Because while India’s ‘big biotech’ companies, like the bellwether Biocon and the globally acknowledged vaccine makers like Serum Institute of India, Bharat Biotech, Panacea Biotec, have always attracted funding and partners (with one of them, Shantha Biotech even being bought over by big pharma Sanofi), the smaller companies, remained below the radar of investors. India’s Department of Biotechnology (DBT) also focussed on public sector research.
Susan Finston CEO & Mng. Director, Amrita Therapeutics |
The paradox of the Indian biotechnology sector, says Susan Finston, Chief Executive Officer / Managing Director, Amrita Therap-eutics, is that most investment to date—including both private and Government of India funding—has gone into well-established Indian companies, and/ or newer contract service providers. So as she points out, the Indian biotech market is the opposite of the US paradigm of ‘high-risk, high-reward,’ for the innovative life sciences where biotech was driven forward by scores of small bio-discovery start-ups. Many have fallen by the wayside but those that have succeeded have grown beyond their dreams.
Finston cites the example of a few such US biotech companies. Amgen in Thousand Oaks, CA recently has been valued at over $50 billion and employs 17,500 people; Gilead Sciences in Foster City, CA is worth nearly $38 billion and has 4,500 workers and Biogen Idec in Cambridge, MA with a market cap of roughly $31.5 billion has created over 5,000 jobs. This is in addition to companies like Genentech, Genzyme or Chiron, founded by university professors, that have been sold to multinationals for tens of billions of dollars. She opines that no such companies exist in India because of the current government policies.
She points out that while contract service providers in bioinformatics, early discovery, pre-clinical, CRAMS and clinical research, etc., have been very important to the growth of biotech opportunities in India, they do not, generate commercially valuable intellectual property (IP), and are considered to be at the lower end of the value chain because they do not engage in fundamental basic research to develop new types of drugs for the global market as Amrita Therapeutics is trying to do.
A break from the past
The Indian biotech story was stuck in a familiar rut: investors wanted to see a success story, or least a glimmer of that success, but these smaller enterprises needed investment to get to that success.
In that respect, the National Biotechnology Development Strategy was nothing less than pathbreaking, because it promised to look beyond the funding of existing companies and technologies. To do this, DBT committed to invest upto 30 per cent of its budget in private public partnerships (PPPs) by the end of the 11th Five Year Plan. It has a special focus on finding and funding innovative technologies/ companies and hand-holding them through all the sometimes painful growth process.
The search is now on for companies and technologies in their early stages of research, especially high-risk innovative research, who find it difficult to fund from the usual sources, as the concept maybe too futuristic or too complicated for the usual funding sources to comprehend.
Many of these companies may not have the management bandwidth. Sometimes it could be a researcher with a great idea, but without the financial resources or contacts to test it and take it to the next level.
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The first step towards this goal was the setting up of a pilot Biotechnology Industry Research Assistance Programme (BIRAP) in 2008. As a DBT programme, BIRAP aimed to get an understanding of the needs and specialised requirement for creating and nurturing a ‘biotech innovation research ecosystem’ in the country, according to Dr Renu Swarup, Adviser, Ministry of Science and Technology, DBT.
She says the learning has been tremendously useful in setting up a separate public sector company, Biotechnology Industry Research Assistance Council (BIRAC), in March, 2012, which she heads as Director. The special feature of BIRAC is that as a not-for-profit Section 25 Company, with its own independent board of directors, it has the flexibility of operation and provides an excellent instrument for managing the PPP programmes.
BIRAC’s role is significant because, while DBT is focussed on funding biotech research in the public sector, BIRAC’s brief is to support and manage all PPPs and nurture start-ups and small companies. BIRAC has been set up as DBT’s inter-phase agency which serves as a single window for the emerging biotech enterprises.
Swarup indicates that currently upto 20 per cent of DBT’s budget has being allocated and invested in promoting PPP programmes. BIRAC would be the agency through which this budget would be operated in future.
Five years after the National Biotechnology Development Strategy was first formulated, DBT has a series of funds at every stage of a company’s growth curve: Biotechnology Industry Partnership Programme (BIPP) for existing companies, Small Business Innovation Research Initiative (SBIRI) for smaller companies, Biotech Ignition Grant (BIG) schemes for start ups, facilitating technology validation and development through the Contract Research Scheme (CRS) and creating world class quality incubation space (bio-incubators) for entrepreneurs and start-ups through the Bio-Incubator Support Scheme (BISS). (See BOX: Schemes under BIRAC) And BIRAC will be the link between all of these companies and DBT.
Utkarsh Palnitkar Executive Director, Centrum Capital |
DBT and BIRAC seem to be on the right path. Utkarsh Palnitkar, Executive Director, Centrum Capital, a company that offers customised and integrated financial solutions feels that these schemes instituted by the DBT provide a “life line to budding entrepreneurs”. While he feels that the sum may not be large and perhaps does not have the capacity to cover the entire gamut, at least a beginning has been made. He stresses that what is required is like a baton exchange where the entrepreneurs move from seed level funding to more mature capital.
Navroz Mahudawala Managing Director, Candle Partners |
Navroz Mahudawala, Managing Director, Candle Partners, which offers quality investment banking and consulting services in the mid-sized deal space, is also skeptical pointing out that while the intention is honourable, he hopes it serves the purpose it is intended for. He recalls that in the past there has been red tapism surrounding these government programmes. He says in order for such programmes to be successful, it’s important that unbiased personnel from the private sector evaluate these proposals and not academicians.
| Schemes under BIRAC |
Under BIRAC there are number of schemes which are currently being operated for promoting and nurturing innovation research. The schemes are
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Hurdles in the path
But now that the funds are available, there are not enough takers of the caliber required. Swarup says, “Although there are enough takers, our success rate is 8-10 per cent. We need to see more high level innovation research coming forward. Also innovation research for production of public good needs to be an emphasis.”
While there is no denying that there have been success stories, especially under BIPP as this was the first scheme launched in 2008, (BOX: Success stories under BIPP), there is no doubt that industry feels that more needs to be done, not just in terms of funds. Perhaps some aspects of these schemes need to be tweaked.
Relating her company’s experience when applying for DBT support under the BIPP, Finston says the process is “rigorous and time-consuming”. She agrees that DBT funding and related supports play a “critical role” for small companies that are engaged in basic research leading to new types of drugs like Amrita Therapeutics in the absence of meaningful VC and/or angel investors for bio-discovery companies in India. In addition to providing financial support at a very early stage, she says they have benefitted from the continuing opportunities for discussion and technical exchange with DBT officials under the BIPP programme.
Nandakumar Subburaman CEO & Founder, Perfint Healthcare |
Another BIPP beneficiary company, Perfint Healthcare seems to have had a smoother ride. Nandakumar Subburaman, Chief Executive Officer and Founder, Perfint Healthcare, says that the best feature of the DBT schemes would be the absolute transparency and pro activeness demonstrated by the BIPP team. He mentions that Swarup and her team were fully supportive at all the stages.
Expanding on the role of DBT, he says that their experience with DBT and other government agencies has been very satisfying when it comes to showing returns on their investment. “We have received all the prompt support from them whenever we required. Having said this, DBT is not passive – through their regular reviews they are very focused on moving things along and providing ample networking. They are as engaged as PE’s!”, analyses Subburaman.
| Success stories under BIPP |
Affordable product development supported under BIPP:
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Good schemes but …
One of the key challenges for biotech start-ups in India is the issue of fundraising and Finston says that under the current BIPP programme financing agreement that Amrita Therapeutics has signed, there is a 50 per cent matching requirement. While a 50 per cent R&D match is very helpful to support continued R&D outlays by established Indian companies, this can be a considerable burden for a small start-up company that comes out of academic research.
Palnitkar says that the Government should focus its resources in the one area where there is a tremendous deficit, which is funding start-ups as there is plenty of development capital available in India. He reiterates that what is needed is a baton exchange mechanism with the enterprise finding the next level of institutional funding.
There are already examples of this happening. Take again the case of Perfint Healthcare which was already a DSIR recognised R&D lab and a SBIRI supported entity. Subburaman muses that this might have helped their case when they applied for funding under BIPP to take their robotic solution for image guided tumour ablations to the next level. In addition, they already had proof of concept so this probably helped swing the decision of the Technical Screening Committee, comprising scientists from across the country, in Perfint Healthcare’s favour.
Once the technology qualified for a soft loan, the founders got the confidence to go out and invest in the development supported by the soft loan under BIPP. Within 12 months of funding Perfint Healthcare is already out in the market with pilots and soon will be commercialising.
… can be better
Palnitkar also makes the point that funding is only one aspect of the incubation process. What is needed, he says, is a more wholesome approach, which includes provision of management bandwidth and mentoring. Typically what happens in India is that a new entrepreneur has to deal with multiple agencies, for concessional lab space, capital, loans etc. Accordingly, he has to interact with bankers, lawyers, HR professionals etc. As a first time entrepreneur this can prove to be a bewildering process. What instead needs to be done is that feasible plans need to be nurtured up to the break-even point in an environment that encompasses all the elements. “I think the time for an incubation corporation of India has arrived,” he advises.
Hopefully the BISS scheme and the various services by BIRAC, like the IPR and technology evaluation cells, etc will meet this need.
Again comparing the ecosystem created in the US for biotech, Finston says that the Government of India may need to do more to fund the ‘big visionaries’, particularly in the academe, who make up in intellectual capital what they may lack in financial resources.
In practical terms, she mentions measures like reducing or eliminating the high tax burden on academic biotech start-ups, providing investment tax credits, and reducing or eliminating matching requirements for start-ups, of course retaining stringent due diligence and maintaining the financial commitment that Amrita Therapeutics made to DBT in the event of successful commercialisation of the technologies. Overall, Finston does express some hope for the future, because the Life Sciences committee of the Planning Commission has started this process to create more opportunities for more biotech discovery companies to take root in India. “That is where the highest potential is for value creation through innovative vaccines, drugs, and combination medical devices,” she feels.
Beyond DBT
But experts know that the industry cannot depend only on government funding. Mahudawala says, “We do not think government funding would ever be sufficient enough to spur innovation and the growth of lifesciences sector in India. It has to be supplemented by sizeable venture capital(VC)/private capital. Frankly, the credit for the growth of the Indian pharma sector and the status it has today should go to the Indian entrepreneur (and success of private enterprise)–the government has had limited role to play. In fact, the reason the success of this sector (like the IT sector) is that government has had limited role to play!!”
He cites several Indian companies, pharma and biotech biggies today, like Biocon, Bharat Biotech, Glenmark, Ajanta Pharma, etc. which have benefited sizeably from the VC/PE money they raised in the early stages of evolution. In fact, Technology Development and Information Company of India Ltd. (TDICI) and later Kotak have contributed greatly in nurturing lifesciences talent. Companies from the BIPP stable are no different. For example, Perfint Healthcare has PE funding from IDG Ventures, Accel Partners and Norwest Venture Partners and is reportedly tapping more PEs for funding. Subburaman says that future plans include raising more capital for them to go international. But at the same time, they will work with DBT “in creating ‘appropriate’ technologies for India to improve quality of life of those that are fighting cancer.”
Amrita Therapeutics is already proof that high-risk biotech research can be done in India. In terms of an IP portfolio, the company has advanced research through in vitro testing and have filed four patents, including two full utility specifications and PCT applications. Last June, at the 2011 Biotechnology Industry Organization (BIO) International Convention, Amrita Therapeutics was named “Buzz of BIO” Winner as a leading innovative bio-discovery company. According to Finston, this was also the first-ever recognition by the global leading biotech industry association of any Indian bio-pharma company.
Similarly, earlier this year Amrita research has been highlighted in international journals including the Journal of Commercial Biotechnology (January 2012) and ISR Neurology (2012), where the company also acknowledged and thanked DBT for grant support to develop innovative cancer drugs in collaboration with their R&D partners in Portugal at the Instituto Superior Tecnico (IST).
The future for small (early stage) biotech research in India definitely seems a lot more promising today than when Biocon first came on the scene. The fervent hope is that it stays on track.