India's biotech sector crosses $4 bn: E&Y report

Domestic biotech industry crossed the USD 4 billion-mark last fiscal, growing from around USD 3 billion in the previous fiscal, according to an Ernst & Young India report.

Vaccines, diagnostics and devices and personalised medicine are the key innovative growth areas for the domestic biotech sector, says 'Beyond borders: Global Biotechnology Report - 2011'.

The report notes that though the year has seen R&D funding increasingly become scarce for vast majority of firms globally, India's biotech sector is one of the fastest growing knowledge-based sectors with numerous comparative advantages in terms of R&D facilities, cost effectiveness and budding capability.

The domestic biotech industry has the potential to emerge significantly from the current levels, it added.

"While the biotech industry's aggregate performance improved in 2010, there is now a widening gap between large, established companies and those at earlier stage for whom access to capital continues to be difficult," Ernst & Young India Partner for life sciences practise Ajit Mahadevan said in a statement.

"The domestic biotech firms will need to adapt creatively to this environment by doing more with the funding that is available and by working from the earliest stages of development to demonstrate the potential value of their products to investors, payers and regulators," Mahadevan added.

Enhanced performance following the recovery from economic downturn gave rise to a new ray of hope for the global biotechnology industry, says the E&Y report.

The Indian biotech industry is largely dependent on government funding, with only a handful of venture capital funds focusing on this industry and an almost negligible angel investment flowing in, notes the report.

The government has introduced several funding schemes to support this industry in a bid to improve innovation in biotech R&D.

The bio-similar sector will continue to draw attention, leveraging the country's strengths in small-molecule generics. With over 40 deals completed in 2010, strategic alliances continue to gain momentum here.

With low-cost manufacturing capabilities and strengths in small-molecule generics, domestic companies are well positioned to benefit from the estimated 48 biologics - with sales of USD 73 billion - that are slated to go off patent in the next decade.

On the M&As in the sector, report says the year's noteworthy deals included Ranbaxy Labs' acquisitions of Biovel Lifesciences, Biocon's commercialisation agreement with Pfizer (the company also announced plans to establish R&D centres in Malaysia) and Cipla's acquisition of a large stake in MabPharma and BioMab.

However, for new drug development, the industry will require an increase in financial assistance from government, VCs and MNCs, says the report.

"The domestic industry will also have to build drug discovery capability to attract the required funding. This will call on the entire ecosystem (academia, industry and government) to work more closely together," the report concludes.