IITBHF and IITBAA (http://www.iitbombay.org)

The New Money Plant

By Anil Padmanabhan

http://www.indiatoday.com/itoday/20020415/uk-diary.shtml

Excerpts from article ... full text available from India Today on the newsstand.

NRIs at the helm of biotech firms in the USA have set their sights on making India a frontrunner in the race to cash in on the boom

You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the world will be as one
—John Lennon, Imagine

The immortal song by John Lennon was the signature tune for Andhra Pradesh Chief Minister N. Chandrababu Naidu as he wooed US investors on the sidelines of the meetings of the World Economic Forum in New York last month. As Naidu made presentations about the potential of his state, the investors were bemused yet reassured. The minister was reaffirming that India is ready and waiting on the threshold of the next commercial frontier of science-biotechnology (BT).

The clutch of investors that Naidu wooed included medium and high-end biotech firms in the US, some of which were quick to commit investment. But some preferred to wait to see how the Indian Government tackles the prickly issue of protecting Intellectual Property Rights (IPR).

The interesting element, however, is that a fair sprinkling of biotech companies looking eastward has people of Indian origin either at the helm or in pivotal positions. Like it happened before in the field of information technology, will Indian Americans be yet another dominating presence in biotechnology?

Prima facie, it appears so. This could be the outcome of fortuitous circumstances, for BT marries the three sciences of biology, chemistry and information technology (IT)-where the Indian presence is abundant and established.

Though the term is not unfamiliar, biotechnology is still a nascent science involving any technique that uses living organisms or their products to make or modify a product, to improve plants or animals, or to develop micro-organisms for specific uses. Scientists recognise its potential to revolutionise the fields of agriculture, health and medicine and to influence industry. The promises: disease resistant and high yield crops that could solve the world's food problems; new cures and drug delivery systems for diseases and the use of technology to prevent genetically inherited disorders; and new enzymes that make industrial production more efficient and cost effective. It is that and more which is driving the $50 billion-global biotech industry towards an expected $150 billion figure by 2010.

India's share at $2.5 million is less than 1 per cent. However, that figure is expected to jump to $4.5 billion in the next decade. India enjoys certain advantages in the chase for this new pot of gold: it has a well educated, highly skilled, English speaking workforce that can give quality results at lower costs. India already enjoys a formidable reputation in it, a field that will take BT forward. And it is racing neck and neck with China and South Korea in this arena.

Unlike in software, however, the objective is not to create a new generation of sweat shops. "We want to be successful not because we are cheap, but because we are good," says Dr Inder Verma, professor of genetics at the Salk Institute in San Diego, California, and an active player in a host of biotech start-ups.

...

The post-genomic era has certainly leveraged the advantage in India's favour, opening up mind-boggling investment figures-the sales for 50 biotech drugs approved in the US are expected to be upwards of $10 billion. Its established prowess in it makes India an obvious destination for companies seeking data collation in BT. The successful outsourcing by US Fortune 500 companies like General Electric and Hewlett Packard has only reinforced the bullish sentiments on Indian it.

Apart from data collation, however, India also has the scientific manpower to analyse the data. For example, to identify DNA variations- that is to isolate crucial differences at the molecular level at which ailments or hereditary disorders can be ascertained and the right drug to be administered can be determined.

...

Vipin Garg, who came to the US in the 1980s, is a scientist-turned-entrepreneur with a biotech start-up called Tranzyme-a Birmingham, Alabama-based firm focused on post-genomic drug discovery for neuro-sensory diseases. When in Philadelphia, Garg got picked up by Atlantic Richfield Corporation (an oil giant) which was venturing into biotech: it hired 50 PhDs and gave them $10 million and told them to do what they wanted with the money.

Garg maintains there was a severe lesson in this experience, both for him and for India. "Basically, the company wanted quick returns, failing which they lost interest. Similarly, I detect a great impatience in India too. That can be dangerous." There is a big difference between it and BT, he explains. In biotechnology, the investment costs are high ($50-100 million) and the incubation period pretty long, so the profit cycle is that much longer. "You can't make a baby in less than nine months," he quips.

Garg's Tranzyme is now looking to India to set up a stem cell research collaboration. Garg believes that India, with its large market together with its inherent strengths in information technology and scientific manpower, has a great potential as a manufacturing base. "Biotech drugs that have been around for decades and on which the patents are about to expire, can be manufactured in India at a tremendous cost advantage. In the long run, it will establish a core capability and a track record for the Indian biotech industry," he says. This would create the confidence in US companies to bring in more recent compounds to manufacture for export, he feels. Companies like Shanta Biotech have already begun with the manufacture of Interferon and the Hepatitis vaccine.

...

Among the first CEOs of Indian origin at the helm of a public limited biotechnology company is Kumar Chandrashekaran. The Delhi born, IIT Powai alumni came to the US in the 1960s to do graduate work at Berkley in Chemical Engineering, and taught briefly at Stanford. Then he began working with Alza-a pharma company recently acquired by Johnson and Johnson-before moving to a sister concern called Syntax. Now at the helm of InSite Vision, Kumar is pursuing research in biotechnology applications for curing eye ailments.

His company, he says, is in a position to cash in on the country's potential. "On a real time basis, I am interacting with a Mumbai-based pharmaceutical firm. I am trying to see whether I can use the drugs here that they are synthesising in India," he says. The idea is to import the less expensive, slightly superior drug. "To me India is well equipped with scientific manpower and offers low cost innovations," he says.

Tamil Nadu-born Benjamin Issacs, now president of Massachusetts-based Formatech Inc, too thinks the Indian experience will be a two-way street. "The cost structure is advantageous, then you have the exchange rate disparity and finally the much lower cost of living. In addition, it is competitive in manufacturing pharmaceutical products," he enthuses, adding that India can be used as a base to not only sell drugs to other developing countries but also to import drugs into the US.

Formatech Inc, which provides contract services in various fields to both biotech and pharmaceutical companies, however, has reservations about India's failure to update its patent laws. While his company is scouting the Indian market for an alliance and hopes to clinch it in the next 18 months, he is watchful of the Government approach to patent regulation. "Companies engaged in drug manufacture on a contract basis worldwide are very sensitive about protection of IPR. They will be watching how the Government executes existing laws to protect these rights."

...

It is more than apparent that Patel and his ilk having arrived in the US with a little more in their pockets than the statutory $35 permitted in those times, have worked their way into vantage positions in the biotechnology sector in the US. Coincidentally, the entire biotech sector in the US is looking to expand its horizons-in which India is emerging as an investment destination. The issue is whether India will be able to help itself to a portion of the global biotechnology pie or remain a "dreamer", a la John Lennon.

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