Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Pharma: It’s all in the genes! - Views on News from Equitymaster
  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Pharma: It’s all in the genes!
Aug 19, 2005

Biotechnology has assumed significant importance over the last few years. To underline the fact, in the calendar year 2004, biotechnology drugs accounted for 27% of the active R&D pipeline and garnered 10% of the global pharma market. The biopharmaceutical market is expected to be worth US$ 16 bn by 2011. In this article, we take a look at the potential of this industry globally as well as in India.

An insight into biotechnology
Biotechnology is defined as any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use. In healthcare, biotech is used in developing insulin (diabetology) and monoclonal antibodies (anti-cancer) amongst others. Besides healthcare, biotechnological processes are also adopted in the fields of agriculture and industry.

Global perspective
US is the birthplace of modern biotech, generating revenues to the tune of US$ 43 bn in 2004. The situation is not as favorable in Europe, where stricter regulations, pricing constraints and widespread cost containment by government-run healthcare systems are slowing down the rate of biopharma uptake relative to the U.S. However, biotech has now rapidly evolved and spread its wings across the world, which can be gauged from the fact that nearly half of the publicly traded 641 biotech companies are now outside the US. In Asia, the sector is dominated by Australia, which accounts for almost three-quarters of the region's US$ 2 bn revenues. Globally, an increasing number of blockbuster drugs (drugs with annual sales above US$ 1 bn) are being generated by the biotechnology sector. In 2004, 11 blockbusters were biotech drugs out of which 11 were indicated for cancer. (Source: Biocon annual report).

India’s position on the biopharma radar
Currently the Indian biotech sector is in its early phase of development and at a lower level on the value chain. The biopharmaceutical segment, contributing 75% to the Indian biotech industry’s revenues, has been the key growth driver propelling the biotechnology industry to cross the US$ 1 bn mark. The current Indian biopharma industry focuses on vaccines, oncology, statins and diagnostics.

As far as the Indian companies are concerned, Biocon has been in the forefront on the biotechnology front. With regards to diabetology, it launched its proprietary human insulin product ‘Insugen’ in November 2004, which is expected to receive a favourable response and consequently generate revenues going forward. Biocon has also entered into an alliance with Nobex Corporation (USA) to jointly develop oral insulin on a global scale. As far as oncology (cancer) segment is concerned, the company has entered into a joint venture with CIMAB (a Cuban institute) to develop and market monoclonal antibodies. Currently in the pipeline is ‘BioMab’, indicated for the treatment of head and neck cancers. Biocon envisions these R&D programs as rapidly developing into very large global opportunities over the next 3 to 4 years.

Biotech is gradually becoming the new growth driver for Wockhardt too. With 3 key products in this category – Wepox (Erythropotein), Wosulin (human insulin) and Biovac-B (Hepatitis-B vaccine), the company is slowly and surely finding a foothold in the global market place, with revenues to the tune of Rs 322 m (2.6% of revenues) in CY04. With regards to its diabetic portfolio, ‘Wosulin’, which managed to garner a 2.4% market share in the year of launch (CY03), has already captured 25% of new prescriptions for insulin. The sales of ‘Wosulin’ touched the Rs 100 m in CY04. The R&D focus, especially on the diabetology folio, is likely to result in introduction of a new offering - Glargine. This is slated to provide a further impetus to Wockhardt's global initiative. Vaccines continue to remain one of Glaxo’s major growth drivers. The company is banking on global trials of 3 vaccines - two vaccines for Rotavirus and one for cervical cancer in India during 2005.

As far as biogenerics are concerned, both Biocon and Wockhardt were not able to launch generics of biopharmaceutical products in the US and European markets, as the guidelines with regards the same were not very clear. However, recently, the European Medicines Evaluation Agency (EMEA) issued guidelines for launch of generic versions of biopharmaceuticals in the European markets. It must be noted that compared to the traditional synthetic pharmaceutical sector, bio-pharmaceuticals have relatively higher barriers to entry. This is owing to the fact that biotechnology involves the use of certain complex technologies, not easy to develop and be mastered by all pharma companies. Given this backdrop, both Biocon and Wockhardt are in a position to garner a significant portion of the European biogenerics pie.

Looking ahead…
The 1990s were the most productive period in the history of the global pharmaceutical market, as the number of patented products in the pipeline every year was anywhere between 40 and 45. That number has reduced considerably at the turn of the century (25 to 30 on an average). To compound the problem, blockbuster drugs are facing the risk of patent expiry resulting in a flooding of cheaper generic versions. Global companies are also receiving flak due to ballooning R&D expenditure with no corresponding drugs in the pipeline. As the focus shifts to personalized medicine involving disease specific treatment and better diagnostics, biotechnology offers significant growth opportunities to both innovator as well as generics companies. Though still at a nascent stage, India too, boasting of a large pool of scientists coupled with a low cost advantage, is in a position to catch the ‘biotech’ bus going forward.

To Read the Full Story, Subscribe or Sign In

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Feb 23, 2018 (Close)


  • Track your investment in BIOCON LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks