08 Dec Midwest Biotech: Watch India, the Next Biotech Frontier
CHICAGO – While I have been fascinated with India for years, I have to admit that I’ve never been there.
My interest in India started during a marketing internship at Lever Bros. (now Unilever) in New York City during one college semester. A colleague there befriended me. He was a young, Indian man with a doctorate and other degrees from the U.K.
Though he was obviously very bright and energetic, he had just arrived in New York without any contacts. He was clearly overqualified for what he was doing. I was to find out later that he was from a relatively wealthy family in India. Thus, my education on India began.
During my Bristol-Myers years in Evansville, Ind., I struck up a strong relationship with another very bright Indian colleague and his family. The memories of many evenings at his home (with all the delicious Indian dishes) are still strong. When we would travel together to New York City on business, he would go armed with his wife’s grocery list of Indian foods that were unobtainable in Evansville.
During my Searle years, I became good friends with yet another very bright Indian who strangely enough managed Searle’s Latin American businesses (an Indian with a “Latino” feel) and was Searle’s expert at divesting businesses around the world. This friendship led into a relationship in which we both mentored each other over the next 15 years of our careers (particularly whenever we hit career ruts along the way).
He actually got me to take the first step in running a biotech company. A participation in his son’s wedding reception was a grand opportunity to meet his extended Indian family and was very meaningful. While at Searle, I had hoped to make it to India since Searle had established a successful Indian business with some outstanding scientific and creative staff, but I never quite made it there.
Last year, my travel hopes were renewed when a possible consulting job to visit the “hot” biotech center of Bangalore came up. Unfortunately, it was dashed at the last minute.
More recently, as I sat through a presentation at IBIOMarketplace a few weeks ago from an Indian company based in Chicago called Aagami (which is run by an energetic, personable and bright individual by the name of Dinesh Jain), I once again became tuned on to India as well as its potential for biotechnology.
Aagami represents a fascinating spectrum of Indian biotech and pharmaceutical CROs (contract research organizations) that can handle everything from the custom synthesis of new drugs, bulk drug manufacture, pre-clinical studies (safety and efficacy) and even clinical trials running from Phase I and up.
Why go all the way to India to do this? The answer is cost and some extremely bright, talented and creative scientists. Just as other American technology companies have moved operations to India to take advantage of these two important aspects of competitive advantage, the American biotech and pharmaceutical industries are waking up to India as a source of drug development.
The cost of doing business in India is about one-quarter to one-third of the cost in the U.S. Given the high expense of drug development in the U.S., this is no small savings.
In the past, the limitations of contracting work in India were the lack of patent protection and facilities not certified by the FDA. However, the Indian pharmaceutical and biotech industries now realize that in order to participate in the U.S. and European markets (not just in Asia, Latin America and Africa), they must address these issues satisfactorily. They are rapidly moving to do so.
Before we jump into the dynamics of the Indian pharmaceutical and biotech market, here is a brief backgrounder on the country (courtesy of the CIA):
1. India has 1.3 million square miles of land mass versus 3.6 million square miles in the U.S. (slightly more than one-third the size of the U.S.).
2. The Indian population is more than 1 billion (1,049,700,118), which is second only to China and compares to about 280 million people in the U.S.
3. Life expectancy is just under than 64 years of age versus about 74years of age in the U.S.
4. There are almost 4 million people living with HIV/AIDs and an estimated 310,000 deaths related to HIV/AIDs.
5. GDP growth rate in 2002 was 4.3 percent and GDP per capita was $2,540.
6. About 25 percent of the population live below the poverty line (about 250 million people) with an unemployment rate of 8.8 percent.
7. Inflation in 2002 was only 5.4 percent.
8. About 60 percent of the labor force is dedicated to agriculture, 23 percent to services and 17 percent to industry.
9. Exports reached $44.5 billion in 2001 versus imports of $53.8 billion.
10. There are about 48 Indian rupees to the dollar. Each rupee is worth a little more than 2 cents.
11. In 2002, there were 27.7 million telephone lines in India, 2.93 million cell phone users and 7 million Internet users.
12. There are 562 TV stations (of which 82 stations have 1 kW or greater power) and 334 airports (of which 232 have paved runways).
13. Hindi is the national language and primary tongue of 30 percent of the people. However, there are 14 other official languages. About 59.5 percent of the population is literate.
14. There are 28 states and seven union territories.
15. India declared its independence from the U.K. on Aug. 15, 1947.
16. New Delhi is the capital.
17. The president is chief of state with a vice president. However, the head of government is the prime minister.
18. About 26 percent of India’s population is urban. There are more than 299 cities with populations of more than 100,000 people and about 24 cities with populations in excess of 1 million. Mumbai (Bombay) ranked seventh in the world with 12.6 million. Calcutta (in West Bengal) ranked eighth with 11 million. Madras has more than 5.4 million people. New Delhi has 6,352 people per square mile.
19. The Indian middle class is growing fast and is increasingly conspicuous in India’s cities.
For those of you who saw the movie “Monsoon Wedding” last year (almost an Indian version of “My Big Fat Greek Wedding”), you saw a glimpse of this growing Indian middle class and their customs.
Indian Biotech and Pharma Industry
It is currently estimated that the Indian pharmaceutical and biotech market represents about $5 billion in annual sales. It is expected to grow to $25 billion (or five times) by the year 2010 (seven years from now). The Indian market for recombinant medicine is estimated by BioSpectrum magazine to grow from $111 million today to $200 million by 2005.
Due to India’s low-cost structure, it is evident that the country will become a major player in the biogenerics industry just as it is already playing a key role in the existing generics business of small-molecule drugs. Remember that a number of biotech drug patents will expire in the next few years.
The generic bulk drug-supply business is already generating an estimated $6 to $7 billion per year for India and should grow to $18 to $19 billion by 2010. BioSpectrum estimates that there are currently about 160 biotech companies in India. As the numbers show below, there is a growing group of Indian VCs that have substantially increased their investment in the biotech sector.
The Indian biotech industry has been segmented into the following areas:
Another way of measuring the Indian biotech industry is by number of employees, patents, investments and revenue by company size:
The leading biotech companies in India are not just Indian and not just biotech companies. Let’s take a look at the top 20 companies as ranked by revenues by the Indian biotech magazine BioSpectrum.
Surprisingly, if you look at senior management at these companies, there are a number of women CEOs (sound like the Midwest?). Although the sales of these companies may look small in comparison to their U.S. counterparts, remember that the pricing of drugs and services is substantially lower than that of the U.S. given that the GDP per capita is about one-tenth of that of the U.S.
In summary, there seems to be a biotech explosion happening in India. Companies like Aagami in Chicago can help educate the Midwest audience about not only the extensive array of services that Indian biotech companies can offer to Midwest companies (particularly as capital is scarce and everyone wants to make those limited dollars stretch further) but also the increasingly high quality of such activities.
A number of Indian pharmaceutical companies (such as Ranbaxy Labs) with annual sales of more than $1 billion each have already staked out the U.S. pharmaceutical market for generic products and are aggressively pursuing market penetration. The next wave of generics will be the biogenerics. The Indian companies will clearly have a substantial cost-competitive edge.
It is time we all learn more about this growing region of the world and its potential impact on our industry. See you next week!
Michael S. Rosen is the vice chairman of human health at the Illinois Biotechnology Industry Organization (IBIO). He can be reached at email@example.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.
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