A networked approach can help foster biotech growth

Sheela Bhide

It is a widely held belief the world over that biotechnology will be the economic driver in the 21st century. India has many strengths in this field, the most notable being the availability of a large pool of highly qualified, English-speaking scientific and technical manpower at a significantly low cost. What can be done to convert them, as quickly as possible, into economic wealth?

Interventionist policies
It is observed world-wide that clusters of small biotech start-ups have received substantial support from local governments. The Research Triangle Park in North Carolina, the US, is a good example of patient intervention by the state government leading to the establishment of a self-sustaining cluster of biotech companies. The biotech cluster in San Diego, California, owes its growth to the decision of the local government to support high-tech industries to counter the effects of declining defence contracts. Saskatoon in Canada, with the provincial government’s support, has become one of the major centres of agri-biotech in the world.

It is a similar story across the Atlantic. The development of a biotech cluster in Dundee, Edinburgh and Glasgow in Scotland is largely due to the efforts of the Scottish Enterprise, the government’s economic development agency. The cluster is supported by 15 research institutions. The Enterprise has provided infrastructure, facilitated networking and mentoring, carried out market research and in some cases, invested along side the private investors to share risks.

The German Federal government was one of the earliest to target the biotech industry, providing highly subsidised infrastructure, generous research grants and tax breaks which attracted several biotech companies from North America in the late 1990s. East Asian countries believe that biotechnology will fuel the region’s next wave of economic expansion. They are, therefore, strengthening their research facilities, setting up biotech parks and aggressively seeking foreign partners. The government of Singapore has set recently aside $4 billion for biotech research, seeding start-ups and financing joint ventures.

Strategy for India
To develop the biotech industry in India, the government could consider setting up a national advisory team—a multi-disciplinary team of experts— to identify the potential areas and to assist the concerned state governments in formulating location-specific projects which could include asset mapping and gap identification and deciding on core competencies. This could be followed by a national mission on the commercialisation of biotechnology.

In the US, representatives of six regions (Cincinnati, Indianapolis, Pittsburgh, San Diego, San Antonio, and St. Louis) met in Pittsburgh recently (April 2001) to co-ordinate efforts to develop the biotech industry. It was decided to launch a national project which will address the following issues: basic research, transfer of technology, enhancing skills and competencies, infrastructure development, inter-disciplinary convergence, formulation of region-specific strategies, dissemination of best practices and organising theme conferences. Could we, in India, think on similar lines?

Park-based development models
Well-developed infrastructure is a fundamental requirement of any high-tech industry—basic infrastructure such as roads, water, power and telecommunications as also specialised infrastructure such as common effluent treatment, quality control facilities, animal house etc. Access to expensive, sophisticated equipment such as DNA sequencers, protein synthesizers, high throughput screening can keep production costs low, especially for small start-ups.

In order to utilise scarce resources optimally, a Park-based approach to providing specialised infrastructure has been popular in several countries. Biotech parks could be developed in India as joint ventures between state governments and private developers so that the could benefit from the synergies between both the promoters—efficient, customer-oriented management as well as partial subsidisation with public funds.

Research institute-university-industry interface
An integral link between the biotech industry and research institutions and universities has been a key factor for the success of biotech clusters in other countries. There are several instances where universities themselves have promoted biotech parks on their campuses (e.g. Cambridge University, the UK). Almost every research institution and university in the US has established an office of technology management to evaluate the innovations from their own labs, to negotiate with the private industry to commercialise them and to handle patents issues.

Forging links between industry, academia and research institutes could be done in various ways: organising inter-institutional seminars, providing grants to universities to strengthen their research infrastructure, fixing targets to public research institutions for industry-funded research and consultancies, offering attractive monetary incentives to individual researchers working on such projects and ensuring confidentiality in their dealings with industry.

Tax incentives
Since the commercialisaton of cutting edge technologies entails considerable uncertainties and risks, the biotech industry in most countries has received generous tax concessions. In India, there is a need to provide excise and sales tax exemptions for high-end biotech products for at least 10 years. Customs duties in India on some of the equipment imported by the industry are as high as 65 per cent and need to be brought down immediately.

Intellectual property rights
Strong laws to protect Intellectual Property Rights and an efficient mechanism to enforce them have spurred innovation in this frontier technology in other countries. Though, in India, IPR laws are being made compliant with the World Trade Organisation, the administration of these laws is yet to be streamlined. Today it takes seven-to-eight years to get a patent registered and several years to fight a patent infringement in a civil court.

Venture capital
The biotech industry in developed countries has been fuelled by venture capital. The venture capitalist has found easy exit routes in the stock exchanges specialising in tech stocks such as NASDAQ in the US, AIM in the UK and the Neuer Markt in Germany to benefit from capital gains and free resources for new ventures.

If the OTCEI could be restructured and reactivated or if some of the regional stock exchanges (possibly those of the “tech triangle”—Bangalore, Hyderabad and Chennai) could specialise in tech stocks, it would provide a fillip to the flow of venture capital into the biotech industry.

Mergers and alliances
The rapidly changing structure of the global biotech industry has been thus described by Alex To, Head of the Biotechnology Research Group, Credit Suisse, First Boston: “The technology explosion in the post-genome era is fundamentally changing the industry structure. Instead of conglomerates that can do it all from generic research to product marketing, the biotech industry is now a matrix of supply chain relationships along the drug discovery process, with increasing reliance on technology, alliances and partnerships.” The recent investment by the Tatas in the small Bangalore-based biotech firm, Awasthagen Graine, could set a trend of mergers and alliances in this country. Industry associations could play an important role in establishing such linkages.

A clear lesson that can be learnt from other countries is that government intervention can—and does—fuel growth in the biotech sector, but only if other factors are in place. These factors may vary but would typically include the existence of experienced techno-entrepreneurs, advance research capabilities and facilities, universities with established life sciences faculties, venture capital, professional advice, and well-developed basic infrastructure.
In India, there is an urgent need to create a conducive climate for the growth of biotechnology and this can be better done by establishing strategic partnerships between public and private institutions.

(The writer is a member of the Indian Administrative Service. The views expressed are her own)