16
........................................................................................................................
FOREWORD
The era of Indian biotechnology began in 1978 with the establishment of India’s first biotech firm. After that, the government set up the National Biotechnology Board in 1982, which was renamed the Department of Biotechnology in 1986. The industry saw a turning point in 2002, when the Genetic Engineering Approval Committee approved the large scale production of Bt Cotton, India’s first successful genetically modified crop. The government also launched the National Biotechnology Development Strategy in 2007 to streamline the industry’s growth strategy and address various issues related to research and development (R&D), funding, technology transfer, public private partnerships (PPP) and regulations.1 As a consequence of this increasing focus, India is entering an era of “bio-economy”, and the country’s biotechnology industry is expected to play a key role in sustaining future growth. The advancements in various sub-sectors of the industry, such as bio-pharmaceuticals, agri-biotech, bio-informatics and bio-services, are expected to address some of the nation’s key challenges such as food scarcity, energy deficit and unmet medical needs .2 India offers a combination of skilled manpower, low costs, and a large pool of existing R&D institutions to the global biotechnology industry. In addition, the information technology (IT) revolution in the country has benefited the pharmaceutical sector, which in turn has helped in the evolution of the biotechnology sector over the last decade3. Consequently, India currently ranks amongst the top 12 biotechnology destinations in the world4, and is a global leader in the production of vaccines and industrial enzymes for green technologies. Considering the industry’s importance in the nation’s development, the Government has significantly increased its efforts to accelerate R&D activities, and innovation. It has set up institutions for higher learning and has sanctioned numerous research grants. This report analyses the growth of the biotechnology industry in India over the past decade and sets a stage to assess the parameters driving the industry’s growth. It also analyses the factors that are expected to drive future industry growth with the help of Union Budget, 2012–13, and the developments that lead to the 12th Five Year Plan. 1 Eximbankindia – Biotechnology industry in India 2 The Economic Times – Indian biotechnology sector to grow 20 per cent in the foreseeable future 3 UK Trade and Investment – Sector briefing – Opportunities for biotechnology and pharmaceuticals in India 4 Invest India – The Indian biotechnology sector
The Indian Biotechnology Sector: Investments, Growth and Prospects 4
………………………………………………………………………………………………………………………….........
1. KEY DEVELOPMENTS AND CURRENT STATE OF THE INDIAN BIOTECHNOLOGY SECTOR
The Indian government’s increased focus on the country’s biotechnology industry has enabled it to grow at a compounded annual growth rate (CAGR) of approximately 20 per cent over the past decade. The biotechnology sector in India has reached an estimated size of Rs 20,441 crore (US$ 3.8 billion) in value over FY125, and is forecasted to reach Rs 55,300 crore (US$ 10.4 billion) by 20156. However, given the availability of skilled manpower, improved infrastructure, and the presence of strong regional markets, analysts project that attaining an ambitious growth rate of approximately 30 per cent, taking the industry to a value of Rs 5,50,000 crore (US$ 103.7 billion) by 2025, is a possibility5. This exceptional growth has been facilitated by the robust performance of all the sub-sectors of the Indian biotechnology industry, namely, bio-pharmaceuticals, bio-services, agri-biotech, bio-industrial, and bio-informatics. As shown in Figure 1, bio-pharmaceuticals is the largest sub-sector of the industry, whereas agri-biotech is the fastest growing. Out of the top 10 biotech companies in India (by revenue), six specialise in bio-pharmaceuticals and four specialise in agri-biotech5.
Figure 1 Market size by value of the Indian biotech industry
Source: ABLE annual survey The bio-pharmaceutical segment accounts for over 60 per cent of the Indian biotechnology industry in value. It primarily comprises vaccines, non vaccine
5 ABLE Annual Survey 6 The Indian – India eyes US$ 10 billion from biotechechnology by 2015
0
5,000
10,000
15,000
20,000
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Rs
Cro
re
Bio-services Bio-pharma Bioinformatics Bio-industrial Agri-biotech
Total Industry Size (Rs crore)
20,441
1,830 3,265
4,745
6,521
8,541
10,272
12,137 14,199
17,249
CAGR FY02 - FY11
39.4%
25.8%
13.5%
11.5%
39.4%
55,300 (2015F)
The Indian Biotechnology Sector: Investments, Growth and Prospects 5
…………………………………………………………………………………………………………………………......... therapeutics, novel products and contract services3. It is a dominant segment of the biotechnology sector because India is one of the world’s leading manufacturers of vaccines, with over fifteen companies manufacturing for more than 50 brands. Further, India is rapidly becoming the preferred destination for contract research, and manufacturing services (CRAMS) due to its skilled manpower, low costs, a large number of patients and strong government support. Consequently, the CRAMS market grew at a CAGR of more than 50 per cent over 2007-10,7 and is expected to reach a market size of US$ 7.6 billion by the end of 20128. Though reliable estimates are unavailable, experts forecast the market to grow at a CAGR of 30 to 35 per cent in the near future9. Due to this explosive growth in the CRAMS market, India’s contribution in global clinical trials (which including pre-clinical trials constitute approximately 80 per cent of the domestic contract research market) is expected to rise from 3 to 5 per cent by the end of the current calendar year3. India’s most significant achievement in agri-biotech over the past decade has been the successful cultivation of genetically modified Bt Cotton. This achievement has provided several socioeconomic benefits to the country. The cultivation of Bt Cotton in India exceeds 10 million hectares, and has significantly increased yield, while simultaneously decreasing the use of pesticides by approximately 50 per cent. These advantages benefited over seven million small scale farmers living below the poverty line in 2011.10 The biotechnology industry needs to assess the factors contributing to its growth for ensuring sustainable development. With the biotechnology boom in India and the advent of global biotechnology players, numerous initiatives have been taken by both the government and the private sector to propagate rapid growth. The government funding for the Department of Biotechnology (DBT) has increased nearly four-fold during 8th to 12th five year plans (Figure 2).
7 E&Y Report – Doing Business in India 8 ICRA estimate of CRAMS market size in India 9 Indo-Dutch connect – Report 10 ABLE – Report on genetically modified crops
The Indian Biotechnology Sector: Investments, Growth and Prospects 6
………………………………………………………………………………………………………………………….........
Figure 2 Allocation of budget to the department of
biotechnology between 8th to 12th Five Year Plans (Rs crore)
Source: Presentation by Dr. M. K. Bhan, Department of Biotechnology The increased government funding, along with additional funds from the private sector led to the formation of numerous biotechnology parks and Special Economic Zones (SEZ) across the country, targeted specifically at incubating biotech companies, and propagating research. By the end of 2011, India had 26 operational biotechnology parks11, with key clusters emerging in Andhra Pradesh, Karnataka, Tamil Nadu, National Capital Region (NCR), Maharashtra, Gujarat, and some parts of Rajasthan. Out of the clusters in Western, Northern, and Southern India, the Western cluster had a value share of about 46 per cent, and exhibited a strong compounded growth of approximately 12.5 per cent over FY 07-12. Figure 3 shows the details on growth trends for the Western, Northern and Southern clusters. 11 IBEF Report on biotechnology
400 675 1,450
6,400
15,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
VIII Plan IX Plan X Plan XI Plan XII Plan (E)
Rs
in C
rore
2.2 x
4.4 x
2.4 x
1.7 x
The Indian Biotechnology Sector: Investments, Growth and Prospects 7
………………………………………………………………………………………………………………………….........
Figure 3 Growth trends and value shares (2011-12) of biotechnology clusters in Western,
Northern and Southern India (revenue in Rs crore)
Source: ABLE annual survey
1.1 Key factors influencing industry growth
The next sections analyse some key factors, such as exports, investments and funding, and the regulatory framework, which have directly or indirectly influenced the industry’s growth over the past years. Exports Though India’s biotechnology industry has traditionally been export driven, the domestic industry is rapidly gaining prominence as a consequence of rising income levels and an increasing rate of consumption of biotechnology products.
1,025.0 1,453.0
1,792.1 2,030.5 2,100.7 1,379.8
4,100.0 4,452.4
5,280.8
6,631.0
7,521.0
8,318.9
3,416.0
4,368.6 5,084.0
5,537.7
7,627.7 8,318.9
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Rev
enu
e in
Rs
Cro
re
North West South
46% 46%
8%
Western Cluster
Southern Cluster
Northern Cluster
Growth CAGRs (FY07-12) North: 5 per cent West: 12.5 per cent South: 15.99 per cent
The Indian Biotechnology Sector: Investments, Growth and Prospects 8
…………………………………………………………………………………………………………………………......... Figure 4 highlights the export and domestic revenue trends for the industry over 2002-12.
Figure 4 Split between revenues through domestic consumption and exports
Source: ABLE survey Regulatory environment and government initiatives The Indian government has started providing grants and forming investment friendly policies to accelerate the biotechnology industry’s growth. It allowed 100 per cent foreign direct investment (FDI) through the automatic route to produce drugs and pharmaceuticals and set up the Department of Biotechnology (DBT). The department is a part of the Department of Science and Technology (DST), and is responsible for making policies related to the biotechnology industry12. The DBT has been instrumental in the growth of the Indian biotechnology industry, with special focus on human resource and infrastructure development13. The government also proposed the formulation of the Biotechnology Regulatory Authority of India, an independent legal body to manage the production, research, transport, import, and usage of organisms and other modern biotechnology products. It also set up the Biotechnology Industry Research Assistance Council to aid high end innovation in the industry, by providing adequate infrastructure and other essential services12. Among other initiatives, the government established a venture fund of Rs 12,100 crore (US$ 2.3 billion) to finance the new drug discovery projects.12 It has also provided monetary initiatives such as relaxed price control, subsidies on capital expenses and tax holidays for R&D activities.13 12 Invest in India – Biotechnology sector 13 UK Trade and Investment – Biotechnology and pharmaceuticals oppotunities in India
3,164 3,604 4,540
4,985
6,668
8,397
10,599
3,357 4,937 5,732
7,152 7,531
8,852 9,842
1,830 3,265
4,745
6,521
8,541 10,272
12,137
14,199
17,249 20,441
0
5,000
10,000
15,000
20,000
20
02-0
3
20
03-0
4
20
04-0
5
20
05-0
6
20
06-0
7
20
07-0
8
20
08-0
9
20
09-1
0
20
10-1
1
20
11-1
2
Rs
Cro
re
Domestic Export Total
The Indian Biotechnology Sector: Investments, Growth and Prospects 9
…………………………………………………………………………………………………………………………......... Investments, Joint Ventures and Partnerships The drugs and pharmaceutical segment alone attracted approximately Rs 9,000 crore (US$ 1.7 billion) of investment over 2000-1014, and more than Rs 17,500 crore (US$ 3.3 billion) over 2011-1212 in the form of FDI.
According to data provided by European Business and Technology Centre, some of the large scale investments made in the Indian biotechnology sector are as follows14: The UNICEF awarded a three year contract of Rs 1,223 crore (US$ 230.6
million) to Panacea Biotech Ltd during 2010-12, to provide the UNICEF with the EasyFive vaccine. The vaccine offers immunity against a set of paediatric diseases.
Alexandria Real Estate made an investment of Rs 588 crore (US$ 110.9 million) to set up an R&D, and biotech incubation facility in Gujarat, having applied for 25 acres of land in 200915.
Defence Research and Development Organisation (DRDO) planned to invest
Rs 349.2 crore (US$ 65.8 million) to customise its biotechnology products for common use, in 201016.
Biocon acquired its previously formed joint venture (JV) Biocon
Pharmaceuticals from its partner CIMAB, based in Cuba, through buying a 49 per cent stake in CIMAB in 201017.
Some examples of tie ups and joint ventures (JV) are as follows14:
Atash Seeds Pvt Ltd was formed in October 200918 as a JV between Avesthagen (49 per cent stake), a Bengaluru based firm; and Limagrain (51 per cent stake), a French group; to build a business model for field crops.
An agreement for research cooperation was formed between Bayer
Cropscience AG, Germany; and GVK Biosciences Pvt Ltd. in November 200919.
14 European Business and Technology Center – Overview of Indian biotechnology industry 15 Alexandria Real Estate applies for 25 acres of land with the Gujrat government in 2009 16 The Economic Times – DRDO to invest to upgrade biotechnology products for civilian use 17 Biocon press factsheet 18 Avasthagen press release 19The Business Standard – Bayer and GVK sign pact for research cooperation
The Indian Biotechnology Sector: Investments, Growth and Prospects 10
…………………………………………………………………………………………………………………………......... India, with a share of over 2 per cent in the global biotechnology industry, 20 is set to become one of the world’s largest biotechnology hubs, especially due to the rapid development of the contract research outsourcing (CRO) and the contract research manufacturing (CMO) markets in the country. It needs to build the country’s R&D infrastructure, encourage public private partnerships, and lay down efficient regulatory frameworks to help the industry grow. The government is progressively working towards achieving these objectives through initiatives introduced in the past and current five year plans, and the union budgets. These initiatives are analysed in the subsequent sections.
20 UK Trade and Investment – Opportunities in the Indian biotechnology and pharmaceutical sectors
The Indian Biotechnology Sector: Investments, Growth and Prospects 11
…………………………………………………………………………………………………………………………......... 2. WAY FORWARD – AN ANALYSIS OF THE 2012-13 UNION
BUDGET, AND OTHER INITIATIVES
The Association of Biotechnology Led Entrepreneurs (ABLE) is a non profit organisation representing the biotechnology industry in India. It had provided a set of recommendations (changes) to the Finance Ministry for the 2012–13 Union Budget. These recommendations broadly cover tax incentives and other industry level policies. Amongst the tax related changes, ABLE recommended reducing Minimum Alternative Tax (MAT) from its current rate of 10 per cent while exempting clinical trial research institutions from MAT and service tax. It also suggested granting a 100 per cent tax free status to biotech and pharma SEZs, and recommended that companies should operate as Limited Liability Partnerships (LLPs) to gain tax benefits. Further, the industry level changes suggested by ABLE included exempting import duty for raw materials used by domestic manufacturers of life saving drugs, and the inclusion of anti cancer drugs to the life saving category. ABLE also aimed to improve R&D funding due to the high initial investments required for research in biotech and advanced clinical trials21. 2.1 Impact of the Union Budget of 2012–13 on the biotechnology industry in India
The Union Budget of 2012–13 did not suggest many direct changes for the biotechnology industry except for in the vaccines segment. However, there are many initiatives that are expected to affect the industry growth indirectly, which are analysed in the next sections. R&D gains21, 22 The government announced an extension of weighted deduction of 200 per cent on expenditure on in-house R&D facilities for five years, starting 31st March 2012. The deduction is expected to increase innovation in the biotechnology industry, with at least 91 drugs going off patent by 20157. Further India’s growing bio-generics market is also expected to step up the demand for new products. Agricultural benefits21,22,23,24,25
The proposed weighted deduction of 150 per cent in agricultural extensions is expected to motivate biotech companies in India to invest in the agri-biotech segment to increase crop yields. Further, the government has sanctioned a
21 Indiamart – ABLE demands , ABLE's wishlist , Biospectrum – Investing in innovation funds 22 Times Of India – Budget 2012-13 , Ernst & Young “Doing Business in India” 2011 Report 23 IndiaInfo – Pranab Mukherjee's speach on the Union Budget 24 Times of India – Union Budget 25 Key features of the budget 2012-2013 – Indiabudget.nic.in
The Indian Biotechnology Sector: Investments, Growth and Prospects 12
…………………………………………………………………………………………………………………………......... research grant of Rs 350 crore (US$ 66 billion) for agri-universities, of which Rs 100 crore (US$ 18.8 billion) is given to the Kerala agri-university. This funding will help 1,500 scientists across the country to work on various seed research programmes to improve the productivity of crops while simultaneously lowering the use of pesticides. Given that agriculture is a large contributor to the economy at around 14 per cent of the GDP, investments to increase the agricultural output of the country will have a positive impact on the economy in the long term. Initiatives in the vaccines segment25,26
The Union Budget of 2012–13 has announced the following three initiatives that will benefit the country’s vaccine industry: Setting up of a new integrated vaccine unit in Chennai to improve the
immunisation coverage
Modernisation of existing vaccine units
Extension of concessional basic customs duty (BCD) of 5 per cent, with full exception from excise duty/ countervailing duty (CVD) to six specified life saving drugs
The flexibility on customs duty for imports will allow multinational companies to focus on the Indian market and bring in more investments. 2.2 Key developments during the 10th and 11th Five Year Plans,
and the way forward in the 12th plan In the 12th Five Year Plan, the Planning Commission of India increased DBT’s funding to approximately four times the amount in the 8th Plan. Given this huge increase in investments, we will briefly discuss the achievements of the 10th and 11th Five Year Plans, along with the approach to the 12th Five Year Plan in the next section. Major achievements of the 10th Five Year Plan The Planning Commission of India allocated a budget of Rs 1,450 crore (US$ 273.4 million) to DBT in the 10th Five Year Plan. Some of the key developments in the industry over this period are as follows27: Building skilled manpower: During this period, the government started 22 26 The Times of India – Budget 2012-13 27 Planning Commission – Five Year Plans
The Indian Biotechnology Sector: Investments, Growth and Prospects 13
………………………………………………………………………………………………………………………….........
new M.Sc./M.Tech. programmes, including 63 courses with an annual intake of approximately 1,000 students. It has also established a network of 65 institutions for higher learning in bioinformatics. This resulted in the publication of 1,200 research papers in peer reviewed journals in bioinformatics, and a total of 3,500 research papers in biotechnology.
Advancements in R&D: India succeeded in decoding the genome information of rice chromosome 11 and filed six patents related to the mass production of bio control agents/ bio pesticides. Further, the total culture repository at the National Centre for Cell Science reached 1,161 samples after the addition of 34 new cell lines. The centre published 155 research papers and achieved 9 patents. Over 2005-06, DBT also initiated the Centres of Excellence programme, through which they gave grants to five institutes working in the areas of cancer biology, industrially important non conventional yeasts, draught tolerant crop varieties, the genetics and genomics of silk moths, and tuberculosis.
Infrastructure development: DBT helped in the establishment of a biotechnology park in Lucknow, and five biotechnology incubation centres in Hyderabad, Bengaluru, Kochi, Chandigarh and Solan.
Public Private Partnerships: DBT launched the Small Business Innovation
Research Initiative to propagate PPPs in the country.
Technology transfer: Eight of 19 technologies developed under DBT funding, especially in the fields of bio pharmaceuticals, environmental biology and food biotechnology; and transferred to the industry. For example, the technology for recombinant Anthrax vaccine was developed, and then transferred to Panacea Biotech Ltd., New Delhi.
Major achievements of the 11th Five Year Plan28
DBT utilised approximately 90 per cent of its allocated budget for the development of the biotechnology industry in India. The major achievements of the 11th Plan are as follows: Establishment of 7 new autonomous R&D institutions, 10 translational
research centres and platforms, and 50 centres of excellence in biotechnology
Carry out 2,400 R&D projects on a priority basis with the help of over 3,000
investigators and 6000 researchers
28 Pharmabiz – DBT increase in budget allocation
The Indian Biotechnology Sector: Investments, Growth and Prospects 14
…………………………………………………………………………………………………………………………......... Carry out 100 PPP and key global partnerships projects involving high
investments Way forward – An approach to the 12th Five Year Plan In the 12th Five Year plan, DBT’s primary focus is to increase funding to thrice the funding in the 11th Five Year plan. The increased funding will be utilised to take successful schemes to the next level. It will also help in initiating new schemes for human resource development, the expansion and establishment of new generation research resources, and providing support to institutions of interdisciplinary research in medical sciences and biopharmaceuticals. DBT also plans to facilitate some mega projects in specific areas of chronic diseases, agricultural productivity, climate change, bio engineering and bio fuels, along with the setting up of new innovation centres. Some key growth drivers for the industry over 2012–17 will be as follows: More Public Private Partnerships: One of DBT’s main objectives is to
integrate PPPs initiatives in every research plan. To this effect, DBT plans to allocate 30 per cent budget to the private sector for research collaborations and commercialisation of biotech products29.
Intensify training and education: DBT plans to set up institutions for marine biotechnology and bio informatics in addition to 50 centres for research in priority biotechnology areas.30
Rapid development of infrastructure: DBT plans to invest in setting up three
additional bio clusters besides the existing ones in the Pune-Mumbai, Bengaluru, Ahmedabad-Vadodara, and Hyderabad areas.31
Focus on R&D: DBT plans to start 1,500 new R&D projects related to basic
and strategic research. The government has already set up the Biotechnology Industry Research Assistance Council to provide R&D support and facilitate high end innovation by providing the industry with a suitable environment.
29 World Bank 30 EBTC 31 Chillibreeze – Biotechnology industry in India
The Indian Biotechnology Sector: Investments, Growth and Prospects 15
………………………………………………………………………………………………………………………….........
3. CONCLUSION
Despite strong growth and great potential, the Indian biotechnology industry faces certain challenges, such as lack of adequate resources for R&D, molecular and chemical screening libraries and level 3 biosafety facilities for research on infectious diseases. The Department of Biotechnology and the ABLE address these challenges by making effective schemes and policies. DBT’s major focus currently lies in increasing the investment in the biotechnology industry through public funding and PPP initiatives. Although the Union Budget of 2012–13 has not offered anything special for the biotechnology sector, the major focus has been on R&D in the agriculture and the vaccines domains. Both of the domains are expected to have a positive impact on the industry. The government’s core focus areas over the past, current and future five year plans have been the following: Increasing the influx of funds: This will help the Indian companies to innovate
within the various segments of the industry. Innovations have driven the agri-biotech segment by developing crops (Bt Cotton), which have increased yield and lowered wastage and use of pesticides.
The government’s focus on PPPs has encouraged the private sector to invest in the biotechnology industry and promote the commercialisation of biotech products.
Strong focus on educational infrastructure: The government has laid a strong focus on educational infrastructure through grants and funds for agri universities and research work.
Impending shift of focus from international to domestic markets: Though exports have accounted for a larger share of the biotechnology market by value in past years, a rise in income levels and the growth of the Indian middle class is expected to drive the domestic market in future years.
Though India has a large pool of educational institutions offering biotechnology degrees, there is a shortage of skilled manpower in research areas, such as oncology, medicinal chemistry, drug delivery, and in-vivo pharmacology. For this reason, the government plans to set up 50 research centres focussing on priority areas in biotechnology such as the ones listed above, in addition to establishing biotechnology parks with high tech facilities. A combination of these factors has poised the Indian biotechnology industry for strong growth in the future. Note: Conversion rate used for US$ to Rs is US$ 1 = Rs 53.03
The Indian Biotechnology Sector: Investments, Growth and Prospects 16
…………………………………………………………………………………………………………………………......... DISCLAIMER
India Brand Equity Foundation (IBEF) engaged Evalueserve to prepare this report and the same has been prepared by Evalueserve in consultation with IBEF. All rights reserved. All copyright in this report and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This report is for information purposes only. While due care has been taken during the compilation of this report to ensure that the information is accurate to the best of Evalueserve and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Evalueserve and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this report and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Evalueserve nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this report.
