By Dr Jogin Desai
India is undeniably one of the top 12 biotechnology destinations globally and ranks as the third largest in the Asia-Pacific region. The nation’s bioeconomy, valued at over $92 billion in 2022, is poised for explosive growth, with projections reaching $150 billion by 2025 and a staggering $300 billion by 2030.
Our country is a major supplier of low-cost drugs and vaccines worldwide and leads in the biosimilar sector, boasting the highest number of approved biosimilars in the domestic market. Still, the pertinent question remains: What hinders India from becoming a top-tier biotechnology innovation destination? One obvious answer stares us in the face: The lack of a robust private biotech funding system similar to one that exists on the technology side.
At present, BIRAC, established by the Department of Biotechnology (DBT), and incubators such as the Centre for Cellular and Molecular Platforms (CCAMP) offer infrastructure and funding support for early-stage biotech startups. The early success of these initiatives has brought hope for biotech companies like us, empowering us to turn ideas into products that address critical healthcare challenges in today’s world. A renewed focus on setting up biomanufacturing hubs to create core competence in drug product manufacturing is also in the works and will plug a much-needed gap for the country.
However, our ecosystem lacks a steady flow of venture capital. If we want to realise the economic potential of the biotech ecosystem, we need to recognise that there is a significant need and opportunity for private capital investments.
Why does VC funding remain an uphill battle?
To transform innovative ideas into market-ready products, VC money is and has been an important resource that ensures financial support and strategic guidance. For an early-stage biotech company, VC funds can provide access to capital, expertise and mentorship, network, and connections.
Just as the Y2K crisis created an opportunity for Indian IT to go global, COVID set the foundation for Indian pharma and, eventually, biotech. The truth remains, though, that getting VC funding for biotechnology companies is a lot harder than getting similar funding for technology-driven ideas.
One of the main apprehensions for VC funding remains the false notion of “slow returns.” Research has consistently indicated that the returns on investing in biotech outstrip those from investments in technology-related companies. A 2011 study by Bruce Booth and Bijan Salehizadeh highlighted how biotech ventures had outperformed tech venture investments from 2000 to 2009 and also revealed how fewer biotech venture investments lost money compared to software and generated more than 5x returns. Moderna’s success with the COVID vaccine is an example of how a small percentage of biotech VC investments account for a large portion of outsized returns.
However, this myth of the lack of returns in biotech investments refuses to die and needs to be consistently rebutted. The survival of this myth is also enabled by the lack of expertise in most VC companies to evaluate the potential of such science-backed startups.
Consequently, VC funds generally gravitate towards technology companies that address a large market and can achieve sales of hundreds of millions of dollars. Additionally, at present, biotech startups cannot list on capital markets in India unless they are revenue-positive; hence, there is a drain to markets such as the US and Hong Kong for capital raising.
What we need is an ecosystem that promotes VC funding, entrepreneurship and ease of doing business from all stakeholders in the industry. A thriving public-private partnership where the government helps fund the highest risk phase, moving onto a public-private partnership in the middle, and then transitioning to fully private and, hopefully, public funding as the risks decrease and the company matures seem logical next steps in solving this issue.
Finding funding = finding solutions
As per GlobalData’s Thematic Intelligence report, 44% of healthcare professionals worldwide are optimistic or very optimistic about a recovery in biotech funding over the next 12 months. This outlook comes after a significant decline in private biotech venture financing, which saw a drop of 43.2% in 2023 compared to 2022 and 52.3% compared to 2021.
Biotechnology companies, which can also be referred to as deeptech companies, are infused with science and technology and are building IPOs, and this focus shift from entrepreneurs has garnered more attention to the product side. Many PhD holders are becoming entrepreneurs, which is translating into more technology-fused science companies.
There are currently around 4,000 to 5,000 companies, which have raised approximately half a billion dollars in domestic funds and an additional 30 to 40% from foreign direct investment (FDI), indicating that this sector is growing.
Investors have started to show interest, but many deeptech companies will only succeed by crossing the valley of death and securing the next round of funding. Therefore, they must prepare their innovative solutions for the global market and not just for India. From day one, these companies must establish a global foundation, including their outlook, processes, understanding of both US and Indian regulatory landscapes, and a full understanding of the patentability and freedom to operate for their innovation. Make in India for the world should be our mantra.
Conclusion
The future of this industry is bright enough to stretch its boundaries overseas and strengthen our economy even more. Overcoming the funding gaps, providing the manufacturing infrastructure, and nurturing talent that can create truly innovative solutions will propel our nation to the helm of global bio-innovation. That day is not too far away!
(The author is Founder and CEO, Eyestem.)
Views are personal and do not represent the stand of this publication.
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