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Posted by Levasto India
Domestic biotech companies face funding constraints
MUMBAI: Indian biotech companies have not been able to launch new products at a pace they would have liked, says a recent study by consultant company Ernst &Young.
Pointing out that the industry is at a critical juncture, as companies have not been able to make a sizeable impact on the industry, despite its focus on innovation, the study observed:
"Many of them are facing funding constraints as the investor community has shied away from investing in early stage ventures. With the lack of funding, many innovative companies will be forced to shut shop or become service providers rather than innovators."
The Government has introduced schemes to fund biotech start-ups. For instance, the incentive for in house research includes the 200 per cent weighted tax deduction, which has been extended till 2017 in this year's Budget.
But dealing with multiple regulatory bodies too has resulted in delays. And the Government is looking to overcome this through the proposed Biotechnology Regulatory Authority of India.
Mr Ajit Mahadevan, Partner, Ernst & Young, points out that India is facing stiff competition from China, Korea, Singapore, and more recently Malaysia too, in terms of attracting investments from multinational companies.
'This has been enabled due to better technological and scientific competence, better infrastructure, tax and duty exemptions, and easier regulatory procedures as compared to India,' he said.
The industry is estimated at $4 billion for FY 2010 - 2011. While the industry has grown at a double-digit rate over the last five years (CAGR 19.2 per cent , 2007-2011), it has concurrently been facing diverse challenges that have prevented the industry from transcending to the next level, the report said.
Action plan needed
The Government needs to act swiftly and undertake regulatory reforms, develop infrastructure and provide more incentives to the biotech industry to remain competitive and spur growth in the industry, Mr Mahadevan points out.
The industry, on its part, needs to come up with a concerted action plan to utilise available infrastructure and resources more efficiently and focus on nurturing innovation to take the biotech industry to new heights, he added.
The biopharmaceutical industry constitutes 60 per cent of the biotech industry in India and grew at 21 per cent over last year to clock $ 2.3 billion in 2010-2011 -- approximately 15 per cent of the Indian pharmaceutical industry. Vaccines, insulin, erythropoietin and monoclonal antibodies have been the mainstay of the biopharma segment.
Concerns
Outlining key concerns, the study said, while India has a substantial number of graduates and post-graduates in biotechnology and related fields, they are not optimally trained to cater to industry demand.
Companies, therefore, have to significantly invest in their training and development before they become ready to contribute to the business. There is a need to revamp the course structure and design of biotech education to improve the quality of graduating students. Towards this end, the Government of Karnataka has started biotech finishing schools to train and empower students to be equipped to address industry demand.
Several biotech parks have been set up in India in the last five years with public- private partnerships. The industry, however, believes that most of biotech parks are more congenial to biotech services and diagnostics firms rather than pure-play biotech manufacturing companies.
To support bio-manufacturing activities, the government should evaluate the feasibility of making available land at subsidised rates, uninterrupted power at competitive prices, good quality water supply and effluent treatment facilities to improve the efficiency and productivity of pharmaceutical companies.
Pointing out that the industry is at a critical juncture, as companies have not been able to make a sizeable impact on the industry, despite its focus on innovation, the study observed:
"Many of them are facing funding constraints as the investor community has shied away from investing in early stage ventures. With the lack of funding, many innovative companies will be forced to shut shop or become service providers rather than innovators."
The Government has introduced schemes to fund biotech start-ups. For instance, the incentive for in house research includes the 200 per cent weighted tax deduction, which has been extended till 2017 in this year's Budget.
But dealing with multiple regulatory bodies too has resulted in delays. And the Government is looking to overcome this through the proposed Biotechnology Regulatory Authority of India.
Mr Ajit Mahadevan, Partner, Ernst & Young, points out that India is facing stiff competition from China, Korea, Singapore, and more recently Malaysia too, in terms of attracting investments from multinational companies.
'This has been enabled due to better technological and scientific competence, better infrastructure, tax and duty exemptions, and easier regulatory procedures as compared to India,' he said.
The industry is estimated at $4 billion for FY 2010 - 2011. While the industry has grown at a double-digit rate over the last five years (CAGR 19.2 per cent , 2007-2011), it has concurrently been facing diverse challenges that have prevented the industry from transcending to the next level, the report said.
Action plan needed
The Government needs to act swiftly and undertake regulatory reforms, develop infrastructure and provide more incentives to the biotech industry to remain competitive and spur growth in the industry, Mr Mahadevan points out.
The industry, on its part, needs to come up with a concerted action plan to utilise available infrastructure and resources more efficiently and focus on nurturing innovation to take the biotech industry to new heights, he added.
The biopharmaceutical industry constitutes 60 per cent of the biotech industry in India and grew at 21 per cent over last year to clock $ 2.3 billion in 2010-2011 -- approximately 15 per cent of the Indian pharmaceutical industry. Vaccines, insulin, erythropoietin and monoclonal antibodies have been the mainstay of the biopharma segment.
Concerns
Outlining key concerns, the study said, while India has a substantial number of graduates and post-graduates in biotechnology and related fields, they are not optimally trained to cater to industry demand.
Companies, therefore, have to significantly invest in their training and development before they become ready to contribute to the business. There is a need to revamp the course structure and design of biotech education to improve the quality of graduating students. Towards this end, the Government of Karnataka has started biotech finishing schools to train and empower students to be equipped to address industry demand.
Several biotech parks have been set up in India in the last five years with public- private partnerships. The industry, however, believes that most of biotech parks are more congenial to biotech services and diagnostics firms rather than pure-play biotech manufacturing companies.
To support bio-manufacturing activities, the government should evaluate the feasibility of making available land at subsidised rates, uninterrupted power at competitive prices, good quality water supply and effluent treatment facilities to improve the efficiency and productivity of pharmaceutical companies.
