S.Y.BFM EQUITY MARKETS PROJECT Pharmaceutical sector in ...


Dec 3, 2012 (5 years and 7 months ago)




Pharmaceutical sector in

Abhimanyu Kasliwal


Chirag Jain(20)

Akhil Panjwani

Aman Maroo


Ajay Rupani

Tuba Ansari

a Lakhani




Praptej Singh




We would like to acknowledge our gratitude to the following people for the
ir contributions:


Mr. Dharmesh Shah, C.E.O. of B.D.R. Pharmaceuticals, for his valuable inputs on the
Pharmaceutical Industry


Mr. Raheel Shah, Director of B.D.R. Pharmaceuticals, for the same.


Finally, Professor Vishal, without whose guidance and encourage
ment our work would
not have been possible.



1) Introduction



Top 10 Indian Pharmaceuticals companies



Patents in India



Product Development



Major Players in the industry




a case study


7) Biotechnology

the future?


8) Conclusion


9) Bibliography




The earliest

date back to the
Middle Ages
. The first known drugstore was opened by
Arabian pharmacists


in 754, and many more soon began operating throughout the
Islamic world

and eventually medieval
. By the 19th century, many of the drug stores in Europe
North America

had eventually developed into larger pharmaceuti
cal companies. Most of today's
major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key
discoveries of the 1920s and 1930s, such as

, became mass
manufactured and
distributed. Switzerland, Germany and Italy had particularly strong industries, with the UK, US,
Belgium and the Netherlands following suit.

Legislation wa
s enacted to test and approve drugs and to require appropriate labelling. Prescription and
prescription drugs became legally distinguished from one another as the pharmaceutical industry
matured. The industry got underway in earnest from the 1950s, due

to the development of systematic
scientific approaches, understanding of human biology (including
) and sophisticated
manufacturing techniques. Numerous new drugs were developed during the 1950s

and mass
and marketed through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone,
pressure drugs and other heart medications. MAO Inhibitors,


(Haloperidol) and the tranquilizers ushered in the age of psychiatric medication.

(diazepam), discovered in 1960, was marketed from 1963 and rapidly became the most prescribed drug
in history, prior to controversy over dependency and habituation.

Attempts were made to increase regulation and to limit financial links between compani
es and
prescribing physicians, including by the relatively new
U.S. Food and Drug Administration

Such cal
ls increased in the 1960s after the

tragedy came to light, in which the use of a new
tranquilizer in pregnant women caused severe birth defects. In 1964, the World Medica
l Association
issued its
Declaration of Helsinki
, which set standards for clinical research and demanded that subjects
give their informed consent before enro
lling in an experiment. Phamaceutical companies became
required to prove

in clinical trials before marketing drugs. Cancer drugs were a feature of the
From 1978, India took

over as the primary center of pharmaceutical production without
patent protection.

The industry remained relatively small scale until the 1970s when it began to expand at a greater rate.
Legislation allowing for strong patents, to cover both the process
of manufacture and the specific
products, came in to force in most countries. By the mid
1980s, small biotechnology firms were
struggling for survival, which led to the formation of mutually beneficial partnerships with large
pharmaceutical companies and a

host of corporate buyouts of the smaller firms. Pharmaceutical
manufacturing became concentrated, with a few large companies holding a dominant position
throughout the world and with a few companies producing medicines within each country.

The pharmaceuti
cal industry entered the 1980s pressured by economics and a host of new regulations,
both safety and environmental, but also transformed by new DNA chemistries and new technologies
for analysis and computation. Drugs for heart disease and for AIDS were a f
eature of the 1980s,
involving challenges to regulatory bodies and a faster approval process.
Managed care

maintenance organizations

(HMOs) spread during the 1980s as part of an effort to contain rising

medical costs, and the development of preventative and maintenance medications became more
important. A new
business atmosphere became institutionalized in the 1990s, characterized by mergers
and takeovers, and by a dramatic increase in the use of contract research organizations for clinical
development and even for basic R&D. The pharmaceutical industry confron
ted a new business climate
and new regulations, born in part from dealing with world market forces and protests by activists in
developing countries.
Animal Rights

activism was a
lso a challenge.

Marketing changed dramatically in the 1990s, partly because of a new consumerism. The Internet made
possible the direct purchase of medicines by drug consumers and of raw materials by drug producers,
transforming the nature of business. In

the US, Direct
consumer advertising proliferated on radio
and TV because of new FDA regulations in 1997 that liberalized requirements for the presentation of
risks. The new antidepressants, the SSRIs, notably

(Prozac), rapidly became bestsellers and
marketed for additional disorders. Drug development progressed from a hit
miss approach to
rational drug discovery in both laboratory design and natural
product surveys. D
emand for nutritional
supplements and so
called alternative medicines created new opportunities and increased competition
in the industry. Controversies emerged around adverse effects, notably regarding

in the US, and
marketing tactics. Pharmaceutical companies became increasingly accused of
disease mongering

medicalizing personal or social problem


pharmaceutical industry

is the world's second
largest by volume and is likely to lead
the manufacturing sector of India. India's bio
tech industry clocked a 17 percent growth with

revenues of Rs.137 billion ($3 billion) in the 2009
10 financial year over the previous fiscal. Bio
pharma was the biggest contributor generating 60 percent of the industry's growth at Rs.8,829
crore, followed by bio
services at Rs.2,639 crore and bio
i at Rs.1,936 crore. The first
pharmaceutical company are
Bengal Chemicals

Pharmaceutical Works
, which still exists
today as one of 5 government
owned drug manufacturers, appeared in

in 1930. For the
next 60 years, most of the drugs in India were imported by

either in fully
formulated or bulk f
orm. The

started to encourage the growth of drug
manufacturing by Indian companies in the early 1960s, and with the
Patents Act in 1970
, enabled
the industry to become what it is today. This patent act removed composition

from food
and drugs, and though it kept process paten
ts, these were shortened to a period of five to seven
years. The lack of patent protection made the Indian market undesirable to the multinational
companies that had dominated the market, and while they streamed out, Indian companies
started to take their
places. They carved a niche in both the Indian and world markets with their
expertise in reverse
engineering new processes for manufacturing drugs at low costs. Although
some of the larger companies have taken baby steps towards drug innovation, the indust
ry as a
whole has been following this business model until the present.


Top 10 Pharma companies in India



With a 2007 turnover of Rs 4,198.96 crore (Rs 41.989 billion) by sales,
Ranbaxy is the largest pharmaceutical company in India.


Dr Reddy's

With the turnover of Rs 4,162.25 crore (Rs 41.622 billion),
Dr Reddy's Laboratories is the second largest pharmaceutical company in India.



With the revenue of Rs 3,763.72 crore (Rs 37.637 billion) Cipla is the third
largest pharmace
utical company in India.


Sun Pharma Industries

Sun Pharma Industries is the fourth largest pharma company
in India with the total revenue of Rs 2,463.59 crore (Rs 24.635 billion) and led by Dilip


Lupin Labs

Lupin Labs has the total revenue o
f Rs 2,215.52 crore (Rs 22.155 billion


Aurobindo Pharma

Sales revenues stood at Rs 2,080.19 crore (Rs 20.801 billion)
makes it the sixth largest pharmaceutical company in India.



Pharma (GSK)

GSK is the seventh largest pharma company with
the total sales revenue of Rs 1,773.41 crore (Rs 17.734 billion)


Cadila Healthcare

Eight largest company has the t
otal sale revenue at Rs 1,613.00
crore (Rs 16.13 billion)


Aventis Pharma

has the revenue of Rs 983.80 crore (Rs 9.838 billion)
and the ninth largest pharmaceutical company in India.


Ipca Laboratories

Revenue of Rs 980.44 crore (Rs 9.804 billion) makes Ip
ca India's
10th largest pharma firm by sales.


Patents in India

In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk
drugs. 85% of these formulations were sold in India while over 60% of the
bulk drugs were exported, mostly to
the United States and Russia. Most of the players in the market are small
medium enterprises; 250 of the
largest companies control 70% of the Indian market . Thanks to the 1970 Patent Act, multinationals represent
y 35% of the market, down from 70% thirty years ago.

Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from
the lowest ranks to high level management. Mirroring the social structure, firms are very hierarc
Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private
enterprise. Although many of these companies are publicly owned, leadership passes from father to son and the
founding family holds a majority shar

In terms of the global market, India currently holds a modest 1
2% share, but it has been growing at
approximately 10% per year. India gained its foothold on the global scene with its innovatively
generic drugs and active pharmaceutical ingre
dients (API), and it is now seeking to become a major player in
outsourced clinical research as well as contract manufacturing and research. There are 74 U.S. FDA
manufacturing facilities in India, more than in any other country outside the U.S, a
nd in 2005, almost 20% of all
Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies.
Growth in other fields notwithstanding, generics are still a large part of the picture. London research company
Global Insight e
stimates that India’s share of the global generics market will have risen from 4% to 33% by


As it expands its core business, the industry is being forced to adapt its business model to recent changes in the
operating environment. The first a
nd most significant change was the January 1, 2005 enactment of an
amendment to India’s patent law that reinstated product patents for the first time since 1972. The legislation
took effect on the deadline set by the WTO’s Trade
Related Aspects of Intellec
tual Property Rights (TRIPS)
agreement, which mandated patent protection on both products and processes for a period of 20 years. Under
this new law, India will be forced to recognize not only new patents but also any patents filed after January 1,
1995. I
ndian companies achieved their status in the domestic market by breaking these product patents, and it is
estimated that within the next few years, they will lose $650 million of the local generics market to rightful

In the domestic market,

this new patent legislation has resulted in fairly clear segmentation. The multinationals
narrowed their focus onto high
end patients who make up only 12% of the market, taking advantage of their
bestowed patent protection. Meanwhile, Indian firms h
ave chosen to take their existing product
portfolios and target semi
urban and rural populations.


Product development

Companies are also starting to adapt their product development processes to the new environment. For years,
firms have made their way
s into the global market by researching generic competitors to patented drugs and
following up with litigation to challenge the patent. This approach remains untouched by the new patent regime
and looks to increase in the future. However, those that can af
ford it have set their sights on an even higher
goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of
hefty profit margins and the recognition as a legitimate competitor in the global industry. Local f
irms have
slowly been investing more money into their R&D programs or have formed alliances to tap into these

Small and medium enterprises

As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is not a
s bright.
The excise structure changed so that companies now have to pay a 16% tax on the maximum retail price (MRP)
of their products, as opposed to on the ex
factory price. Consequently, larger companies are cutting back on
outsourcing and what business
is left is shifting to companies with facilities in the four tax
free states

Himachal Pradesh, Jammu & Kashmir, Uttaranchal and Jharkhand.

As SMEs wrestled with the tax structure, they were also scrambling to meet the July 1 deadline for compliance
the revised Schedule M Good Manufacturing Practices (GMP). While this should be beneficial to
consumers and the industry at large, SMEs have been finding it difficult to find the funds to upgrade their
manufacturing plants, resulting in the closure of many

facilities. Others invested the money to bring their
facilities to compliance, but these operations were located in non
free states, making it difficult to compete
in the wake of the new excise tax.


All of these changes are ultimately good
for the Indian pharmaceutical industry, which suffered in the past from
inadequate regulation and large quantities of spurious drugs. They force the industry to reach a level necessary
for global competitiveness. However, they have also exposed some of the

inadequacies in the industry today. Its
main weakness is an underdeveloped new molecule discovery program. Even after the increased investment,
market leaders such as Ranbaxy and Dr. Reddy’s Laboratories spent only 5
10% of their revenues on R&D,
behind Western pharmaceuticals like Pfizer, whose research budget last year was greater than the
combined revenues of the entire Indian pharmaceutical industry. This disparity is too great to be explained by
cost differentials, and it comes when advances i
n genomics have made research equipment more expensive than
ever. The drug discovery process is further hindered by a dearth of qualified molecular biologists. Due to the
disconnect between curriculum and industry, pharmas in India also lack the academic c
ollaboration that is
crucial to drug development in the West.


Both the Indian central and state governments have recognized R&D as an important driver in the growth of
their pharma businesses and conferred tax deductions for expenses related to researc
h and development. They
have granted other concessions as well, such as reduced interest rates for export financing and a cut in the
number of drugs under price control. Government support is not the only thing in Indian pharma’s favor,
though; companies a
lso have access to a highly
developed IT industry that can partner with them in new
molecule discovery.


Labor force

India’s greatest strengths lie in its people. India also boasts a cheap, well
educated, English
speaking [only a
percentage, see labor force

that is the base of its competitive advantage. Although molecular biologists are in
short supply, there are a number of talented chemists who are equally as important in the discovery process. In
addition, there has been a reverse brain
drain effect in wh
ich scientists are returning from abroad to accept
positions at lower salaries at Indian companies. Once there, these foreign
trained scientists can transfer the
benefits of their knowledge and experience to all of those who work with them. India’s wealth
of people
extends benefits to another part of the drug commercialization process as well. With one of the largest and most
genetically diverse populations in any single country, India can recruit for clinical trials more quickly and
perform them more cheap
ly than countries in the West. Indian firms have just recently started to leverage.


Major Players in the industry

Ranbaxy Laboratories


is the leader in the Indian pharmaceutical market, taking in $1.174 billion in
revenues for a net profit of $160 million in 2004. It was the first Indian pharmaceutical to have a proprietary
drug (extended
, marketed by Bayer) approved by the U.S. FDA, and the U.S. market
accounts for 36% of its sales. 78% of Ranbaxy’s sales are from overseas markets; its offices in 44 countries
manage manufacturing in 7 count
ries and distribution in over 100.

IMS Health estimated that Ranbaxy is among
the top 100 pharmaceuticals in the world and that it is the 15th fastest growing company. By 2012, Ranbaxy
hopes to be one of the top 5 generics producers in the world, and it co
nsolidated its position with the purchase
of French firm RGP Aventis in 2003. Ranbaxy also has higher aspirations, however, “to build a proprietary
prescription business in the advanced markets.” To this end, it keeps a dedicated research facility in Gurga
staffed with over 1100 scientists. They currently have two molecules in Phase II trials and 3
5 in pre
testing. It spent $75 million in R&D in 2004, a 43% increase over its 2003 expenditure.

CEO Brian Tempest is
the only non
Indian on
the senio
r management team.

Dr. Reddy's Laboratories


Founded in 1984 with $160,000, Dr. Reddy’s was the first Asia
pharmaceutical outside of Japan and t
he sixth Indian company to be listed on the New York Stock Exchange. It
earned $446 million in fiscal year 2005, deriving 66% of this income from the foreign market. In order to
strengthen its global position, Dr. Reddy acquired UK
based BMS Laboratories a
nd subsidiary Meridian

Although 58% of Dr. Reddy’s revenues come from generic drugs, the company was committed to
compliance long before the 2005 bill took effect, and most of these products were already off patent. Dr.
Reddy has long been
a research
oriented firm, preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out
licensing its first compound just four years later. Dr. Reddy’s
has since outlicensed two more molecules and currently has three othe
rs in clinical trials.

Although Dr. Reddy’s
is publicly
traded, the Reddy family (including founder/chairman K. Anji Reddy, son
GV Prasad

and son/COO Satish Reddy) holds a hef
y 26% share in the company.

Nicholas Piramal


Now a company grossing $350 million per year, Nicholas Piramal started its existence with
the 1988 acquisition of Nicholas
Laboratories and grew through a series of mergers, acquisitions and alliances.
The company has formed a name for itself in the field of custom manufacturing. It cites its 1700
person global
sales force as another core strength; with its acquisition of

inhalation anaesthetics business, Nicholas
Piramal gained a sales and marketing network

spanning 90 countries

Nicholas Piramal is well
poised for the
challenge of

surviving in the aftermath of product patent protection. The company has respected intellectual
property rights since its inception and refused to "support generic companies seeking first
file or early
market strategies." Instead, it decided to make

its own intellectual property and opened a research facility last
November in Mumbai with hopes of launching its first drug in
2010 at a cost of $100,000.



Cipla burst into the internat
ional consciousness in 2000 with Triomune, an AIDS treatment costing
between $300 and $800 per year that infringed upon patents held by several companies who were selling the
cocktail for $12,000 per year. Long before this news, Cipla had been building a s
trong global presence, and it
now distributes its 800
odd products in over 140 countries. Privately
held Cipla holds a prominent spot in its
home country as well; it is the leader in domestic sales, having just unseated GlaxoSmithKline for the first time
n 28 years. Revenue in 2004 totaled $552 million (using Rs 43.472 = $1) about 75% of which was derived in
India. Cipla did not report having a research program.



Originally an extensi
on to an Irish chemicals company seeking to break into the Indian market, Biocon
is now the leading biotech in India, bringing in Rs 646.36 crore (almost $150 million) in revenue for fiscal year
2004. It initially made its money by producing enzymes, but B
iocon recently decided to become a research

oriented company with the goal of bringing a proprietary new drug to market.

The company went public in
March 2004, and "its shares were oversubscribed by 33 times on opening day." Eight months later it launched
Insugen, a bio
insulin that is its first branded product. Biocon also has two wholly
owned subsidiaries, Syngene
and Clinigene, that perform custom research
and clinical trials.

Serum Institute of India


The Serum Institute of India can make the enviable claim that 2 out of every 3
children in the world are immunized with one of their vaccines. It is the world’s largest producer of measles and
DTP vaccines,

and its portfolio includes other vaccines, antisera, plasma products and anticancer compounds.
The Serum Institute earned Rs 565 crore ($130 million) in revenue in fiscal year 2005, selling mainly to UN
agencies and to the Indian government. The Serum Ins
titute is part of the Poonawalla Group, whose holdings
include a horse stud farm and manufacturers of industrial

equipment and components.



a case study


With over 40 years of history, Lupin is a big name in the Indian pharmaceu
tical industry. The Mumbai
firm has travelled a long way from being an API manufacturer to an innovation
led transnational company.
Promoted by Dr Desh Bandhu Gupta, Lupin went public in 1993
94. The company is the largest manufacturer
of the tubercu
losis drug in the world.

The company focuses on complex generics
and branded formulations which gives it an upper edge over other
generic players.



Lupin has been one of the fastest growing pharmaceutical companies, rising at over 23% CAGR for the past
four years. It is among the top five companies of the IPM, with an overall market share of 2.73%.

The company is pres
ent across therapeutic segments like respiratory (number 2 with 11.9% market share),
cardiac market (share 5.1%), diabetes, neuro psychiatry, oncology and anti
infective segments among others.
The company recently added new therapy areas like gynecology an
d oncology to its portfolio.



Export contributes around

65% to the company’s consolidated revenues. Its major markets are

United States

Lupin is the best player among Indian peers in the US.



Backed by mainstay products and Intellectual Property (IP), the company has emerged as the fastest
generics company in the US, by prescriptions, clocking over 90% y
y growth and is the ninth largest
generics player in the US, in terms of total prescriptions. The company has a total of 22 products in the market.
Eight of them are market leaders.



Lupin’s branded business contributes 27% to the overall US business. The company is aggressively
seeking in
licensing opportunities and alliances to add new products to further augment the branded business.


The company has a solid foundation wi
th a product pipeline in anti
infective, cardiovascular and CNS therapy
products. It intends to make around 15 EDMFs/COSs per year in European markets, currently 54 EDMFs/COSs

Other Countries

It has a strong presence in Asia, Africa, Middle East, Latin Ame
rica (AAMLA), Australia, etc. Lupin
concentrates on chronic therapies and lifestyle segments like cardiovascular, central nervous system, gastro
intestinal as well as anti
infectives, anti
asthma and anti
TB treatments. During FY08
09, these markets
ted for 15% of the company’s consolidated revenues.


Lupin has become the largest Indian player in Japanese markets post Kyowa acquisition. Kyowa is amongst the
top 10 generic companies in Japan and has over 50 years of history in manufacturing and m
pharmaceutical products. The company has identified neurology, cardiovascular, gastroenterology and
respiratory as core therapeutic areas for drug development and marketing in Japan. Kyowa’s FY09 sales
contributed 12% of consolidated revenues.


Lupin has 10 (6 formulations and 4 API) state
art manufacturing facilities, which adds to the company’s
overall ability to deliver quality products and ensures scalability of a wide range of product portfolio.



The Lupin Research Park (LRP) located at Pune is spread across 1
9 acres and is the hub of the company’s
research activities. The company’s research programme covers the entire value chain, from developing complex
APIs to value added, controlled release, first
files, to difficult
replicate products, to a highly ev
ADDS and NDDD programme.

Housing a pool of over 550 scientis
ts, the company spends over 7% of the consolidated net sales on R&D,
which is among the highest in the industry. Lupin’s R&D activity is spread across


Generic Research


Process Research


Formulations Research


Advanced Drug Discovery Systems (ADDS)


Novel Drug Discovery and Development (NDDD)


Biotechnology Research

During FY08
09, the company filed a record 28 ANDAs, with as many as 5 first
files. Lupin’s cumulative
filings stand at 90, addressing an estimated market size of US$ 90 billion.


Lupin’s Intellectual Property Management Group (IPMG) works in conjunc
tion with the research and
marketing team to identify lucrative opportunities.

The company’s biotech activities have come a long way since they were initiated two years ago. Today, the
company has 7 proteins in different stages of development. During FY08
09, Lupin set up a state
biotech facility on the outskirts of Pune.

Lupin’s NDDD program is an important pillar of the company’s long
term growth plans. It has a pipeline of
four Investigational New Drugs (IND) addressing three different disease

areas of migraine, psoriasis and
tuberculosis. These drug candidates are in the various phases of clinical development.


Another important aspect of scaling to newer orbits would be introducing new business lines and adding new
therapy areas each year for

the company. In FY08
09, the company entered the Oral Contraceptives (OC)
segment through the filing of 7 OC ANDAs. Associated DMFs also instituted research in Ophthalmological

The Indian Contract Research and Manufacturing Services (CRAMS) have
been rapidly gaining momentum
with its low
cost base and skilled manpower. Lupin initiated its CRAMS business through an acquisition,
Novodigm, way back in 2007.



Lupin is a market leader in anti
TB and CVS segments. The company is
growing over 20% CAGR in domestic
markets almost twice the industry average. It is expected to continue with this run rate in the future also.
CRAMS: India is the flavour of the segment with its low cost base and skilled manpower. Global CRAMS
market was e
stimated to be approximately US$ 55 billion in 2007 and is expected to reach US$ 64 billion by
2010 (excluding clinical trials market). It has entered the segment with the acquisition of Novodigm and is
ramping up the business.


Niche products:


asthma, CNS among others would drive growth in the US as well as other markets as
lifestyle segments have comparatively better margins. Pressure on cost containment is pushing generics sales,
which is a positive for a pharmaceutical giant like Lupin ltd.
Also, significant patent expiry provides a window
for growth in developed markets.

Branded Formulations:

In the US, Lotrel would be the key growth driver for the company. Lupin recently got
the approval for this product having a market size of US$ 1.1 bill
ion. This exemplifies that Lupin has strong
research and development capabilities with strong execution skills.

New geographies like Japan are now opening up. Lupin has already made its presence felt in Japan, which is the
second largest pharmaceutical mar
ket (worth over US$ 65 billion), by acquiring Kyowa. Japan’s stringent
regulatory guidelines act as entry barriers for other companies thus limiting competition. Exports are expected
to grow over 25% in future.


Lupin has made some strategic acqui
sitions in the last two years, which enhanced the company’s penetration in
developed markets. Products like Antara, AllerNaze provide a strong foothold in the primary care markets.


The company has a strong NCE pipeline of 6 molecules including two mol
ecules in phase II and one in phase
III. Anything positive in the segment like an outlicensing deal would be a big catalyst for the company’s


Lupin remains an attractive long
term player considering the aging population in developed markets, demand
for generics, its proven track record and its leadership positi
on in various segments.

At the current market price of Rs 1572, the stock trades at 21x FY10 (nine months annualized earnings of Rs
74.3). Given the strong fundamentals and earnings momentum, the stock has potential to grow from its current



the future?

Relationship between pharmaceuticals and biotechnology

Unlike in other countries, the divide between biotechnology and pharmaceuticals remains fairly defined in
India. Biotech there still plays the role of pharma’s little sister, bu
t many outsiders have high expectations for
the future. India accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the
Pacific region and 11th in the
world in number of biotechs.

In 2004
5, the Indian biotech industr
y saw its
s grow 37% to $1.1 billion.

The Indian biotech market is dominated by biopharmaceuticals; 75% of
5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from
biopharmaceuticals, vaccines led the
way, c
omprising 47% of sales
. Biologics and large
molecule drugs tend to
be more expensive than small
molecule drugs, and India hopes to sweep the market in biogenerics and contract
manufacturing as drugs go off patent and Indian companies upgrade their manufact
uring capabilities.

Biotechnology statistics

Top 20 Biotechnology Companies in India, 2004



Revenue 2004


Revenue 2004







Serum Institute of India




Panacea Biotec




Venkateshwara Hatcheries




hyco Monsanto




Novo Nordisk




Rasi Seeds




Aventis Pharma




Bharat Serums




Chiron Behring Vaccines








Indian Immunologicals




Shantha Biotechnics








Eli Lill
y and Company








Bharat Immunological & Biological Corp.




Bharat Biological International




Advanced Biochemicals




Biological E




Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in

revenues. At last count there were 265 firms registered in India, over 75% of which were incorporat
ed in the
last five years.

The newness of the companies explains the industry’s high consolidation in both physical and
financial terms. Almost 50% of all b
iotechs are in or around Bangalore, and the top ten companies capture 47%
of the market. The top five companies were homegrown; Indian firms account for 62% of the biopharma sector
and 52% of the industry as a


The Association of Biotechnology
Led En
terprises (ABLE) is aiming to
grow the industry to $5 billion in revenues generated by 1 million employees by 2009, and data from the
Confederation of Indian Industry (CII) seem to suggest that it is pos

Comparison with the U.S.

The Indian biotech se
ctor parallels that of the U.S. in many ways. Both are filled with small start
ups while the
majority of the market is controlled by a few powerful companies. Both are dependent upon government grants
and venture capitalists for funding because neither wil
l be commercially viable for years. Pharmaceutical
companies in both countries have recognized the potential effect that biotechnology could have on their
pipelines and have responded by either investing in existing start
ups or venturing into the field th
In both India and the U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth

elationship with IT

Many analysts have observed that the hype around the biotech sector mirrors that of the IT sector
. Biotech
colleges have been popping up around the country eager to service the pools of students that want to take
advantage of a growing indu

The International Finance Commission, the private investment arm of the
World Bank, called India the “cente
rpiece of IFC’s global biotech strategy.” Of the $110 million invested in 14
biotech projects investment globally, the IFC has given $43 mil
lion to 4 projects in India.

According to Dr.
Manju Sharma, former director of the Department of Biotechnology, the
biotech industry could become the
“single largest sector for employment of skilled human re
source in the years to come.”

British Prime Minister
Tony Blair was similarly impressed, citing the success of India’s biotech industry as the reason for his own
s own biotech opportunities.

Malaysia is also looking to India as an example for growi
ng its own
biotech industry.

Government support

The Indian government has been very supportive. It established the Department of Biotechnology in 1986 under
the Mini
y of Science and Technology.

Since then, there have been a number of dispensations offered by both
the central government and various states to encourage the growth of the industry. India’s science minister
launched a program that provides tax incentive
s and grants for biotech start
ups and firms seeking to expand
and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously
limited to rodents, animal testing was expanded to include large animals as part o
f the

minister’s initiative.

States have started to vie with one another for biotech business, and they are offering such goodies as
exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from
estment to land

to utilities

Foreign investment

The government has also taken steps to encourage foreign investment in its biotech sector. An initiative passed
earlier this year allowed 100% foreign direct investment without compulsory li
censing from the government1.


April, a delegation headed by the Kapil Sibal, the minister of science and technology and ocean development,

visited five cities in the U.S. to encourage investment in India, with
special emphasis on biotech.

Just two
months later, Sibal returned to the U
.S. to unveil India’s biotech growth strategy at the BIO200
5 conference in


The biotech sector faces some major challenges in its quest for growth. Chief among them is a lack of funding,
particularly for firms that are just starting

out. The most likely sources of funds are government grants and
venture capital, which is a relatively young industry in India. Government grants are difficult to secure, and due
to the expensive and uncertain nature of biotech research, venture capitalis
ts are reluctant to invest in firms that
have not yet developed a
commercially viable product.

As previously mentioned, India hopes to solve its
funding problem by attracting overseas investors and partners. Before these potential saviors will invest
ficant sums in the industry, however, there needs to be better scientific and financial accountability. India
is slowly working towards these goals, but it will be a while before they are up to the standards of Western

India’s biotech firms shar
e another problem with their pharmaceutical cousins: a lack of qualified employees.
Biotech has the additional disadvantage of competing against IT for ambitious, science
minded students but not
being able to guarantee the same compensation. An aspiring re
searcher in India needs 7

10 years of education
covering a range of specialties in order to qualify to work in biotech. Even if a student does choose to go on the
biotech path, the ineffectual curriculum at many universities makes it doubtful as to whether

he will be qualified
to work in the field once finished. One estimate shows that 10% of upper
echelon biotech recruits have come
from foreign countries. While this is not a problem, per se, it drives up cost in a country whose competitive
advantage is bas
ed on cheap, high
quality labor. Far from ending with scientists, there is also a shortage of
people with a knowledge of biotechnology in related fields: doctors, lawyers, programmers,
personnel and others.

While little has been done about the la
tter half of the employee crunch, the government has addressed the
problem of educated but unqualified candidates in its Draft National Biotech Development Strategy. This plan
included a proposal to create a National Task Force that would work with the bio
tech industry to revise the
curriculum for undergraduate and graduate study in life sciences and biotechnology. The government’s strategy
also stated intentions to increase the number of PhD Fellowships awarded by the Department of Biotechnology
to 200 per

year. These human resources will be further leveraged with a “Bio
Grid” that will knit together
the resources of the academic and scientific industrial communities, much as they are in the U.S.




ian companies need to attain the right product
mix for sustained future growth. Core
competencies will play an important role in determining the future of many Indian
pharmaceutical companies in the post product
patent regime after 2005. Indian companies,
an effort to consolidate their position, will have to increasingly look at merger and acquisition
options of either companies or products. This would help them to offset loss of new product
options, improve their R&D efforts and improve distribution to
penetrate markets.

Research and development has always taken the back seat amongst Indian pharmaceutical
companies. In order to stay competitive in the future, Indian companies will have to refocus

heavily in R&D.

The Indian pharmaceutical industry also needs to take advantage of the recent advances in
biotechnology and information technology. The future of the industry will be determined
how well it markets its products to several regions and distributes risks, its forward and
backward integration capabilities, its R&D, its consolidation through mergers and acquisitions,
marketing and licensing agreements.






3) Top 200 pharma companies profile; Cygnus business consulting and Research Pvt. Ltd.