Bio-pharmaceutical industry

Step 1: Identify and understand the industry

Biotechnology can be defined as the use of microorganisms, such as bacteria or yeasts, or biological substances, such as enzymes, to perform specific industrial or manufacturing processes. Indian Biotech industry generated revenues of US$ 2.56 billion during 2007-08, growth rates have been around 24-28%. In 2010 revenue expected to cross US$ 5 bn -- US$ 13-16 billion by 2015provided the low levels of innovation are countered. Biopharma contributes significantly to this, about half. Compared to US-EU presence, Indian presence is small. Four segments in biopharma

Vaccines Non-vaccine therapeutics Novel products Contract services

1. Indian biopharma successful in vaccines, price competitive (low cost products and driving MNC product prices downwards)

Examples of Indian success stories, Shanvac B (from Shanta Biotechnics brought down the price significantly US$15 to US$0.5 Serum Institute of India is a success storyevery second child in the world vaccinated with measles-DPT uses SII product. 15 companies have 50 brands of vaccines contributing about 3500 cr.

2. Non-vaccine therapeutics like insulin products and anti-carcinogenic drugs, alpha interferon, are success stories (Panacea Biotech, Biocon, Transgene Biotech and Bharat Biotech are successful examples) Eli Lilly, Aventis and GSK have Indian presence 3. Novel products (bacteriophages againt multi-drug-resistant bacteria) still picking up 4. Contract services: rapidly growing segment

Step 2: Understand the concern or theme

Current low levels of innovation will affect the future growth of the industry
[Many references; CII, pharma majors, DBT, exposure as a result of Bio International Expo since 2001, possibility of clinical services etc.]

The new IPR regime, post-2005, where process patenting focus diluted in favour of product patenting precipitated this concern From industry, and Department of Biotechnology: National Strategy 2007) -- concern has been to develop an innovation-driven approach to biopharma development

Step 3: Study current practice (benchmarking)

Case study approach:

Key players include Biocon, Shanta Biotechnics, Panacea, Serum Institute of India, Indian Immunologicals, Transgene Biotech MNCs: Novo Nordisk, Aventis and GSK

Assess responses to the concern about low levels of innovation

Step 4: Key guiding questions

How have the major players responded to the issue of low innovation? Case studies: focus is actually on establishing an R&Ddriven identity (low innovation is repackaged in more relevant terms) (Revisit guiding question; non-linear writing) If focus has been on establishing R&D driven identity for themselves, how have they gone about doing this? What are the drivers of an R&D identity? Focus on limited disease line (diabetes, carcinoma Biocon) Intensive research on expanding treatment options (Novo Nordisk)

Focus on limited line of molecules (macromolecules in vaccine) Technology (rDNA, Combination vaccines e.g.) Specific therapeutics like bacteriophages

Step 4: Key guiding questions (contd.)

What are the financial investments and structures that facilitate an R&D led approach?

(Indirect data available; some direct information)

What are the barriers or constraints to this approach, and how do these affect firms differentially?

Quality of human resource; HRD for an R&D led identity; Choices in public-private partnerships; Handling risk; Problems in venture/ angel funding; Role of ignition grants; Regulatory process; public initiatives supportive of new entrants but hard choices regarding partnerships

Step 5: How do I move towards an R&D led identity?

Proactive strategies of larger players: Mergers and Acquisition: E.g. Acquisition of 70% stake in German Pharma AxiCorp by Biocon Acquiring technology/ licensing Leasing in facilities/ contract services Investment in own R&D (choices regarding structure; financial liabilities and risk) Smaller firms, new entrants: Leveraging public sector support: Biotechnology Industry Partnership Programme (BIPP) to facilitate high risk, transformational technology/process development

Leveraging public sector support

Model 1 Government supported private managed, facility will be located in a National Laboratory and managed by a consortia of industries or a single industry which has no conflict of interest. 100% grant-in-aid User charge basis Ownership with Government Differential fee for public and private user

Model 2
Public-supported in a public institution in partnership with a private investor who has no conflict of interest 1. Cost sharing with the industry 2. Up to 50% grant-in-aid 3. Shared profits 4. Ownership will depend on contribution 5. Differential fee for public and private user

Model 3
Specialized facility for discovery and innovation to be established, operated and managed by a single private industry 1. Soft loan 2. User charge basis 3. Differential fee for public and private 4. Should devote a % of time for education and training of DBT identified trainees for capacity building

Step 6: Conclusions

Segmentation and targeting within industry Tailoring recommendations on developing R&D identity to size, age and resource position of firm Choices regarding structure, contractual arrangements, HRD, financial structuring Clear communication of risks and pay-offs Implications for internal and international competition

Recap of Steps
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Identify and understand the industry Understand the theme/ concern/ problem Study current practice (Cases for benchmarking) Develop and refine key guiding questions: iterative process of data collection and analysis (a reflective/ analytical process) Answer the question: How do I develop an R&D driven identity? Address all segments Conclusions