A rising middle class, government support and private investment
are fueling the growth of biotechnology in India.
The Spectacular Growth of Biotechnology in India
India is a well-known technology hub.
Did you know it is also a global leader in biotechnology?
That’s right: India is the 3rd largest biotechnology destination in the Asia Pacific Region and among the top 12 in the world.
Incredibly, it’s on par to gain even more importance in the coming years.
By 2025, India’s contribution to the global biotechnology market is expected to grow to 19% from 3% in 2017. This means that India will eventually represent a whopping one-fifth of the international biotech market.
How can we explain this phenomenal growth?
Here are 3 factors driving the rise of India’s biotechnology industry.
1 – Biotechnology in India is Fueled by the Rising Middle Class
The Rising Standards of the Middle Class
India is developing rapidly – and so is its middle class.
By 2030, as much as 80% of the country’s population may be considered middle class.
As the population’s living standards increase, so do its healthcare expectations.
One popular belief held in India is that Western biotechnology is not addressing the needs of the Indian population. Indeed, many corporations are reluctant to treat certain diseases due to a lack of financial return.
As a result, Indian scientists and entrepreneurs are becoming active in the healthcare sector to provide Indian solutions to Indian problems. They are also benefitting from the reduction in the cost of technology, such as genome sequencing and medical sensors, so it is now making economic sense for Indian biotech to harness these advances for the national market.
By 2022, the Indian healthcare market is expected to reach $372 billion – a huge opportunity for Indian biotech entrepreneurs and corporations. The country’s 1.3 billion inhabitants are in dire need of medical help, and this demand for better health and medical choices is one of the main drivers of investment in biotech R&D.
In addition to is rising middle class, India can also count on an incredible talent pool to help drive research and innovation.
India Has a Deep Talent Pool of Educated, English-Speaking Workers
India’s rise as a biotech giant is facilitated by its vast human resources. With a total population of 1.3 billion people, 50% of which are under the age of 25, the country has a tremendous reservoir of scientific human resources, including scientists and engineers.
While the country’s literacy rate is less than 70%, it boasts more than 1,000 universities and its engineering programs produce 1.5 million graduates every year.
But India is more than a nation of engineers.
The country boasts a dedicated Biotech Industrial Training Programme and 12 Biotech Finishing Schools to train graduates and researchers. At writing, there are millions of technologists who are ready to either be connected to medical practice or launch their own healthcare start-ups.
India’s population also presents vast opportunities for clinical trials, owing to low costs and a large patient pool. In fact, it is the preferred destination for global clinical trials. Recently, the Indian Council of Medical Research (ICMR) selected 12 institutes for clinical trial of the country’s indigenous COVID-19 vaccine in partnership with Bharat Biotech.
The Indian population’s demands for better healthcare are being supported by the national government.
2 – The Government is Committed to Developing Biotechnology in India
The Department of Biotechnology
India’s Biotechnology Industry can be traced back to the creation of the Department of Biotechnology by then-prime minister Rajiv Gandhi in 1986. At the time, India became one of the first countries in the world to have a government department dedicated solely to biotechnology.
The success was immediate and long-lasting.
The Department of Biotechnology started as an obscure venture with very modest means. However, it quickly gained steam and helped the Indian biotech industry grow from a $1.1 billion industry in 2003 to a more than $60 billion industry in 2020.
Despite this phenomenal growth, the Department of Biotechnology’s ambitions remain intact and it wants the industry to reach a $100 billion valuation by 2025.
If things continue to progress as they have over the past 20 years, this vision may well become a reality.
Centers of Excellence (CoEs)
Since its inception, the Department has established 17 CoEs in biotechnology at institutes and universities around the country.
Centers of Excellence are bodies that “provide leadership, best practices, research, support, training or trainers and skill training for specific sector/s [it is] a place where the highest standards are maintained”.
CoEs help attract talent to develop proof of concepts (PoC) around emerging technologies. The Department of Biotechnology has implemented a scheme known as Centers of Excellence and Innovation in Biotechnology (CEIB) which provides funding to “augment and strengthen institutional research capacity for promotion of excellence in interdisciplinary science and innovation in specific areas of biotechnology”.
The establishment of these CoEs is contributing to the rapid development of India’s thriving biotech industry.
Biotechnology Parks
The Department has also inaugurated 8 Biotechnology Parks.
These parks provide facilities for scientists and small to medium-sized enterprises (SMEs) to assist them in developing and demonstrating their technologies and even building pilot plants.
The government hopes that these parks will help speed up the commercialization of new products and services. Park staff also provides support services to researchers such as mentorship and guidance on Intellectual Property, business plans, proposals for clinical development and exit strategies.
Other Achievements
In addition, the Department of Biotechnology also supports research infrastructure, including the financing of a high-resolution mass spectrometry facility in Mumbai, flow-cytometry, imaging and microarray facilities in Delhi, and animal-house facilities in 5 other regions.
Another of the Department’s proudest achievements is the Biotechnology Industry Research Assistance Council (BIRAC). This non-profit, public-sector enterprise was set up in 2012 to “stimulate, foster and enhance the strategic research and innovation capabilities of the Indian biotech industry, particularly start-ups and SMEs”.
The driving force behind the creation of BIRAC is to help fundamental research translate into commercial outcomes. Over the years, this was the main challenge faced by the country’s nascent biotech industry.
Evidently, BIRAC is fulfilling its promises.
From 2012-2016, it supported 316 start-ups which have collectively generated $125 million through 122 products and technologies. For example, these start-ups launched such products as cattle-feed supplement, a new process to manufacture human albumin and immunoglobulin, microfluids-based diagnostics and a rapid test for malaria.
Two of BIRAC’s main initiatives are:
- “Biotechnology Ignition Grants” (BIG): financial aid to help start-ups and entrepreneurs take a proof-of-concept through the first major step on the path to commercialization.
- “Glue Grants”: connects clinical-science departments with those for basic science in institutes and universities in the hope that this will encourage partnerships and collaborations.
Furthermore, the Indian government’s continued support allows the Indian biotech industry to be resilient and reactive. This is crucial, especially during times of crisis such as the current COVID-19 pandemic.
COVID-19
In 2020, Mission COVID Suraksha was announced to support the development of safe, efficient and affordable Made in India vaccines.
The mission entails a grant that is given to the Department of Biotechnology. The Department will be responsible for providing grants to help the end-to-end passage to vaccines – from preclinical stage to manufacturing. Thus, companies will receive capital to fund R&D, get a license and introduce the vaccines to market.
The missions appears successful. A few weeks ago, Bharat Biotech’s intranasal COVID-19 vaccine received approval to begin phase II/III human trials.
The final reason why India’s biotech company is growing so quickly is the influx of private capital over the past decade.
3 – Private Equity and Venture Capital are Stimulating the Biotechnology Start-Up Environment
The Rise of Private Equity in India
Access to capital is one of the most important factors behind virtually every industry’s success.
This statement also holds true in India.
Government can help foster an environment where research and entrepreneurship are encouraged. However, government cannot be the sole provider of capital. It is essential that start-ups receive sufficient private capital to fund their early and late stage growth.
Thankfully for Indian biotech, the Private Equity and Venture Capital (PE/VC) industry is in full bloom.
Indeed, 2011-2020 saw the PE/VC industry come of age and become mainstream. The industry grew at a CAGR of 19% from a base of $8.4 billion in 2010 to $47.6 billion in 2020.
which is more than twice the value recorded in the preceding decade.
An Increase in Buyout Activity
Despite the global downturn in 2020, private equity buyout activity increased in India.
More than 100 deals worth a combined $20 billion were finalized, up from 83 deals worth $7 billion in 2019.
The pharmaceutical sector was the main source of buyout deals, with $2.4 billion invested across 31 deals, up from $1.1 billion invested across 24 deals in 2019.
In 2020, the largest deals were brokered for hundreds of millions:
- KKR purchased a controlling stake in publicly listed J.B. Chemicals & Pharmaceuticals for $500 million.
- Carlyle Group acquired 20% of Piramal Pharma for $490 million
- Carlyle also agreed to buy 74% of SeQuent Scientific for $216 million.
These types of deals will continue well into 2021-2022 as the Indian pharmaceutical market keeps growing. In fact, the Indian Pharma market grew 14% in June 2021, indicating gradual normalization post-Covid.
A Promising Future for PE/VC
India is seeing the same trends as everywhere else in the post-pandemic world: a renewed interest and more robust deal activity in the life science space. Investors are realizing that life science supply chains, drug development, R&D and critical healthcare infrastructure are of utmost importance going forward.
Another positive development is the growing prominence of Contract Research and Manufacturing Services (CRAMS). This is a business model where innovator companies focus on new drug discovery while outsourcing key ancillary activities.
Earlier this year, Ernst & Young published a report in which it revealed that India’s shift towards CRAMS by life science companies enables asset-light operations by freeing up resources for R&D efforts. EY claims that this allows India to benefit “greatly from this trend leading to an expansion in revenues/margins and valuations of small and big players alike in the sector”.
As a result of this inflow of PE/VC capital, it is believed that there will be 10,000 biotech startups by 2024.
Some of the most well known include:
- XCode Life Sciences raised $170 million to fund its preventive healthcare treatments
- MapMyGenome is a personal genomics startup that raised $1 million from Singapore angel investors to fund its immune system diseases research
- Oncostem Diagnostic is a cancer treatment startup that raised $7 million from Artiman Ventures
- Sea6 Energy raised $9 million from Tata Capital and Biocon CEO Kiran mazumdar
- Pandorum Technologies raised $9.2 million from investors to design and 3D print human liver tissue for medical research
- There are dozens of other innovative Indian biotech startups that are raising funds to develop their own healthcare solutions.
With such a flurry of start-up activity, PE/VC momentum is spilling well into 2021.
At the midpoint of 2021, Prequin notes that the “561 healthcare-related VC deals have been concluded so far this year, for an aggregate value of $14bn – more than 67% of 2020’s level”:
- Jan.-March 2021: 7 healthcare deals were finalized for a total value of $436 million.
- February 2021: Advent International acquired ZCL Chemicals from Morgan Stanley for $275 million.
Clearly, the Indian biotech industry is in full bloom and looks set to continue growing well into 2022.
As a result, investments are pouring into the industry. Clearly, Indian entrepreneurs are set to secure significant amounts of growth capital.
About the Author
Michael Megarit is a partner with Cebron Group.
With over 25 years of domestic and international corporate finance experience,
he provides M&A and capital advisory to high-growth technology companies.