oration and developing two anticancer molecules. We went through
dif cult times, says Surya, but now we can plan our future with con
dence.
It is the largest-ever R&D deal struck by an Indian company
with a multina-tional, and it has not escaped the notice of the
venture capital community. Nei-
ther has it escaped the notice of other startups that have
formed recently, and are working like Curadev with small or smaller
teams and low budgets. They would be hoping to emulate Curadev.
Take Radha Rangarajan, founder of Vitas Pharma in Hyderabad. The
com-pany has just eight people but four
molecules under development. It has re-ceived `3 crore in
funding from the An-gel Investment Network, and some ad-ditional
funding from the government. Drug discovery is a dif cult business,
involving high science and high risks, but Rangarajan isnt
perturbed. Un-less tough science is done in India the
ecosystem will not come together, she says. However, Rangarajan
is also spreading her wings far, by working with some best
institutions abroad, one of them being Cambridge University. We may
be India-based, she says, but we are not India-bound.
As they discover drug candidates for development, drug discovery
startups in India will go abroad frequently in the next few years:
for research partnerships, for capital, and for access to markets.
The number of drug discovery startups in the country, though, can
be counted on ones ngers. The majority of new life sciences
companies are in areas like energy, en-vironment, value-added
chemicals, vac-cines, agriculture and so on. They may not be as
ambitious as drug discovery companies, but are lling niches that
can together form a sound foundation for a large and varied
industry.
In Pune, Abgenics Life Sciences uses probiotics foods lled with
good bac-teria to deliver drugs. Abgenics was founded by Sanjipan
Banerjee, who was a scientist at CSIR-Imtech in Chandi-garh, and
incubated inside the venture centre at the National Chemical
Labora-tory in Pune. It got going with `5 crore from individual
investors, and then got a $100,000 grant from Gates Foundation to
prove its idea. If it proves the idea, it will get another $1
million. Abgenics has not taken any government grants, a rare
oc-currence among biotech companies. We did not work with the
government, says
Banerjee, because we did not want to share the intellectual
property.
Other recent startups include the bio-gas rm Green Power Systems
and the genetic testing company Mapmygenome in Hyderabad; the
Pune-based Seagull Biosolutions that uses viruses as a platform to
deliver anticancer drugs; the Chennai-based XCode that provides
genetic tests for aging and other condi-tions; the Mysore-based
String Labs that generates omega-fatty acids from waste from the
silk industry. Green Power Sys-tems is developing a process that
pro-vides biogas at a high rate from waste. Mapmygenome provides
genetic tests to determine disease risk. Seagull has a developed a
product using the measles vaccine virus that can kill cancer cells
without harming other cells.
Although separate at the moment in developed countries, life
sciences com-panies in India overlap somewhat with diagnostic and
healthcare companies. This is partly because some venture
cap-italists have combined funds for both, and partly because of
overlap of skills necessary to start them. Diagnostic and devices
companies need engineering as a primary skill, but they are likely
to be developed side by side with life sciences companies in the
future, as clinical tests have to often go hand in hand with the
drugs being developed for a disease.
The Bangalore-based Achira Labs is a good example of this
synergy. It was actually born inside Connexios, a life sciences
company. Connexios wanted to develop new markers for diseases as
well as tests for them, but soon spun off Achira Labs for it to
focus on using existing markers. Achira is developing tests for
hormones thyroid and fer-tility using the emerging technology of
micro uidics. Achira has done the clinical validation for its
tests. Mul-tiplexing markers for several diseases are necessary in
clinical studies, says Dhananjaya Dendukuri, CEO of Achi-ra.
Clinical development is an area where diagnostics and
biotech-pharma companies exist side by side. It may not be an
accident that these companies are being formed at the same time in
the country. [email protected]
Special Feature Startup HiringSpecial Feature Life Sciences
Startups
Most software companies are easy to start, provided the
entrepreneur has a good idea and a team. All you might need is a
small of ce, some computers, an internet connection and some
soft-ware. Starting a life sciences company is a completely
different matter. You need to buy expensive equipment just to prove
the feasibility of your idea. Fortunately for Indias life sciences
startups, many institutions have set up incubators to help
them.Many startups mentioned
earlier would not have formed if there were no incubators
around. Abgenics and Segull Biosolutions were incubated in the NCL
Venture Centre in Pune. Bugworks was incubat-ed at the Centre for
Cellular and Molecular Platforms in Bangalore. Vitas Pharma was
incubated in IKP Knowledge Park and the University of Hyderabad,
where it is still housed. I dont think we could have done this kind
of work here if there was no in-cubation, says Vitas Pharma CEO
Radha Rangarajan.In the past few years, incuba-
tors have come up in many institutions in the country.
Incubators in IIT Madras and Bombay have already generated several
compa-nies. The NCL Venture Centre is attached to the National
Chemical Laboratory, known for a long time for innovation in the
chemical sciences. Some universities University of Hyderabad and
University of Delhi, for instance have in-cubation centres as well.
Even smaller universities have now started thinking of incubators.
A vital part of the ecosystem is now well established.
Incubators are Key
ARE INDIAS LIFE SCIENCES STARTUPS
TURNING A CORNER?
When Anand Anandkumar set up his company Bugworks in Bengal-uru,
to develop treatments against antibiotic-resistant bacteria, he was
clear that it would be head-quartered in Silicon Valley. As a
long-time resident of the US, he knew it would be easier to raise
funding as a US company. It did not stop him from looking for money
in India, but he gave up after sev-eral attempts. VCs in India want
to invest in areas they already know, says Anand Anandkumar,
founder and CEO at Bugworks Research in Bengaluru. In the US they
want to be rst in an area and want to learn with the
company.Anandkumar has raised $700,000
for his company, and is in the middle of raising larger VC
invest-ments from the US. It was easy for him as he had worked in
Silicon Valley before returning to India. But not so for a large
number of companies being formed now, who would look for venture
capital in the next few years. Unless they can attract funding and
expand, the current entrepre-neurial enthusiasm can die down
quickly. History suggests that such companies will struggle to
raise VC money, but there are signs of change in the air.Assistant
professor at the Mas-
sachusetts Institute of Technology (MIT), Shiladitya Sengupta,
wanted to pursue his commercial ideas in India. In the past few
years he has set up three companies: Vyome Biosciences, Mitra
Biotech and In-victus Oncology. All the three have raised venture
capital, amounting to more than `150 crore, without too much dif
culty. If you have good science with IP protec-tion, says Sengupta,
I think it is possible to raise money and build a strong team.In
its most recent
round, Vyome Bio-sciences raised $8 million (`50 crore) from
Sabre Partners, Kalaari Capital, and Aarin Capital. It had
investments earlier from Navam Capital. Many Indian companies are
now absolutely ripe for investment in both and late stage, says
Rajeev Maliwal, founder and managing partner of Sabre Partners. But
while the rst cheque is still available, the challenge is in the
second and third cheques. Sabre has two funds focussed on life
sciences and healthcare, one $50 million and the other $100
million.Large VC investments are rare in
life sciences, with some excep-tions. Connexios, a drug
discov-ery company in Bangalore, has raised more than `200 crore
from one investor: Nadathur Holdings. Strand Life Sciences, founded
in 2001, has managed to raise $20 million (`20 crore) in two rounds
so far. Investors come to India with an expectation to exit in
ve
years, says Strand CEO Vijay Chandru. This
is because of our services history, but in life sciences they
need to have more patience.Services compa-
nies dominated in the early round of
biotech startups. But recent startups are
not in services, and they need to create value quickly
to interest the VCs. Biotech valuations are still not high, says
Ranjan Pai, CEO of the Manipal Ed-ucation and Healthcare Group, and
one of the early investors in Indian life sciences companies. Yet
many investors are hopeful. It is like the early stages of the IT
industry, says Kumar Shiralagi, managing director of Kalaari
Capital. People are returning from abroad and there is talent
available.
Ripe for Investment
Nidhi Adlaka & Neha Munjal
are developing a bioprocess for
butanediol. Over the next few decades, chemical routes of
manufacture will gradually be replaced
by more environment-friendly biological
methods
Dhananjaya Dendukuri
of Achira Labs: Indian engineering
skills promise a good diagnostics and
devices industry, and it may aid the
traditional life sciences industry by
developing devices side by side with drugs
Radha Rangarajan of Vitas Pharma, among the few drug discovery
startups formed recently. Drug discovery is among the toughest
businesses to be in, but it is vital for the biotech industry that
at least a few Indian companies succeed in this game
Photo: N NARASIMHA MURTHY
Phot
os: A
MRE
ND
RA
JH
A.
Drug discovery startups in India will
go abroad frequently in the next few
years: for research partnerships, for
capital, and for access to markets
Lack of VC money is not stopping entrepreneurs, even in risky
areas like drug discovery. Companies support angel investment with
government and foundation grants
The majority of new life sciences companies are in areas like
energy, environment, value-added chemicals, vaccines, agriculture
and so on. They may not be as ambitious as drug discovery
companies, but are filling niches
A large number of life sciences ventures are sprouting across
the country, rich in ideas and talent. But they will soon need
venture capital
funding to realise their potential, says Hari Pulakkat
18 THE ECONOMIC TIMES | BENGALURU | THURSDAY | 14 MAY 2015
