f o r    m a n a g i n g    t o m o r r o w
FEB. 11, 2007
 Cover Story
 BT Special
 Back of the Book

Taxing Times
The phase-out of central sales tax is yet another move towards ushering in the national goods and services tax (GST). The compensation to the states, in lieu of CST phase-out, will include revenue proceeds from 33 services currently being taxed by the Centre as well as 44 new services of an intra-state nature that will be traded by the states. However, VAT is the way forward, though much needs to be done to iron out the anomalies in the current VAT regime.

India, Ahoy!
Indian investments overseas are growing and how. For instance, total Indian investment in Latin America and the Caribbean has topped $3 billion (Rs 13,500 crore) so far. The latest investment is by ONGC Videsh, which acquired an oilfield in Colombia for $425 million (Rs 1,912.5 crore). Earlier, ONGC bought an offshore oilfield in Brazil for $410 million (Rs 1,845 crore).
More Net Specials
Business Today,  January 28, 2007
The Buzz in Biotech
Biogenerics is the new buzzword, but don't expect any fireworks for the next few years.
Long way to go: Biotechnology is still in a nascent stage, having been around for just three decades globally. In India, there are few stand-alone biotech firms and they are predominantly vaccine-based companies
Biotech in India is big or small, depending on how you define it. Revenue estimates range from a few hundred million dollars to $1 billion. The higher number includes tissue culture and other fermentation-based technologies as well as services such as clinical trials. So, even if one were to discount the figure by a good 60 per cent (as those who track the sector would suggest), the industry revenues would still add up to a respectable $400 million. "The bouquet of biotech products on offer will increase at a rapid rate and the rate of growth of biopharma will be much steeper compared to the growth in small molecule (conventional chemistry)-based products," says Utkarsh Palnitkar, a partner at Ernst & Young and who has tracked the sector closely for years now.

But, as Palnitkar notes, it is pharmaceuticals that dominate the market and this scenario will remain unchanged for some years to come. In fact, biotechnology is typically a division for several large companies in India. There aren't too many stand-alone biotech firms in the country, and the handful that are, have grown from being one-trick ponies to multiple-product marketers. Still, the vast majority of them are first generation protein manufacturers and predominantly vaccine-based companies. Few of them can claim to have a monoclonal antibody-based pipeline, the hallmark of a biotech company.

Talk to players and it becomes evident that the strength of the Indian biotech industry at present is largely in bio-manufacturing and this is expected to grow. "There is a huge potential going forward. Just look at the players and the quantum of investments that the sector is now attracting in India," says Kiran Mazumdar-Shaw, Chairman and Managing Director, Biocon. She feels that with corporate players such as the Tatas and Reliance Life Sciences entering the industry, there's good chance of the sector growing to $5 billion in revenues by 2010 and to $20 billion by 2020. A lot of the players are placing their bets on the generic space or bio-similars. For instance, Dr Reddy's Laboratories, which set up its critical care and biotechnology business in 1998, intends to continue its investments into building the infrastructure and capabilities for launching biogenerics in the less-regulated markets in the next few years. Its longer-term target is to enter regulated markets when regulatory issues become clear.

Global access: French healthcare major Merieux Alliance acquired 60 per cent stake in Varaprasad Reddy's (above) Shantha Biotechnics in November 2006
In biotechnology, it is often said that the process is as important as the product itself, since different strains can be used to extract the same protein. Therefore, the manner in which bio-equivalence can be established is the crux of the issue. If the regulatory authorities accept bio-similars and simultaneously prescribe a larger quantum of clinical trials, the cost advantage that Indian companies have will stand negated. But "I do think biotech has a lot of potential and since the technologies are evolving, there is now a greater understanding of the genetic basis of diseases," says Dr Reddy's Executive Vice Chairman and CEO G.V. Prasad.

Currently, Dr Reddy's biotechnology portfolio comprises Grafeel, the biogeneric version of Filgrastim, a recombinant protein used in chemotherapy-induced neutropenia (blood disorder) and bone marrow transplantation. Other than Grafeel-which has been launched in India, Brazil and a few other countries-it has 10 products in various stages of development.

Some biotech players are even looking at taking their improved drugs to international markets. Panacea Biotec, a vaccine-focussed company, is a case in point. The company, with its tie-up with UK-based Chiron Vaccines, is focussed on manufacturing, especially in the area of vaccines. Some analysts also say that Panacea is gearing up to launch proprietary NDDS-based products in international markets. Similarly, Hyderabad-based Shantha Biotechnics has put its global manufacturing strategy on a stronger footing by selling a majority stake in itself to French major Merieux Alliance. Biocon has a discovery programme as well with its joint venture partner CIMAB of Cuba.

Although earnings-focussed analysts aren't too upbeat about Biocon's prospects in the short term, it has the most ambitious plans of all biotech companies in the country. It has a presence in biopharmaceuticals and specialty enzymes (via Biocon), custom synthesis (Syngene), clinical research (Clinigene) and biologicals (a joint venture, Biocon Biopharmaceuticals). At present, about half of Biocon's revenues come from statins. It has signed a licensing deal with a us-based company in insulin (further details are not available), and has plans of launching erythropoietin (used for kidney failure and cancer associated anaemia) in India. It recently launched a first-of-its-kind cancer treatment drug called Biomab-EGFR, a therapeutic monoclonal antibody-based drug for treating head and neck cancers. More recently, Biocon and Abu Dhabi-based pharma company Neopharma signed an MoU for a JV to manufacture and market a range of biopharmaceuticals for the GCC (Gulf Cooperation Council) countries.

Globally, biotechnology completed three decades in 2006 (the first biotech firm, Genentech, was founded in April 1976). "Increasingly, pharma companies seem to have found that small molecules (traditional chemistry-driven) have not been able to solve some of the emerging medical problems and they are beginning to rely on biopharmaceuticals,'' says Deepanwita Chattopadhyay, CEO, ICICI Knowledge Park, in Hyderabad. As the mystery of the human genome unfolds, biotech will only gain in significance.