Vishal Dutta, ET Bureau Jul 10, 2012, 03.14PM IST
AHMEDABAD: Indian biotechnology industry is at critical juncture, while global biotechnology industry showed a second straight year of increasingly stable financial performance in 2011 as its revenue grew by 10% for the first time since the start of the global financial crisis says Ernst & Young's annual biotech report issued on Tuesday.
Indian biotech industry has been growing at a double-digit rate over the last five years (CAGR 19.2%, 2007-2011), it has concurrently been facing diverse challenges that have prevented the industry from transcending to the next level.
The industry size stood at $4 billion for Financial Year 2010-11. Indian biopharmaceutical industry constitutes 60% of the biotech industry and grew at 21% y-o-y to reach $2.3 billion in 2010-11, which is approximately 15% of the Indian pharmaceutical industry. Vaccines, insulin, erythropoietin and monoclonal antibodies have been the mainstay of the biopharma segment.
The key concerns that puts Indian biotech at critical juncture - Indian companies are not able to launch new product at regular pace in the domestic market, multiple regulatory bodies resulting delays, companies facing funding constraints as investor community shied away from early stage ventures, no optimal trained manpower to cater the biotech industry demand and most of the biotech parks across the country are not congenial for pure-play biotech manufacturing companies.
"India is already facing stiff competition from China, Korea, Singapore, and more recently Malaysia, in terms of attracting investments from MNCs." said Ajit Mahadevan, Partner, Ernst & Young adding that this has been mainly due to the better technological and scientific competence, better infrastructure, tax and duty exemptions, and easier regulatory procedures of these countries compared to India.
However, the global biotech industry scenario has improved, as it has showed a second straight year of increasingly stable financial performance in 2011, according the E&Y; report, Beyond Borders: global biotechnology report 2012. The established biotech markets registered more than 10% revenue growth for the first time since the start of the global financial crisis.
Revenue has shown stabilisation of biotech industries in countries like US, Europe, Canada and Australia that had achieved revenues of $ 83.4 billion in 2011, a 10% increase from 2010 on a normalised basis. Industry has modestly increased its R&D; spending by 2% in 2010 compared to slashing R&D; spending in 2009. The industry's R&D; increased by 9% in 2011.
However, as per the report the longer-term sustainability remains challenging, with the traditional funding-and-innovation model for pre-commercial biotech firms putting it under unprecedented strain and the industry's practice "do more with less" creates uncertainty in providing significant productivity gains.
"In this capital-constrained environment, the inefficiency and duplication of the drug R&D; paradigm is an indulgence we can no longer afford," says Glen Giovannetti, Ernst & Young's Global Life Sciences Leader. According him, global biotech industry especially the western biotech industry needs to remove duplication, encourage pre-competitive collaboration, pool data and allow researchers to learn in real time to improve further.
According to the report, global biotech companies raised $33.4 billion in 2011, second only to the year 2000, when the genomics bubble was at its height. IPO buyers remained selective, with only 16 IPOs and aggregated proceeds of $ 857 million, compared to $1.3 billion in 2010.
Mergers and acquisitions involving European or US biotechs increased from 49 deals in 2010 to 57 deals in 2011. However, big pharma was the buyer in only 7 of these 57 deals, a potentially troubling trend given pharma's critical role in supporting biotech innovation.
