The Biotechnology Boom
Can India Meet The Biotechnology Challenge?

Presented by Kiran Mazumdar-Shaw
Chairperson & Managing Director, Biocon India Ltd.

Bangalore, March 13, 2001

Introduction:

The knowledge economy of the 21st century has catapulted Biotechnology into great prominence and the race is on to see which nations will emerge as global "bio powers" in the coming decade. India has found a berth for itself in IT and the question being posed is whether it can do likewise in Biotechnology. If intellectual capital is the prime driver, India has a natural advantage but there are other drivers that India needs to address in this pursuit for global excellence in Biotechnology.

Low cost R&D capabilities, speed of innovation and the value of IPRs so generated are going to be key factors in determining success in Biotechnology. It is inevitable that in this context China and India will vie for leadership position in the region. Whilst India has the "english speaking advantage", China has the "mindset advantage". China already has an "early mover" advantage in that it has taken proactive and pragmatic steps in Biotechnology by being a key participant of the Human Genome Project, embracing GM crop technology and encouraging recombinant therapeutics in its healthcare programs. In contrast India is still grappling with ethical and moral issues relating to Clinical research, safety issues surrounding GM crops and debating the merits and ramifications of the Product Patent Regime. The Indian psyche has always been to resist and defy change as an initial response but to then quickly adapt to change with a Darwinian survival instinct to evolve into impressive success in the end. The pharmaceutical industry's response to the WTO mandate on the phased implementation of product patenting by 2005 is a classic example of this phenomenon. It sent shock waves throughout the industry in the early '90s and there were vehement protests of such enforced legislation on the detrimental and even fatal implications on the cost of healthcare to the country as a whole. NGOs and other bodies joined this movement and for a while it appeared that nothing would change the complexion of R&D in the Indian pharmaceutical sector where mimic molecules instead of original molecules was the preferred approach . However, as 2005 rapidly draws nigh, the protests have died and most of the Indian Drug majors have made substantial commitments to R&D and have begun to announce interesting developments in their research programs. Dr. Reddys and Ranbaxy have already tasted the sweet success of patented products and have begun to earn substantial revenues through licensed molecules. What is even more encouraging are recent reports of both these companies intending to pursue the clinical testing route with new molecules with the ultimate goal of taking these to the market. Others like Nicholas Piramal who had a strong distribution and brand focus with little or no stake in R&D have also bought out HMR's R&D facility as a part of an overall acquisition and have announced the first Genomics JV , GENOMED, with The Centre for Biochemical Technology, to prospect for gene-linked disease indicators. Others have set up specialised clinical testing facilities as extensions of their pharmaceutical businesses. Ranbaxy, Dabur and many others have also renewed a keen interest to bioprospect for new drug molecules based on Ayurveda and other herbal medicines. All in all there is a flurry of activity on the R&D front which has never been seen before. But how and when will this translate to real business?

Before we seek an answer, I would like to briefly draw your attention to some emerging global trends and forecasts in the Human Healthcare sector which are highly relevant to R&D opportunities for Indian companies:

• The share of licensed molecules is on the increase from <30% in 1997 to >45% in 2000.
• 70% of NCEs under clinical testing are all products of r-DNA or gene based Biotechnology, most of these emanating from small and medium sized biotech companies.
• Approximately 25% of R&D is out sourced by Drug Majors. The revenues of CROs in 2000 was estimated at $ 7 billion and is expected to grow at 30% per anum. Outsourced R&D is estimated to account for 40% of R&D spends by 2004.
• Approximately 20% of drug revenues is paid out by Drug majors as royalties on licensed products and technologies.
• R&D spends of the top 20 pharma companies has more than doubled over the last 5 years from $20 billion in 1995 to $40 billion in 2000. R&D spends are forecast to grow at 12% per year and yet revenues are forecast to grow by just 7% per year for the next 5 years.
• In 1997 the pharmaceutical industry typically spent 15% of its turnover on R&D in a market growing at about 11% per anum.
• The rise in R&D expenditure is attributable to the fierce demand on pharma companies to come up with new molecules.
• Given the R&D spends and the required market growth, the top 20 companies will each have to generate 5 to 7 products per year each with a billion dollar billing per year over the next 5 years to justify such R&D budgets. This is 6 times more than their present productivity.
• Genomics, HTS & other informatics based research is expected to result in an explosion in the number of leads for drug discovery which will expand both opportunities and challenges for new drugs. and will dictate the focus of research to disease subsets and differentiated treatments. Eg. 5 subsets of asthma requiring 5 different treatments.
• Big pharmas will be forced to cut R&D spends and speed up R&D programs through collaborations and contractual R&D initiatives with smaller Biotech companies and CROs.

Given the above scenarios, the opportunities for scientists and Indian start-ups are vast and highly attractive and it is imperative to seize these opportunities NOW!

The following are some of the unique opportunities that India has to offer in Biotechnology in the human healthcare sector:

1. Genomics:

India's vast number of inbred communities both tribal and others offer unique human gene pools as powerful as those of Iceland, for exclusive genomic studies. We are losing valuable time in not focussing on this golden opportunity to unravel high value IPR by way of disease-linked genes and the diagnostic and therapeutic products emanating thereof.

Huntingdon's disease, a fatal hereditary disease that causes neuro-muscular degeneration, is a classic example of how an inbred Venezuelan Tribe provided the invaluable genetic information to a lone woman crusader, Nancy Wexlar. This now makes diagnosis of Huntingdon's syndrome possible. A therapeutic solution is now underway.

If a lone American woman could crack Huntingdon's disease in far flung Venezuela, just think of what Indian scientists can do with their own inbred communities by way of providing startling, high value information relating to genetic diseases. Clues already exist to the potential of working on our own populations. For instance, Parsi women are known to be prone to certain forms of breast cancer. Thalessemia is another genetic disease prevalent in many inbred Indian societies and so on and so forth. Given the proper approach, we can convert the disadvantage of these diseases into R&D opportunities which can translate into therapies and cures for thousands in India and others across the globe.

Pharmacogenomics is another rapidly growing segment which is providing a wealth of information pertaining to defective or missing genes which call for differentiated medicine - a new avenue for drug research. Given our abundant patient populations, Indian scientists can play a significant role in harnessing this very high value genomic information.

2. Biodiversity:

The race for discovering new lead molecules is frenzied in the Pharmaceutical arena. Plant, Microbial and Animal biodiversities are all being mined by High Throughput Screening techniques for New Chemical Entities or NCEs.

To illustrate some interesting findings of this bioprospecting, I have selected a few examples: A Californian biotech firm, Neurex Corporation isolated a peptide derived from the squirt gland of a marine Philipino snail which formed the base molecule of a revolutionary new Anti ischimia drug Neutrex.

Likewise, the Himalayan yew tree, provided another billion dollar cancer drug, Taxol. Taxol and taxol derivatives are now being mined from fungal and bacterial biodiversities in many parts of the world.

Many of the large Pharma majors have collaborative HTS programs with universities worldwide. India has not been an option due to our stand on Product Patenting. Hopefully, 2005 should correct this situation. Our own treasure trove of Ayurvedic and Unani medicine offers a unique mining opportunity for such high throughput mining activities.

Suffice to say that CSIR labs and private enterprise need to initiate large scale work in HTS activities to take advantage of this global pharmaceutical strategy.

3. BioInformatics:

This is an emerging discipline that combines both IT and BT skills in augmenting high speed data mining of both genotypic and phenotypic information with a view to evolving new forms of medical diagnostics and therapies. Genomics and most recently Proteomics are churning out endless reams of data which need to be statistically evaluated and harnessed for commercial end use. Bioinformatics has unlimited scope in doing so. A recent issue of Nature highlights the mind boggling size of the Bioinformatics market and the more serious problems that exist in the form of an acute shortage of skills in this area. Another exciting opportunity in this area is "in silico" testing which involves computational simulation of "in vivo" and "in vitro" tests, a new trend that is envisaged to ensure greater predictability of clinical trials, thereby shortening approval times from regulatory authorities.

Given our well developed software skills, Indian scientists and Indian business need to make the necessary investments in Bioinformatics and create the right framework whereby these rare skills can be utilised in the country and not lose them to the enticing opportunities overseas.

4. Gene Therapy & r-DNA Technologies:

The method of injecting "healthy genes" into faulty cells in order to correct the expression products of defective genes, is the essence of gene therapy. Cloning and expressing healthy genes is simple, but finding a mechanism to deliver these genes into target cells is the difficult part. Indian scientists have the opportunity to pursue gene therapy based R&D over a wide array of platforms ranging from cloning and expression of disease specific healthy genes, to designing delivery systems and the sky is the limit.

Likewise the opportunities of developing therapeutic products based on genetically engineered or recombinant genetic technologies including vaccines, monoclonal antibodies and other specialized therapeutics is limitless. Erythropoetin or EPO, Interferons, Hepatatis B & C vaccines, Monoclonals for a host of diseases etc. are some of the hot ticket items which command a present market size of in excess of 20 billion dollars. Recombinant technologies are becoming to be relied upon as more exacting and efficacious. The technology is itself a low cost option but what makes it expensive is the R&D costs involved in taking it through clinical testing. Indian scientists have an exciting opportunity of developing competitive advantage in such technologies. Shantha Biotech's recombinant Hepatitis B vaccine has forced down SKB's profit loaded selling price of Rs:500 per dose down to Rs:60 per dose and state that they are targeting a price of Rs:10 per dose. These figures are important to demonstrate the power of these technologies to produce low cost mass therapies, a need of the hour for countries such as India.

5. Clinical Studies:

The cost of launching a new drug into the marked is estimated to cost between $300-500 million of which the cost split between Research and Development is 25% : 75% which would translate to an approximate cost of US$200-400 million for patient clinical studies and trials which form the main components of drug development. The potential of being a key player in this segment is high and remunerative. However,the infrastructure required to identify, document and monitor patients under clinical trials need to be first put in place before India can partake in this activity. There is also an exciting opportunity of conducting longitudinal studies in disease segments for prospecting new bio markers and novel pharmacogenomic information both yielding high value IP.

Conclusion:

India has the vital ingredient for global success in Biotechnology & pharmaceutical R&D: its scientific manpower. However, we need to harness this talent in an enabling business environment with a pragmatic, entrepreneural mindset. There are no ifs and buts in this Biotechnology mission : India must emerge as a Bio-power in the forseeable future.