Indian Biotech Industry's five year growth at 19%: E&Y

Introduction

The biotechnology industry in India is at a critical juncture. While the industry has been growing at a CAGR of 19% rate over the last five years, it has concurrently been facing diverse challenges that have prevented the industry from transcending to the next level, says a report by the global audit and advisory firm Ernst & Young.

The industry size stood at US$4 billion for FY 2010 - 2011. The biopharmaceutical industry constitutes 60% of the biotech industry in India and grew at 21% y-o-y to reach US$2.3 billion in 2010-11, which is approximately 15% of the Indian pharmaceutical industry in value terms. Vaccines, insulin, erythropoietin and monoclonal antibodies have been the mainstay of the biopharma segment.

The E&Y report, while noting the significant growth of the industry, highlights the reasons that are hindering further growth of the industry in India. According to it, within the domestic market, companies have not been able to launch new products at a pace that they would have liked.

Dealing with multiple regulatory bodies typically results in serious delays. Parallely, companies focused on innovation have not been able to make a sizeable impact on the industry. Many of them are facing funding constraints as the investor community has shied away from investing in early stage ventures, said the report.

Ajit Mahadevan, Partner, Ernst & Young said, "India is already facing stiff competition from China, Korea, Singapore, and more recently Malaysia, in terms of attracting investments from MNCs. This has been enabled due to better technological and scientific competence, better infrastructure, tax and duty exemptions, and easier regulatory procedures as compared to India. Thus, there is strong call for action for the government to act swiftly to carry out regulatory reforms, develop infrastructure and provide more incentives to the biotech industry to remain competitive and spur growth in the industry."

The report also calls for more action on part of the industry to come up with a concerted action plan to utilize the available infrastructure and resources more efficiently and focus on innovation to take the biotech industry to new heights.

The government, on its part, has introduced several schemes to fund biotech start-ups. As an incentive for in house R&D, the government also provides 200% weighted tax deduction, which has been extended till 2017 in this year's budget. In terms of infrastructure, several biotech parks have been set up in India in the last five years with public private partnerships.

The industry, however, believes that most of biotech parks are more congenial to biotech services and diagnostics firms rather than pure-play biotech manufacturing companies. To support bio-manufacturing activities, they want the government to evaluate the feasibility of making available land at subsidized rates, uninterrupted power at competitive prices, good quality water supply and effluent treatment facilities to improve the efficiency and productivity of pharmaceutical companies.

Globally, the biotech industry achieved revenues of US$83.4 billion in 2011, a 10% increase from 2010 on a normalized basis.

Source

India Brand Equity Foundation, July 17, 2012