Comment

When Germany-based Merck made a brief announcement last week about its acquisition of Bangalore Genei, a tiny company with knowledge of cutting-edge biotechnology discovery research tools, the press did not notice much.

First, the announcement made at the global level appeared to be half-baked and lacked any intention of information sharing on the latest move. Second, the world seems excited about only deals of transformational proportions that would match Pfizer’s takeover of Wyeth or Daiichi Sankyo’s emerging markets objectives with Ranbaxy. Small deals, no matter, how strategic, are not seen as game changers and are less admirable.

Going beyond the usual noises of buying companies to spread into newer therapies or geographies, Merck seems to have scanned units in India that can add more meaningful prowess to its existing domain of biosciences.

That is an area largely left uncovered by big multinationals in India. The obvious targets for big companies seeking fresh pastures in India are brands or manufacturing units, but many have not noticed the scores of Indian biotechnologists who have set up small technology-driven companies in cities like Hyderabad and Bangalore —- units that may be barely surviving today but could fetch rich valuations if their operations fit into a larger company’s game plan.

Take Bangalore Genei, which is an example of a scientist’s dreams reaching its ultimate goal. Started by P Babu in the late eighties, Bangalore Genei had a slow start. Genei, as it is usually referred to, was never a company waiting to have a full-scale biotech play, though it definitely envisioned an opportunity in biotechnology. Scientists were deployed to develop products such as enzymes, diagnostics and specialised reagents and the head start gave the company tremendous insights in niche areas of proteomics and genomics. Among the post-graduate science students, too, Bangalore Genei became popular as it delved into a few laboratory products required in biology research.

The range of activities covered by Bangalore Genei seemed suitable to Sanmar Group’s chemicals businesses in some way and the company was sold in 2003.

Merck had been among the earliest to express its biology ambitions with the takeover of Serono many years ago.

Having bought a core research company, Merck now needed to keep its pipeline full while looking at technologies and units that can keep its costs of developing complex biotech drugs under control. It probably took the less glamorous route of checking out smaller, low profile companies with fundamentally differentiated and strong product history.

In contrast to the buzz of big-sized buyouts, Merck seized the opportunity with a possibly much lower valuation when compared to a few other Indian companies that are floating on hyped valuations.

There are two distinct types of shoppers in India — one, the established hunters, who go for topline expansion or add more products to their portfolios, and two, the likes of Merck that are looking at niche advantages.

And it’s not just Merck. Sanofi Aventis acquired control of Shantha Biotech a few months ago, at a time when Sanofi’s name was being linked to Piramal Healthcare by every known media almost everyday. Few recognised that it was as important for Sanofi Aventis to take care of its vaccines business and see how cost-efficient it can become globally; most only saw the company’s need to grow its Indian formulations business by buying companies like Piramal Healthcare.

GSK, too, has been a notable player when it comes to buying research units that employ future technologies. Clearly, the thrust is on ensuring new pipeline of next generation blockbusters than spend money and effort on milking age-old products that can give limited growth.

For Indian companies that claim to have good technologies, it is very important to be more visible and more relevant. There are scores of venture funds ready to bet their money on such outfits. Round-one funding is not as difficult to obtain as it was in the second half of 2008.

If Merck could see value in Bangalore Genei, it is safe to assume that there are at least half-a-dozen other Indian companies that can aid global research undertaken by the big daddies of the world. There will be many genies in the bottle for every Aladdin.
Pillman is an executive closely linked to the global pharma industry