Indian Biotechnology Sector: A Catalyst for Growth Opportunities

author A&A

calender July 31, 2020

Indian Biotechnology Sector: A Catalyst for Growth Opportunities

The year 2020 has been incredibly challenging worldwide. The spread of the novel coronavirus, known as COVID-19, has led to an unprecedented health crisis in countries across the world. The crisis has unleashed an unprecedented crippling impact on all business sectors and aspects of how people communicate, work or live in general. The economic ramifications of the pandemic unravelled into a reality, with employees and customers staying indoors, and supply chains facing disruption challenges with halts and closures.

The enterprises in the Biotech Sector that have been the most impacted and put under great stress and unpredictability of the pandemic are the Small and Medium Enterprises (SMEs), which provide for almost 50% of economic activities and caters to about 70% of the job market in India. It has, therefore, become the need of the hour to grant strategic importance to the Biotechnology Sector, which necessitates the ramping up of the production of health-related products and investments.

A Swathe of Modern Biotechnology in India

The Biotechnology Sector of India is highly inventive and is on a strong growth trajectory. India is counted amongst the top 12 biotechnology destinations in the world and prides itself as the 3rd largest biotech destination in the Asia-Pacific region. The country boasts of the second-highest number of US Food and Drug Administration (USFDA) approved plants, after the USA, which includes 665 USFDA approved plants outside of the US, 44% of global Abbreviated New Drug Applications (ANDA) and over 1400 manufacturing plants compliant with the World Health Organisation. The Indian biotech industry comprises of more than 2700 start-ups, which is expected to rise up to 10,000 by the year 2024. It is also expected, that by the year 2025, the Indian biotech industry will reach $ 150 billion.1

The Indian biotechnology sector has attracted a significant amount of attention recently and has, now more than ever, become one of the most significant sectors in enhancing India’s global profile as well as contributing to the growth of the economy. Hence, it would not be ludicrous to imagine that COVID-19 is providing a huge stimulus to the biotechnology sector in India, which has resulted in the massive efforts to develop vaccines, highly efficient antibody tests, deploy test kits, develop new drugs and repurpose existing anti-viral drugs, thereby causing billions of dollars to flow towards many companies in India. This has further brought several global companies to aggressively join hands with Indian companies due to India’s strong generic biotechnology potential.

An Ideal Opportunity for Investors

 Among the emerging markets, India is seen as the ideal destination with ample opportunities available to be capitalized on without compromising on the quality, which has attracted major multinational pharmaceutical and biotech companies around the globe, which are looking for low-cost suitable options in the Biotechnology Sector in India.

The ever-expanding affluent and middle-class Indian population increasingly demand improved healthcare services which serve as a patient base for these biotech companies and at present very few companies are developing diagnostic kits in India, which means less competition for new entrants.

India harbours the best-in-class medical professionals and boasts of a population which is willing to cough up funds for the finest foreign-made technologies and technologically advanced devices such as cancer diagnostics, medical imaging, ultrasonic scans and others.

India imports nearly 80% of its medical devices, which offers a unique opportunity for leading med-tech companies globally to import and invest in India.

India is Not Without Problems

The intelligent human resource pool, India’s strong selling point, has its weaknesses too. The absence of standardized biotechnology policies and investment routes with multiple authorities overseeing different requirements is an element of concern.  However, recently announced government policies and regulatory reforms are aligned with the interest of the investors in the Indian biotechnology sector. Another major concern is the absence of proper enforcement of Good Laboratory Practice (GLP) compliance. Very few laboratories and research facilities follow the guidelines strictly. However, initiatives undertaken by government bodies are gradually improving the situation for clinical research. India still faces the crunch of venture capital funding, which is a major issue in the local industry. The small size of most Indian companies and the absence of a defined exit route limits the enthusiasm of venture capital providers in this sector. This can be taken care of by proper exit route planning by the policy-makers in India.

Rising to The Occasion

The Indian Biotechnology industry that was valued at $64 bn in 2019 will reach $150 billion targets by 2024-25. It is further anticipated that by the year 2025, the contribution of the Indian biotechnology industry in the global biotechnology market is expected to grow to 19% from 3% in the year 20171.

Foreign Direct Investment

India today is a part of the top 100 clubs on Ease of Doing Business (EoDB). The Foreign Direct Investment (FDI) inflows in India increased to $55.56 billion in 2015-16, $60.22 billion in 2016-17, $60.97 billion in 2017-18 and the country registered its highest ever FDI inflow of $62.00 billion (provisional figure) during the last Financial Year 2018-19. Moreover, India has attracted more than $74 billion in investments across sectors during 2019-20. In the biotechnology sector, India allows 100% FDI under the automatic route for greenfield pharma. Further provides 100% FDI under the government route for brownfield pharma, which is up to 74% under the automatic route and beyond 74% is under the government approval route (*which is further subject to compliance of additional conditions). India also allows FDI up to 100% under the automatic route for the manufacturing of medical devices.[1]

Hence, it can be concluded by stating that the inherent advantages in India along with the rising public interest in this sector, growing investments by international companies and traditional business houses, favourable government regulations are likely to enable India to realize its dream of a $ 150 billion biotechnology industry by the year 2025.

[1] Invest In India

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