Comment

Investing in new business opportunities such as biotechnology or vaccine manufacture is a subject being discussed with a lot of interest these days. The ideas may be good, with revenues in line of sight, but a few in the thick of things say the financial meltdown has left investors and angel investors scarred. In fact, a good number of them are still recovering from the wounds inflicted due to the sudden credit squeeze.

So, is it sensible to invest in nascent companies led mostly by committed scientists? From the innumerable examples that we have from Europe and US, entrepreneurs with sound technology backgrounds seem to have a great penchant for taking risks. Most technology-edged companies being lapped up by the Big Five of global pharma, namely Pfizer, Glaxo, J&J, Roche and Novartis had been run by small groups of people.
Those scientists may have started with a small idea and may not have even carved out their businesses with any intention of selling off to big pharmaceutical companies. It perhaps became relevant to global pharmaceutical companies as they fanned out on their hunt to fill up pipeline gaps.

That spirit of enterprise is sadly lacking in Indian scientists. After embellishing themselves with post-doctorals, the best consensus option found is academics. Nothing wrong with that, but many are averse to the idea of running their own units —- primarily because they are not sure there will be any money to make after burning so much and losing precious time.

A few months ago, the government agency —- through its department of biotechnology —- had called for new ideas that may require financial infusion. Not many came forward, according to a high level government official and those who did present their cases had put greed before the power of their respective ideas.

And so we have not had too many companies that could associate with big pharmaceutical companies as they still scout around for new treatment options. Against that backdrop, China has seen thousands of returnees from big pharmaceutical companies in the US and Europe and they have started their own enterprises. Many of those very scientists are now helping multinational companies navigate through the painful process of identifying good drug candidates. Needless to say, they are also making a lot of money sitting in their homeland.

In India, we have only a few examples such as Varaprasad Reddy of Shantha Biotechnics that got sold to French major Sanofi Aventis or Dr P Babu who founded Bangalore Genei that changed hands from Sanmar group to Germany-based Merck recently. A few others, such as like Bangalore-based Strand Life and Avesthagen are waiting for their turns to make a mark.

A veteran in the pharmaceutical industry pointed at the lack of an ecosystem that can help those brainy ones to work on their own ideas. Universities are not doing enough to provide avenues for scientists who would want to get into the business thought process. The doubts raised by scientists are reasonable. What if the idea fails? Who gives the guarantee of success for an idea that needs to go through onerous process of experiments?

Angel investors or venture capital companies too have their own dilemmas and cannot be blamed for not going all out in funding Indian start-ups. In a science that is as complex as drug discovery, what are the pipeline evaluation parameters? Scientists who have some leads ask for a high price tag, while VC investors look at the lowest value example.
It may be highly debatable to say so, but drug pipelines can never be valued accurately. In the developed world, several departments within a company exchange notes over many months before a particular drug or a company can be put under the lens. Indian companies may have sounded optimistic, but due diligence of drug candidates in Indian companies by a few large multinational companies have not evoked much excitement of late.

It is said that what is available in India has already been done by others or is prone to dismissal in the clinical stage. That may be an aberration or an individual comment, but seen in the global context, not too many Indian companies are working on any mentionable innovation. A few that had taken the courageous leap have sized down their pipelines or are looking at ways to raise fresh funds.

Therefore, it will be an opportune time for venture funds to keep their hunt on. May be the right mix will make the difference to a potential billion-dollar idea.

(Pillman is an executive closely linked to the global pharma industry)