Biotechnology is steadily emerging as high potential growth sector in India andis expected to take the country into the next big league of internal andinternational investment. Thebiotechnology sector of India is highly innovative and is on a strong growthtrajectory.
The government is investing substantially for creating humancapital and infrastructure with a special focus on R&D to develop Indiainto a world-class bio manufacturing hub. The sector in India, which iscurrently growing at 20% is expected to reach USD 100 billion by 2025.Currently, India’s biotech industry holds 2% of the global market share and isthe third largest in the Asia-Pacific region. The sector has immense possibilityto grow and provide plenty of prospects to investors. PolicyInitiatives & InvestmentsForeign Direct Investment (FDI) is allowedup to 100 percent through the automatic route for manufacturing of drugs andpharmaceuticals in the sector. Biotechnology Regulatory Authority of India(BRAI) Bill has been tabled in the Parliament for introduction to promotebiotechnology in the country. In a move to make clinical trials’ proceduretransparent, CDSCO (Central Drugs Standard Control Organisation), has made theregistration of clinical trials and clinical research organizations (CROs) mandatoryin the country.
Centre and State Government provideincentives to boost the biotech industry such as: § Customs duty exemption on goods imported in certain cases for R&D § 150% weighted tax deduction on R & D expenditure. § 3 years excise duty waiver on patented products § 100% rebate on own R & D expenditure § 125% rebate if research is contracted in public funded R &Dinstitutions FDI PolicyIndian Government is set to make the marketconducive to the growth of the Biotechnology with its FDI related relaxationsas mentioned below: 100% FDI is allowed under automatic routefor Greenfield projects for pharmaceuticals; for Brownfield projects, 74% FDIis permitted under the automatic route. For manufacturing of medical devices,the sector was opened for 100% FDI under the automatic route on January 21,2015. To attract investments in Industrial parks,100% FDI is allowed through automatic route to new and existing industrialparks.Government has introduced several taxincentives also in the budget 2016-17 to promote the sector.
§ The turnover limit to avail the Presumptive Tax Scheme under section44 AD has been increased to INR 2 crore from INR 1 crore. § New manufacturing companies incorporated on or after March 1, 2016to be given an option to be taxed at 25% + surcharge and cess on fulfilment ofcertain conditions. Market Entry & OpportunitiesThe Government of India allows Biotechnologyimports under “Open General” category. Reduced import duty and simplifiedimport procedures encourage imports of capital goods and raw materials.
Price, quality and after-sales servicesupport are major factors in purchase decisions. A letter of credit is theusual payment mechanism for imports. Importers are required to find foreignexchange from their export earnings, or to buy foreignexchange from government approved foreign exchange dealers. The buyers of biotechnology products and biomolecules are the research institutes and pharmaceutical companies. Opportunitiesexist for companies to offer consultancy services and build infrastructure forIndian biotech companies as well as offer consultancy services for watertreatment facilities. Many companies seek assistance on certifications,regulatory and FDA clearances.A new entrant to the Indian market shouldconsider one of the following options, depending on the expected volume ofbusiness, the nature of business (whether it’s an active pharmaingredient/generic bulk drug or a pharma product), market potential and itslong term strategy in the Indian market.
§ A foreign company may appoint a distributor as this is the idealentry option which does not require as many resources. But the selection of theright distributor is essential. For most industrial products, one exclusiveindenting agent or distributor is the most common arrangement.§ A foreign company may open its liaison office in India. However, aliaison office is not allowed to transact any business.
It could only undertakemarket development activities. Expenses of this type of office must be metthrough inward remittances from the head office abroad. The Reserve Bank ofIndia ( RBI) grants approval forthe opening of such offices.§ Opening of a Branch Office by foreign companies engaged in manufacturingand trading abroad is another option which is available to undertake buying andselling activities in India. A branch office may render technical support andprofessional consultancy services but it is not allowed to undertakemanufacturing activities.
Permission from the RBI is required to set up thistype of office.§ JointVenture/Wholly Owned Subsidiary: A foreign company can commence operations inIndia through incorporation of a company under the provisions of the IndianCompanies Act (2013). OpportunitiesBiopharma: It is the largest component of biotech industry, India isextensively investing in improving the R capabilities andbio-manufacturing infrastructure. The market will gain momentum as the marketis fuelled by overall GDP growth and increasing prosperity especially thegrowth of the middle class who can afford medicine and the changing profile ofdisease prevalence. Majority of multinationals collaborate with majorbio-pharma companies for early stage clinical trials as well as to sell thefinished product for better market penetration.
Vaccines and recombinant therapeutics arethe leading sectors driving the biotechnology industry’s growth in India.Protein and antibody production and the fabrication of diagnostic protein chipsare a promising area for investment. Bio Agri: The biotechnology agriculture methods for grain production canaddress the daunting challenge of widening demand-supply gap infood grain production. Technology provides methods to improve the effectivenessof agriculture inputs bringing down input costs and increased output. However,there is a need to educate public about the benefits of Bio-agriculturemethods.
The country holds immense potential to become a major producer oftransgenic rice and several genetically modified or engineered vegetables.Others: Some other potential areas of development are; biosimilar, stemcells, medicinal and aromatic plants, animal biotechnology,aquaculture and marine biotechnology, genome analysis and others. Competition in the MarketThe Indian biotech industry is fairlycompetitive. Karnataka is the major hub providing base to almost half of thecountry’s biotechnology companies. Apart from Karnataka, states such as AndhraPradesh, Maharashtra, Tamil Nadu and Kerala have been proactive in supportingthe biotech sector by establishing world-class biotech parks and clusters.India has approximately 350 companiesoperating in the biotechnology sector. Some of the major biotechnologycompanies in India are:v Biocon,v Serum Institute of India,v Panacea Biotech,v Nuziveedu Seeds,v Reliance Life Sciences,v Quintiles,v Rasi Seeds,v Novo Nordisk,v Shantha Biotechnics,v Venkateshwara Hatcheries,v Indian Immunologicals,v TransAsia Biomedics andv Mahyco.
Success StoriesLast one decade witnessed a change inbiotech industry with major mergers and acquisitions deals. Some of theexamples are:§ Matrix lab acquired by US Based Mylan Inc § Piramal Healthcare acquired by US based Abbot Laboratories Biocon has entered into an agreement withMylan for the global development and commercialization of Biocon’s genericinsulin analog products (Long lasting insulins), which has a global addressablemarket of US $ 11.5 billion. RoadAheadWith the country offering numerous competitive advantages interms of R&D facilities, knowledge, skills, and cost effectiveness, thebiotechnology industry in India has immense potential to emerge as a global keyplayer.India constitutes around 8 per cent of the total global genericsmarket, by volume, indicating a huge untapped opportunity in the sector.
Outsourcing to India is projected to spike up after the discovery andmanufacture of formulations. Hybrid seeds, including GM seeds, represent newbusiness opportunities in India based on yield improvement.India currently has a marginal share in the global market forindustrial enzymes. Hence, there is an opportunity in focused R&D andknowledge-based innovation in the field of industrial enzymes, which caninnovatively replace polluting chemical processes into eco-friendly processesthat also deliver environmental sustainability.
Another interesting field ofstudy is the area of bio-markers and companion diagnostics, which will enableto optimise the benefits of biotech drugs.