After years of struggle, the Indian biotechnology industry is gaining traction. At present, the market size is estimated at Rs 4,400 crore (about $1 billion) encompassing agri, pharma and industrial biotechnology. Although this figure is a fraction of the revenues of global biotech majors like Amgen or Genetech, I would argue that Indian biotechnology is poised to leverage its scientific skills and technical capabilities to make a global impact, that too on a strong innovation-led platform.

India, like the rest of the world, recognises biotechnology as the next big economic opportunity in the knowledge sector. Today, biotechnology is playing an increasingly important role in combating life-threatening diseases, augmenting food and agriculture and addressing environmental sustainability. The biotechnology sector is already showcasing India's potential to attain leadership in vaccine production, genetically-modified crops and clinical development. Global success for Indian biotechnology will largely depend on creating the lowest cost base for innovation.

In India, biotechnology as a business segment has the potential of generating revenues of $5 billion (Rs 22,000 crore) and creating one million skilled jobs over the next five years through products and services. This can propel India into a significant position in the global biotech sweepstakes. Not surprisingly, there is an emerging group of believers in India's biotech capabilities from leading venture capitalist (VC) Vinod Khosla to globally-renowned biotech personalities like William Haseltine, Founder-CEO of Human Genome Sciences.

Khosla, for one, thinks it is time for India to play a lead role in biotech and nanotechnology by exploiting its vast resource and talent pool. "India can emerge as a front-runner in these next-generation technologies since a good beginning has been made." Haseltine is on record saying: "India is in the process of enormous change and the biotech industry here offers immense opportunities for domestic as well as overseas firms."

Such positive endorsements are a far cry from the early days when pioneering companies like Biocon were starved of VC funding. This, despite the fact that the Indian government had identified biotechnology as a thrust area for development way back in 1986 when it set up a dedicated Department of Biotechnology (DBT). The department had well-defined objectives of setting up several centres of excellence in research and academic institutions focussed on biotechnology-based programmes. In addition, universities were also encouraged to introduce both graduate and post-graduate (pg) programmes specialising in biotechnology.

These initiatives provided a strong foundation and the skilled resource pool that is vital to creating a sustainable biotechnology business. We have 40 National Research Laboratories employing 15,000 scientists. There are more than 300 college-level educational and training innstitutes across the country offering degrees and diplomas in biotechnology, bio-informatics and the biological sciences, producing nearly five lakh students annually. More than 100 medical colleges churn out 17,000 medical practitioners per year. About three lakh pgs and 1,500 phds qualify in biosciences and engineering each year.

Despite these advantages, the handicap of having no financial backers forced early biotech companies to adopt services or generic products as a business strategy. Biocon, for example, started as a joint-venture with a strong R&D focus on enzymes, leveraging India's low cost advantage. Shantha Biotech opted for generic Hepatitis-b vaccines. From this modest base, the sector has gradually built critical mass both in terms of infrastructure as well as markets.

Now, vaccine producers from India (Serum Institute, Bharat Biotech, Shantha Biotech, Panacea Biotech, Wockhardt, Bharat Immunologicals) command a global leadership position that has been well recognised by international organisations like the World Health Organisation, The Gates Foundation and others. Biogenerics is another area where Indian companies are rapidly gaining a global vantage position. Biocon and Wockhardt, between them, can address Asia's insulin requirements. In agri-biotech, India has the potential to be a leading supplier of genetically modified seeds to the world. India's chemical engineering skills make us potential world leaders in biotech equipment. The opportunities are endless.

India's global biotech ambitions look achievable given the human biodiversity that exists here. This offers unique human gene pools as powerful as those of Iceland, for exclusive genomic and pharmaco genomic studies. Coupled with the country's vast disease diversity, this provides an unparalleled research opportunity for generating new medical wisdom. As biopharma moves into the sphere of 'managing wellness', developing personalised medicines from existing molecules is one such exciting possibility.

Indian companies also have a golden opportunity to unravel high-value IPR by way of disease-linked genes and the diagnostic and therapeutic products emanating thereof. For example, thalessemia is a genetic disease prevalent in many inbred Indian societies. Given the proper approach, India can convert the disadvantage of diseased populations into a strong research advantage, which can translate into therapies and cures for thousands in India and across the globe.

India is also the ideal place for cheap diagnostics and can emerge as a hub for clinically validating diagnostics. As diagnostics have shorter market timelines, we can innovate and take advantage of the opportunity

Pharmacogenomics is another rapidly-growing segment that is providing a wealth of information pertaining to defective or missing genes that call for differentiated medicine-a new avenue for drug research. This is an emerging discipline that combines both infotech and biotech skills in augmenting high-speed data mining of both genotypic and phenotypic information to evolve 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.

Given India's abundant patient populations, Indian scientists can play a significant role in harnessing this very high-value genomic information. Monoclonal antibodies provide one such avenue for diagnosing new infectious diseases, oncological disorders and much more. Enzyme-linked immuno assays are another platform. Gene and SNP (single nucleotide polymorphism) assays could be powerful diagnostic tools in researching gene-linked disorders. India is also the ideal place for cheap diagnostics and can emerge as a hub for clinically validating diagnostics. As diagnostics have shorter timelines to market, we can innovate and take advantage of this opportunity rather quickly.

Bio-informatics is a segment that, perhaps, offers the most attractive innovation and discovery opportunities for Indian biotech companies in designing new drug molecules, mining novel bio-markers, generating new pharmaco genomic data and generating high-value medical wisdom based on phenotypic and genotypic data. It is envisaged that in the years ahead, there will be a number of collaborative initiatives between software, biotech and pharma companies.

Custom research is the service model that most Indian biotech companies have opted for at their startup stage in order to earn early revenues with which to fund infrastructure and scientists' salaries. These companies harbour ambitions of original R&D once they reach a certain profit level. Syngene, a company promoted by Biocon, was the first such custom research company, set up in 1994. Aurigene, Genotypic Technology, Chembiotek, Cytogenomics and Jubilant Biosys are good examples of such service-based biotech companies. Other companies like Avesthagen and Bangalore Genei have opted for custom research services as a secondary business to generate revenues to support existing business lines.

Indeed, this earn-while-you-learn model allows companies to come up with their own molecules. Companies like Syngene have leveraged their custom research business to partner with their customers in discovery-led research programmes based on shared IPR and milestone payments. Today, Syngene supports 350 scientists in a state-of-the-art research facility with a well-developed skill base in drug discovery. The client portfolio features global pharma majors and eminent biotech companies across the globe. This segment is expected to reach revenue levels in excess of $1 billion (Rs 4,400 crore) by 2010.

Further, India's plant and microbial bio-diversities provide a treasure trove for drug discovery. Added to this is India's inherent knowledge base of Ayurvedic and Unani medicine, which offer a unique mining opportunity for new drug molecules. Many international pharma majors have collaborative programmes with universities worldwide and are now entering into similar prospecting partnerships with Indian companies. They are beginning to see not just a cost arbitrage but a very real value arbitrage. In fact, co-development is fast emerging as an opportunity, thanks to this value arbitrage.

Although India is a signatory to WTO and trips, there was cautious scepticism about the protection of intellectual property, and both international investors and VCs had voiced their concern. Today, several biotechnology companies have managed to cross these IP hurdles and are now successfully working with international partners on the basis of confidentiality and non-disclosure agreements, which spell out the terms of sharing potential intellectual property that is likely to emanate from such partnerships. From 2005, this trend should only accelerate.

By 2010, India should be in place as a strong bio-partner for global companies. Early-stage discovery biotech companies will definitely find it worth their while to partner Indian companies. Many us biotech ventures have Indian founders and they will look at India as a natural cost arbitrage opportunity at the very least. Bala Manian of ReaMetrix is one such outstanding example. This fledgling Bangalore-based biotech company is developing novel functional assays leveraging the very affordable scientific skill base and providing a value arbitrage to international instrumentation companies to keep their innovations flowing in a cost-effective manner.

The opportunity for international bio-partnering is a fallout of the trend of declining risk capital in the West that seems to have dried up for companies engaged in early-stage discovery work. VCs seem only willing to fund companies that have reached the post-proof-of-concept stage. Therefore, there exists a large number of companies whose resources are simply too frugal to take their ideas to the next stage. Indian companies would be their natural collaborators to reduce burn rates, optimise R&D spends and extend survival timelines. Ernst & Young's Biotechnology Forecast for 2004 indicated that more than 75 per cent of biotech companies had less than $5 million (Rs 22 crore) cash reserves with which to pursue product development-a hopeless situation. An "India strategy" offers an effective de-risked model for VCs who are in dire need for exit or survival strategies for their 'investees'.

Although the nation is striving to gain global recognition for its biotech capabilities, government policies have lagged behind. Investment is inadequate, funding is scarce, infrastructure is expensive and regulatory regimes are deficient. Yet, in this difficult environment, entrepreneurs are bravely setting up new ventures, which only reflects an intrinsic belief in biotech being the business of the future. This trend will not abate. I also foresee a paradigm shift in the research culture in our scientific institutions that will become more IP-savvy and partner more closely with Indian industry.

The success of building a global business will depend on the ability of Indian biotech to apply its people resource in a knowledge-intensive manner to create unique niches in phyto-pharma, clinical research and drug development. A strong patents regime, regulatory reforms that permit Phase I clinical trials and pragmatic fiscal support to R&D will enable India to realise its aspirations of becoming a global bio-powerhouse.