Risky Business

With markets playing ping-pong with business worldwide, the risk attached to the business of biotech has still not lost its heaviness. Aashruti Kak writes about the prospects of bio-entrepreneurship in India in the current scenario

The last decade saw an incredible boom in the biopharma sector and witnessed the rise of several bioentrepreneurs. However, considering that there is always a demand for something new in the market, the existing number of biopharma companies is also not enough. "The Indian biotech industry has more than 300 companies, including leaders such as Biocon, Serum Institute of India and Panacea Biotec, contributing to nearly a third of biopharma revenues. However, the industry is still in its early stages when compared with the mainstream and well-developed pharma industry. In all likelihood, this is likely to grow at 25-30 per cent over the next few years with the introduction of new products," says Dr M S Azimi, business head-life sciences practice, APAC, GlobalData.

Keeping in mind

"My view is that there is no actual absence of capital. The truth is that most agencies are not able to disperse funds because there are not many convincingly good, well defined proposals coming their way." Karnvir Mundrey Atharva Lifescience Consulting

Every industry, world over, has been riding the tumultuous economic wave world in the past few years, and the biopharma industry is no exception. Despite prevailing doubts, off and on, regarding the success of this sector in India, amidst applaudable achievements, the industry has managed to survive in the absence of some things as basic as absolute regulations. "This is an excellent time, especially for bio-entrepreneurs in India. There is a demand at every level, in every field, and so the scope of any service is tremendous in our country in terms of a market. There is no dearth of exposure or communication in India as well. The only aspect that I repeatedly feel that we lack in terms of identifying a problem or serving the market is creativity and the will to conceptualise; we are not looking at new business models," opines Karnvir Mundrey, director, Atharva Lifesciences Consulting.

"More than just encouraging bio-entrepreneurs, the government needs to create an environment where academia, clinicians and industry work together to create intellectual property. Funding alone will not do, a bio-entrepreneur will not be able to survive without the supporting ecosystem." Ajit Mahadevan Partner-Life Sciences Practice Ernst & Young

According to Ajit Mahadevan, partner-life sciences practice, Ernst & Young, the fundamental point in starting a venture is 'the idea', followed by a good core team. "An entrepreneur's biggest challenge is funding, particularly in biotech. Most of the funding, even for small ventures is chasing assets or companies that have something commercialisable in the short term," he says.

"The biopharma industry in India today has a sound knowledge base and trained manpower, excellent network of research laboratories, widespread research and clinical trials, and a very well developed pharmaceutical industry. However, it falls behind due to comparatively low R&D spend by the pharmaceutical industry, and inadequate funding through venture capital." Dr M S Azimi Business Head- Life Sciences Practice APAC GlobalData

While every bioentrepreneur thinks of funding as a primary concern, experts believe that there are more important things they should be worried about, for instance, concept. "Every bioentrepreneur in India must understand the need to find a market for his research dream. They must develop products that could address some of the key unmet needs of the consumer. Most of the recent efforts are targeted on the diagnosis and treatment of chronic diseases," says Azimi. “Key research areas include oncology, CNS disorders, cardiovascular diseases, AIDS and diabetes among others. Several new diagnostic and therapeutic approaches are also emerging through recent advances in genome mapping”, he adds.

"All entrepreneurs in this segment should understand the basics of the biotechnology sector such as clinical and preclinical research, industry collaboration, technology, infrastructure and commercialisation, and look for appropriate business models to succeed," he avers.

Then and now

The biopharma space world over has never been an easy place to survive; however, 10 years ago, it was relatively easier to to create a business as there was less competition and unmoulded regulations. As a keynote speaker at BIO India 2011, held in September at Hyderabad this year, Glenn Saldanha, chairman and managing director, Glenmark Pharmaceutical, spoke about the issues that the industry faced, but also introduced an optimistic side. "In the face of increasing regulatory requirements, strict approval processes, low R&D productivity, the cost of an approved drug has increased by 50 per cent in the last 10 years. However, on the bright side, the international and domestic talent pool in the industry has broadened considerably, the infrastructure and specialised expertise has managed to achieve world class levels, cost control measures have led to alliances with Indian companies in research, there has been an influx of Indian expats to India in drug discovery research, there is more access to funding as venture capitalists gain more confidence over Indian companies, and there is a heightened spirit of entrepreneurship leading to many start-ups. You can accomplish a lot in India today despite not having deep pockets," he said.

Every industry, in the beginning stumbles, falls, but is resilient. The biotech industry in India too went through the same phase, as it did not have success early on. "The extended phases of clinical research needed for the development of these products caused difficulty for the industry to continue due to poor funding. The initial investment required is very high and the uncertain outcomes of research caused investors to be wary of funding these ventures.

Conventional drugs provide symptomatic relief for various diseases," recalls Azimi. However, he adds, “most biotech drugs target underlying cause or the molecular pathways of the disease, and hence, offer a permanent cure. For example, gene therapy, a contribution of biotechnology, cures genetically transmitted diseases.”

Mahadevan treats the current issues faced by the industry as two sides of a coin. "On the plus side, I think the capability of biotechnology in India has improved in the last five to 10 years, and so has achieved the ability to access quality. The flip side is that it also has come at a time when cash is definitely a crunch. You would find that globally, 80 per cent of the funds are following 20 per cent of biotech companies," he opines. The tough part in this, he says, is that the larger chunk of the funding is going to established players, creating a struggle for the smaller or new players; in other words, it is very selective.

Funding woes-real or an imagination

Currently, the Department of Biotechnology (DBT) has a few programmes in place for the Indian biopharma industry that have been taken well advantage of. One such programme is Biotechnology Industry Research Assistance Programme (BIRAP), which the DBT initiated in partnership with Association of Biotechnology Led Enterprises (ABLE) and Biotech Consortium India Limited (BCIL). It is a pilot activity launched under the umbrella of the Biotechnology Industry Research Assistance Council (BIRAC) and plays the role of a promoter and nurturer that assists in incubating innovation and excellence in the biotechnology industry, especially facilitating start-ups and SME's. BIRAC manages public private partnership schemes and participates in activities like capacity building programmes to build human resources, infrastructure, etc. Through this programme, the Government partners with the industry to initiate public support on a cost sharing basis, however, it is only available for high risk, transformational technology/process development, 'breakthrough research' which enables IP generation, with the IP ownership rights resting with the industry. There are various models of grants and/or loans available under the programme. It recently closed its call for proposals for 2011 in November this year.

DBT had also started the Small Business Innovation Research Initiative (SBIRI) which supported high-risk pre-proof-of-concept research and late stage development in small and medium companies lead by innovators. The Biotechnology Industry Partnership Programme (BIPP) was another programme launched by DBT in November 2008. SBIRI has a loan limit from Rs 50 lakh to Rs 10 crore, whereas BIPP aims at much larger projects of higher costs with a mission of IP generation in India.

Another programme that seems to be making a headway is the Biotechnology Entrepreneur Student Teams (BEST) Programme, which is an innovative talent search programme jointly promoted by the Department of Biotechnology (DBT) and ABLE. Mundrey, as a part of the BEST programme jury shares the concept behind it, "The intention behind BEST programme is to create real companies that take products into the market as soon as possible. The fact is that entrepreneurs do not have to always start big; just take something simple and apply innovation to it and you would be surprised that you can bring out a product to the market sooner than the usual 10-15 years spent in clinical trials. Everything in life sciences is not a drug; there are devices, assists, and a hundred other things that one can apply with science," he avers. The programme aims to encourage entrepreneurship in the field of life sciences by identifying student teams and encouraging them to come up with scientific ideas that have commercialisation potential. It has lectures/interactions that add various aspects whicht help budding entrepreneurs gather a different perspective to what they want to do and how they would want to do it, be it about making a business plan, funding and finance, IT, and so on. After the proposals are received, the concepts are screened and 20 teams are shortlisted and invited to a four day residential fully paid for Entrepreneurship Workshop at Bangalore that would impart skills required to start a commercial venture. From the 20 teams, top three teams are identified and awarded attractive cash prizes of Rs 5 lakh, Rs 3 lakh and Rs 2 lakh, respectively.

According to Mundrey, the previous year, the programme received between 150-200 projects, a lot of them being studies done in laboratories about the potential of their products, but the roadblock was the fact that those products did not seem to be viable future offerings which would find their way into the market anytime soon. "There are so many projects on the table but they lack in something as simple as commitment. And this is not the attitude in just academic entrepreneurs, it is prevalent in experienced industry professionals as well," he points out.

In a very recent development this year, a new grant was launched by the name of IKP Knowledge Park--Grand Challenges Explorations (IKP--GCE), which is an IKP initiative in partnership with the Bill and Melinda Gates Foundation to identify, fund and nurture revolutionary ideas that address global health challenges. The goal of the program is to empower ideas that will create new drugs, diagnostics, devices, vaccines, delivery systems and service models that can be made available to all socio-economic layers of the human population. Winners of the programme will be recognised as GCE Phase I grantees by the Bill and Melinda Gates Foundation. The winning ideas will be empowered with a grant of $ 100,000 from the Foundation, in addition to mentoring from IKP Knowledge Park for a period of 18 months, where IKP Knowledge Park will provide access to technical consulting, networking opportunities, and lab facilities to help the winners take their ideas to the next stage of realisation. Upon successful progress in the first two years, candidates will be eligible for Phase II funding of up to $ 1 million.

The last date to submit the applications for this year is December 1, 2011.

The fact is that there are many funding avenues that entrepreneurs are not aware of, which is why there is an unrest, mostly when it come to funding projects. Which is one of the reasons why Atharva Life Sciences Consulting published a book called 'Funding Your Science Idea', which maps out all funding options that are open to Indian scientists/entrepreneurs in lifesciences.

Turning challenges into opportunities

“The truth is that the biopharma industry in India today has a sound knowledge base and trained manpower, excellent network of research laboratories, widespread research and clinical trials, and a very well developed pharma industry. However, it falls behind due to comparatively low R&D spend by the pharma industry, and inadequate funding through venture capital," says Azimi. He goes on to say that India still has good scope in the field of contract research as the costs involved internationally are prohibitive, large domestic pharma market too has great export potential, and its needless to say that the country has a large patient pool with a wide range of diseases. The biopharma segment in India is growing fast, but it is impeded by mainly price controls and patent uncertainty.

"There are two ways to look at where the industry stands. On one side we have half baked regulations, on the other hand, we have seen that whenever there is an industry where new products are coming out, there are always issues of underdeveloped regulations. It is not that the government has not done much to regulate the industry better, it is just that this science is still in its developing stage and building regulations for biopharma from scratch will take time as and when the proof is more exact. Moreover, entering an industry that is still developing is more of an opportunity as there is lots to achieve, there are grey areas that can still be defined," asserts Mundrey.

Azimi, like Mundrey, also believes that the Indian government's support for the biotech industry has been seen in several ways. For instance, at the central level, the government provides funds to the DBT, which in turn funds various institutes. DBT was set up by the Government of India under the Ministry of Science and Technology in 1986, whose initiatives have resulted in creating a pool of scientists and entrepreneurs. As a result, India has emerged as a centre of biotechnology activity over the last decade. "It is conducive to set up biotech companies by both domestic and international players and is an ideal location to set up research laboratories and manufacturing units. India presents an ideal opportunity as it possesses a sound knowledge base combined with skilled manpower," he states.

Mundrey feels that the government is already doing quite a lot. "It is really cuddling the life sciences sector much more than any other sector, and that is visible as crores of rupees are being poured into the system as grants, and we also have so many research laboratories working on numerous studies," he emphasises. Even at the State level, the governments provide financial incentives to promote the industry in several states, eg Andhra Pradesh, Karnataka, Kerala, Madhya Pradesh, Orissa and Tamil Nadu, since projects funded privately in India are rare, with banks being the major source of financing. However, considering that there is always scope for improvement. "More than just encouraging bio-entrepreneurs, the government needs to create an environment where academia, clinicians and industry work together to create intellectual property. Funding alone will not do, a bio-entrepreneur will not be able to survive without the supporting ecosystem," Mahadevan rightly suggests.

"My view is that there is no actual absence of capital. Whether it is DBT or any other funding agency, private equity or venture capital, they cannot disperse the entire amount required by entrepreneurs to start a project. The truth is that most agencies are not able to disperse funds because there are not many convincingly good, well defined proposals coming their way," he mentions. "Whenever I have spoken to prospective bio-entrepreneurs, a majority of them have not even tried to get out of their labs and do field studies, which only reflects that they do not make sufficient efforts to push their projects enough to get adequate funding. Why do you think there are only certain companies that keep getting projects out year after year and keep getting funding? It is because the rest are not applying with proper proposals. Instead of using the phrase half-baked for regulations, I would rather use it for projects," he adds.

What Mundrey suggests is that all stakeholders should ask themselves whether the funding that is already being doled out to the industry is being fully utilised? Not just this, but bio-entrepreneurs, according to him, also need to round up on a suitable business model, as starting a company is not child's play. And if they are very sure about their product then there are other models that can be looked at, though there may not be many. For instance, one can approach big companies, present their work and offer to share IP with them and other benefits in case it succeeds, and so on.

"Whenever we write venture capital in our reports and in the media, we give wrong hope to the emerging entrepreneurs, because the truth is that there is no venture capitalist in India. If you have great research and can get valuable IP for it, that is something that is still very valued in the industry," Mundrey signs off.

aashruti.kak@expressindia.com