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Indo-German Co-operation in Biotech

May 14, 2008

Kiran Mazumdar-Shaw, founder and manager of Biocon, had a vision – affordable health care. To increase the speed of development and to share the financial risk, Biocon, one of the leading Indian biotechnology firms, has co-operated since February 2008 with the German firm AxiCorp. Both firms profit. AxiCorp uses the less expensive research and development facilities of Biocon, and AxiCorp opens up the marketing and business potentials. This co-operation has been noted in the pharmaceutical industry as an interesting growth option. The Frankfurt Innovation Centre of Biotechnology (FIZ) has proved to be a crucial organization which provides a direct access to the international companies to German and European biotechnology markets and facilitates mutual growth of the Indian and German companies.

The Indian generics industry is booming and today has a share of about 25 percent of the generics-market worldwide. India's strength in this sector is indicated, among other things, by the takeover of the German firm Betapharm by Dr. Reddy's Laboratories, at the beginning of 2006, for about 615 million US-Dollars. Further, the Indian biotech-company Wockhardt was one of the first to enter the European market with acquisitions in 1997, and in 2004 it took over the medium-sized biotechcompany Esparma in Germany.

India has been a full member of the WTO since the beginning of 2005. However, due to the associated changes in patent law to accommodate international standards to protect intellectual property the Indian pharmaceutical industry is undergoing a radical change from being a producer of generics to being an exporter of complex services and innovative research results with worldwide marketing collaborations. The patent law, enacted in 1970 and valid until 2005, had the goal of strengthening national pharmaceutical production and of enabling a large number of the national population to obtain medical treatment at the lowest possible prices. New medicines often appeared on the market within two to four years and at a fraction of the original supplier’s price. Because of this pharmaceutical policy, the prices of standard medicinal therapies have become the lowest in the world.
 
Biotechnology on an Upward Trend

In spite of the favourable business climate for Indian firms the increasing regulatory hurdles in the USA, and increasingly keener competition from generics producers, especially those in China and Eastern Europe, raise the pressure on Indian pharmaceutical firms. They reacted by extending their value added chain with innovative products. From this background, internationally competitive activities emerged in the areas of generics (incl. so-called “biogenerics”), biotechnology, custom-synthesis, customer-research, IT-Services, as well as marketing and sales.

According to the firm’s information, about 40 percent of the turnover of the Indian pharmaceuticals producer Ranbaxy should stem from its own developments by 2012. This proportion is about ten percent lower than that of western pharmaceutical firms of similar size. Leading Indian pharmaceutical firms make about 10 percent of their income available for research and development. In research on newer drugs, Indian firms concentrate on medicines to combat malaria and AIDS since the demand potential in these areas is very high. To increase the speed of development, and share the financial risk, it is likely that alliances between Indian and foreign firms will become more common.

The fact, that in coming years numerous worldwide patents of blockbusters of the first generation will expire, is a powerful motivation for growth. Analysts predict that the expiration of patent protection for 11 important active substances by 2010 would be enough to set off a real biotechnology-revolution in India, with sales volumes of about five billion US-Dollars, and up to a million additional workplaces in the services sector. The business magazine Business Standard ranks India, with its approximately 200 biotech-companies, as one of the top-three biotech-industries in the Asian region and as one of the 12 best in the world. Biotechnology turnover rose by 30.98 percent to 2.1 billion US-Dollars from 2006 to 2007. With 1.4 billion US-Dollars, the sector red, medicinally applied biotechnology achieved the bulk of this turnover (70 percent). Among the biotech-companies (2005/2006) with the largest turnovers are: the Serum Institute of India, Biocon, Panacea Biotec, Mahyco Monsanto Biotech, Rasi Seeds, Venkateshwara Hatcheries, Novo Nordisk, Mahyco, and Aventis Pharma as well as Indian Immunologicals. In spite of the new patent law, the development of innovative medicines is, however, still afflicted with a certain legal ambiguity.
 
India Offers a Top-Class Research Environment
 
Even if the general political and legal conditions still involve some uncertainties, the international pharma-industry is increasingly strengthening itself with joint ventures and fully owned subsidiaries in India. With the rising pressure of efficiency in R&D costs, the international top-players are using India's competitive and low-cost infrastructure for clinical studies whose costs are around 30 to 40 percent lower than in the West. Several large international companies have already chosen India as the location for clinical studies. Eli Lilly (USA) is pursuing several projects and Pfizer (USA) is testing antimalarial drugs. The market for custom research could bring India close to 2 billion Euros by 2010 compared with 600 Million Euros in 2006.More than 80 Indian hospitals are involved in international or regional clinical studies. Thus, the population of about 1.2 billion offers a pool of multilayered disease pictures with a complete range of illnesses due to civilisation, and rarer tropical illnesses. 

The research environment meets Western standards. With more than 70 production plants certified by the American health authority, the U.S. Food and Drug Administration (FDA), India has the largest number of plants with such high quality-standards outside the USA. According to A.T. Kearney, up to 2010 the investment of 85 billion US-$ is planned for both the construction of new production plants in the area of chemistry, and the expansion of existing capacity. The construction of a pharmaceutical factory in India is about 40% cheaper than in Europe or the USA and the production costs for pharmaceuticals are considerably lower.

Numerous small and medium-sized companies in India have developed themselves through joint ventures with international pharmaceutical companies and domestic generics producers. Worldwide, these young companies are highly competitive and because of a favourable cost-structure and scientific expertise, for example in custom synthesis, have an enormous potential for growth and innovation. To make use of this, particularly in biotechnology, central contact points in both countries are of great significance. One of these interfaces is the FIZ Frankfurt Biotechnology Innovation Center in Frankfurt am Main.
 
FIZ: Platform for German and Indian Innovators

FIZ offers international companies direct access to the German and European biotechnology markets. Reciprocal science and technology exchange is especially important. Focussing on a few indication sectors (inflammatory diseases, diseases of the central nervous system and proteomics) FIZ is exactly the right contact point for companies in this field. Companies that stimulate each other and conduct an intensive exchange of experiences meet here. FIZ tenants benefit from an established network. FIZ also helps Indian firms to enter the German market.
 
Evolvus, for example, an Indian bioinformatics service provider, uses FIZ support. Evolvus services large and medium-sized pharmaceutical companies in the German and European markets in the field of bioinformatics. Initial business contacts have been developed with the support of FIZ.
 
For the German and Indian biotechnology markets two things are essential: cost efficient and innovative active substances and medicines, and their worldwide marketing. India and Germany should make use of the evermore-varied chances for collaborative work in pharmaceutical research.



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