Opinion

The age of IP

From its initial years, the biotechnology industry was projected as the 'David' to Big Pharma's 'Goliath'. And true to the story, the smaller industry is today proving that agility and brain will win over mere size. Notwithstanding the recent survey by the Association of Biotechnology Led Entrepreneurs (ABLE) which showed a 15 percent slowdown in the growth rate of the Indian biotech industry in the last fiscal, the buzz is that the rate of growth in biotech will be faster than that of the pharmaceutical sector. Obviously, the growth is on a smaller base, but Big Pharma continues to woo biotech in the hopes that their biotech buys will pep up their sluggish pipelines and performance.

Global biotech pioneers like Amgen and Genentech, now into their third decade, are facing a mid-life crisis and are becoming takeover targets of Big Pharma. The situation is typified by Roche's bid for biotech blue chip Genentech and Bristol-Myers Squibb's (BMS) recent takeover offer for the remaining stake in ImClone, it’s biotech partner. Today, biotech partners like ImClone are most often the 'knowledge partner' and can bargain for a better deal, even though they are much smaller and sometimes short of cash. In ImClone's case, even though the company first put itself up for sale, it later withdrew as it felt it could get better valuations from other suitors.

An interesting postscript to these takeover tangos is the suspicion among analysts that these pharma companies are trying to buy over distressed biotech companies, only to make themselves more 'attractive' for future buyers. However that scenario pans out, consolidation is a necessary business strategy.

Though the Indian biotech industry's bread and butter is still a relatively low value, low technology intensive services segment, it will not be long before traditional Indian pure play pharma players like Dr Reddy's Laboratories (which already has its own generic monoclonal antibody product in the market) and Glenmark Pharmaceuticals morph into biopharma majors and up the ante.

When (and not if) it's the turn of India's biopharma biggies to be courted by global pharma or even global biotech, (not counting the deals already in play like the French Merieux Alliance’s majority stake in Shantha Biotechnic or Biocon's latest marketing tie up with Abraxis BioScience), Indian promoters capable of giving the highest intellectual capital per dollar will command a premium in the market. Thus, a company taking time today to lay a good solid foundation, in terms of proprietary platforms and novel biological entities (NBEs), may seem foolhardy when compared to the rest of the herd who are already reaping revenues from low value products. But IP will finally score over mere brawn. After all, that's what David had that Goliath did not.

Viveka Roychowdhury
viveka.r@expressindia.com