INDIA TODAY, August 09, 2004

Biotech Bonanza

Billed as the next big thing after IT, biotechnology clocks the fastest growth in India, spawning a whole new generation of entrepreneurs who are making mega-profits and emerging as major employers. It has already propelled Kiran Mazumdar-Shaw to India's rarefied billionaire club. By Supriya Bezbaruah

In her close circle, Kiran Mazumdar-Shaw is famous for her outlandish pranks. On April 1 this year she sent friends what looked like share certificates of her Bangalore-based company, Biocon. They were delighted till the significance of the day dawned on them. If only they were real, those pieces of paper could have translated into a small fortune for each of them. For the lady appears to have turned the business of wealth creation into a fine art. KIRAN MAZUMDAR-SHAW, 50 CEO, BIOCON INDIA VALUE: Rs 4,843 crore Set up in a garage in Bangalore in 1978, now the country's largest biotech firm spread on an 80-acre campus. She is India's richest woman today In the rarefied avenues of India's rich and renowned, the path to power has traditionally been paved with steel and silicon, gold and blood. But Kiran proved the exception, bursting into the billionaire club this year from the frothy world of enzymes and genes. Her company's debut at the bourses in April put its value at Rs 4,843 crore. Overnight she was crowned as India's richest women with her personal net worth estimated at Rs 1,900 crore. It also propelled biotechnology, a small knowledge-intensive industry, bang into the league of big business in the country (see accompanying story). Zipping around Bangalore in her silver E-class Mercedes, with her trademark pearls and scarves, buoyant hair and booming voice, Kiran seems unstoppable and larger-than-life. Her dizzying success only mirrors India's burgeoning prowess in the life sciences. Among Biocon's products are life-saving drugs called statins, which prevent heart attacks by lowering the blood cholesterol level. Given that one in five people in the developed world has high cholesterol, statins have a $20 billion (Rs 92,000 crore) market. Biocon is also developing antibodies and cancer vaccines. "Biocon," declares Kiran, "is a story of ordinary people who thought they could do great things." The story could as well begin with her and Biocon's slogan: "The difference lies in our DNA". Even as a young girl, she was always racing ahead of the others, breaking barriers, going where angels feared to tread. A topper in science from Bangalore University, Kiran shunned traditional careers and decided instead to become India's first woman brewer and follow in her late father's footstep (her father was a master brewer at United Breweries). Since India did not offer such training, she headed for Australia to study. "Kiran was always independent and confident," recalls her brother Ravi, who is a professor of electrical engineering at Purdue University, US. When she returned to India in the late 1970s, however, Kiran found that her master's degree in brewing from Monash University could barely make a dent in the glass ceiling in the male bastion that brewing is in India. Women brewers were simply not welcome. Kiran was devastated. In retrospect, though, it may have been the best thing that happened to her. BIOTECH UNRAVELED Biotech is an industry that manipulates genes and enzymes, cells and tissues for man's needs. Modern biotechnology involves processes like genetic engineering and cloning tissues, plants, animals. Biotech is revolutionising drugs and Biotech unravelledvaccine s production and have brought down costs. Genetically engineered super plants are expected to boost agricultural yields significantly. INDIA ON TOP India is among the world's top 12 biotech powers. The industry is growing at a rate of 25 per cent. India has more biotech companies than Japan, Taiwan or Korea. By 2010, India is expected to generate $5 billion in revenues from biotech. The sector will create more than one million jobs in India in the next five years. Top global companies now look at India as the partner of choice. In 1978, when biotechnology resided in the realms of science fiction for most ordinary mortals, Kiran, then a 25-year-old with no business experience, decided to turn entrepreneur and use her microbiological training to start Biocon India Ltd. Initially, the firm supplied enzymes to an Irish company called Biocon. Much like Steve Wozniak and Steve Jobs of Apple Computer, she too began in a rented garage on a shoe-string budget of Rs 10,000, manufacturing simple enzymes extracted from sources as eclectic as raw papaya and tropical fish. It is quite a contrast to the glitzy 80-acre Biocon campus on Hosur Road today. Kiran's success lay in accurately sensing the next opportunity, and capitalising on it early. "She was way ahead of the others in her thinking and vision," recalls close friend Vijay Mallya, the liquor magnate who was one of the few who tapped her expertise. She realised the potential of research outsourcing even in the early 1990s. The Anglo-Dutch multinational giant Unilevers had by then bought over her Irish partner. "As a partner of Unilever's global empire, I became aware of research being outsourced by global giants. And I thought, why not leverage the R&D skills we have in India?" she says. So in 1994, Kiran launched another Indian first-Syngene, a contract research company. Syngene today earns revenues of Rs 40 crore annually, partnering some of the world's biggest drug companies, including GlaxoSmithKline Beecham, Bristol Myers Squibb and AstraZeneca on research projects. SUPPORT SYSTEM: Kiran with her husband and 'anchor' John Shaw at their Bangalore villa A fourth-26 per cent-of new biotech companies are following in her footsteps and focusing on "research process outsourcing" (RPO), a term coined and aggressively promoted overseas by Kiran. With an eye typically on the horizon, she has moved to the next potential gold mine-clinical trials. In August 2000, Clinigene was launched to focus on clinical trials. It has already begun clinical trials of oral insulin on diabetes patients. Once again, her business radar is right on track. A CII report estimates the global market for clinical research at $9 billion (Rs 41,400 crore). Now Biocon is moving into even greener pastures. It will use its technology to manufacture recombinant human insulin. It is a multi-billion dollar market that is expected to revolutionise diabetes treatment and the product will pit Biocon with MNCs like Eli Lilly. Her dream: To propel Biocon into the world's top 10 biotech firms. It is Kiran's people-centric nature that makes her rise above mundane things like gender differentiation. Her style is hands on and she usually puts in 15 hours of work daily. She insists on being called chairman and not chairperson of Biocon which now employs over 1,100 people (She bought over Unilever's stake in Biocon in 1998 and now owns 39 per cent of the shares). "Our story is of innovation and intellectual wealth creation," she says. Kiran is also a perfectionist, and a stickler for detail. Almost every plant on the Biocon campus has been personally chosen by her. Pointing to the robust almond tree that grows outside her office window, she says, "I grew that tree with my father's ashes. It is like my father is watching me every moment of my life here." It's the same sort of care that makes her parties-and she loves throwing them frequently-the talk of the town. A tremendous foodie, she loves fish and seafood. Although she generally likes continental cuisine, Gujarati food lists among her favourites. Kiran's other great passion is art. She has one of the best art collections displayed both in her office and in her Spanish style villa, Glenmore. But her favourite is a crayon drawing by her 11-year-old nephew Eric. It says, "If I found a pot of gold, I would give it to my aunt for her to make new medicine to fight very bad diseases." It is her husband John Shaw, whom she met when he was MD of Madura Coats, around whom her universe revolves. "He is my anchor," she declares passionately. After every hectic day, it is with her husband at her side, a glass of her favourite beer or wine and Pavarotti in the background that India's richest woman eases her burdens and dreams a little more.

The Seeds of a Revolution

Raising hopes of creating one million jobs in five years, biotech is already putting India on the world map of great innovators.

Like Kiran Mazumdar-Shaw there is a rapidly growing group of men and women who have hooked their dreams and money to the brave new idea of medicines obtained by tinkering with the processes of life. And like her they are already making pots of money out of it. V. REDDY, 55 FOUNDER, SHANTHA BIOTECHNIQUES VALUE: Rs 725 crore*By producing India's first genetically-engineered Hepatitis-B vaccine in his Hyderabad-based laboratory, Reddy brought down its price from Rs 800 per dose to Rs 40. "Despite the suffocating regulations, we have grown exponentially." Four years ago, there were only 12 modern biotech companies in India. Today, with almost 100 of them, India is among the top 12 global biotechnology powers, according to Ernst & Young's Global Biotechnology Report 2004. "This is expected to grow 10 times in five years," says CSIR Director-General R.A. Mashelkar. It is already a Rs 1,840 crore industry, growing at a rate of 25 per cent annually. "In India, medical biotechnology dominates," says Sandhya Tewari, director, CII. The number of people employed for research and development in the Indian biotech industry grew by 74 per cent in the past two years. The industry now employs about 10,000 scientists. According to the Ernst & Young report, biotechnology is expected to generate $5 billion (Rs 23,000 crore) in revenues and create more than one million jobs in the country in the next five years. There is almost a sense of deja vu here. Twenty years ago, when the first it industry survey was carried out by technology magazine Dataquest, it revealed a Rs 100 crore industry with small, unlisted companies and hardly any published data available. Today, information technology is a Rs 75,000 crore industry that gives India a modern identity. The potential is obvious. The world now has what was considered unimaginable even 30 years ago-the blueprint of life, the human genome sequence. This allows "designer drugs" that can attack the underlying genetic cause of the disease rather than the "one-size-fits-all" synthetic drugs that are currently in use. It is estimated that by 2025, these bio-drugs will replace 70 per cent of conventional therapies. As one scientist puts it, "If we can live the next 25 years, we will be able to live for another 75 years. In the next 25 years, we will be able to design new organs, correct bad genes and fix the problems that eventually lead to ageing and death." VILLOO PATEL, 48 CEO, AVESTHAGEN GENGRAINE VALUE: Rs 600 crore* A scientist-turned-entrepreneur, Patel has focused on innovative research and biotech services in pharma and agriculture. Her Bangalore-based company has 49 patent applications. "Unlike IT, biotech requires heavy investments in top class R&D." The impact on India is already visible. In 1997, a young engineer Varaprasad Reddy was shocked when told that India was technologically so far behind that it could not protect its children with vaccines. Determined to make a difference, he set up Shantha Biotechniques in Hyderabad. With scientific assistance from the Centre for Cellular and Molecular Biology (CCMB), it produced India's first "recombinant" vaccine for Hepatitis-B, called Shanvac. This involved inserting the gene for the Hepatitis-B vaccine protein into the bacterial genome. Genes have instructions for proteins in a cell. The bacteria, thinking this gene is a part of their own, produce a large amount of this protein, which can be extracted and purified. Before Shanvac hit the market, the Hepatitis-B vaccine was imported and a single dose cost around Rs 800. Today, the same vaccine costs only Rs 40. It has saved millions of Indians from fatal jaundice. There has been no looking back. In 2002 Shantha Biotechniques used similar "recombinant" technology to launch an anti-cancer drug, Shanferon, based on a biological substance called interferon. This is the only drug of its kind to be developed, made and marketed by an Indian company. Meanwhile, scientist Krishna Ella, who started Bharat Biotech Ltd International in Hyderabad, used this genetic cut-and-paste expertise to launch a clot-busting drug, streptokinase. This enzyme is a first-line therapy for diseases ranging from acute myocardial infarction to deep vein thrombosis, arterial occlusion and pulmonary embolism. RAJESH JAIN, 40 DIRECTOR, PANACEA BIOTECH VALUE: Rs 260 crore Exporting genetically engineered products like insulin and anthrax vaccines, the Delhi-based firm is among India's fastest growing biotech companies and is considered a one-stop shop. "India is now world class and can do things just as well and better." Reliance Life Sciences of the Reliance Group in the meantime has become a world leader in stem cell research, which could eventually lead to cloning "designer" hearts to replace diseased ones and other organs. In April 2002 Reddy joined hands with Kiran to form a joint venture to produce recombinant human insulin. Beating them at their game, however, was the pharmaceutical firm Wockhardt, which became the first company in Asia to develop, make and market recombinant insulin in 2003. Earlier, insulin cost around Rs 300 per unit. Wockhardt's biotech product made it available at Rs 129 per unit. If India has benefited from its biotech drugs, the world has too. Indeed that is where the money lies. Up to 60 per cent of India's biotechnology products are exported. The global market for recombinant insulin is valued at $3 billion (Rs 13,800 crore) a year, the interferon market even more than that. As the number of drugs in the developed world come off patent-which means they can be made by anybody-India is ready with the biotech-produced generic versions. Innovation, rather than copycat products, however, is the true test of the biotech revolution. But progress has been slow. That is because creating intellectual wealth needs physical wealth to begin with. This is an industry marked by long gestation periods. In a sense, biotechnology involves taking a gamble with the processes of life. It requires at least five years of focused, expensive research, before a viable innovative product emerges. And with living processes, there are no guarantees. To stay afloat in the interim, the company would need, other, more reliable sources of revenue. SWATI PIRAMAL, 47 DIRECTOR, NICHOLAS PIRAMAL VALUE: Rs 120 crore* The Mumbai-based firm is involved in a range of biotech services, including diagnostics, clinical trials, gene testing, lab services and drugs. "Biotech takes staying power as gestation periods are lengthy." Indian venture capitalists have traditionally shied away from this sector. But this is changing. In 2003, the Andhra Pradesh Industry Development Corporation (APIDC) set up a venture fund specifically for biotech. When the Insurance Regulatory and Development Authority allowed insurance firms to invest in biotechnology venture funds the Life Insurance Corporation of India invested over Rs 10,000 crore in biotechnology sector. The Technology Development Board has also proposed launching a $40 million fund with the Unit Trust of India, while the Department of Biotechnology has announced its own venture fund of $21 million. For companies, developing generic bio-drugs is one option that helps earn money which can be ploughed back into research. The second option is to partner more established foreign collaborators. "There is a large opportunity in biotechnology services in India," says Sarath Naru, ceo of the country's first exclusive venture capital firm for biotechnology, the Hyderabad-based Venture Capital. Research service for pharmaceutical MNCs is big business. In the West, the cost of bringing a drug to the market is $500-800 million and takes up to 10 years. Blockbuster drugs like GlaxoSmithKline Beecham's Zantac made this business feasible. But as drugs go off patent, triggering demands for lower-priced alternatives, the entire pharma industry will undergo major changes. According to Arjun Bedi, partner, Accenture Life Sciences, the routes to survival include specialising in a specific disease or technology area and parcelling out the other stages in drug development. SUBHASH BAGARIA, 52 CHAIRMAN, MILLIPORE, REAMETRIX VALUE: Not available Biotech services is where Bagaria saw an opportunity. And he has been proved right with the world buying reagents manufactured by his Bangalore-based companies. "These are uncharted seas but the challenge is worth it." This spells opportunity for Indian biotechnology firms. Around a fourth of them are focusing on high-end global research collaborations that are defining Indian biotech. Biocon, for example, partners pharmaceutical big daddies like GlaxoSmithKline and AstraZeneca. "Alliances with foreign partners bode well for the future of Indian biotech," says Utkarsh Palnitkar of Ernst & Young. With highly trained scientists available at a tenth of the cost, western countries are looking to India for survival. India has another gold mine-the world's largest population of "naive" sick patients, on whom no medicine has ever been tried. India's distinct communities and large families are ideal subjects for genetic and clinical research. A barrier to growth is regulation. This is an industry defined by cutting-edge technology, and the government has just not kept pace. For example, although cloning human beings is banned in several countries and is against ICMR guidelines, it has not yet been outlawed in India. Legal ambiguity has led to a piquant question: can a biotech drug, which is obtained by manipulating living organisms, be treated as any other drug, or does it need to undergo more stringent scrutiny? Biotech is already an industry entangled in red tape. It is governed by five Central ministries and six state ministries. "We need an integrated regulatory clearance system," agrees Kapil Sibal, the new minister of state for science and technology. Clearly, biotechnology is the new frontier to conquer. -with Stephen David and Amarnath K. Menon