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18  Special Feature Life



hile enrolling as a PhD

student, Nidhi Adlaka
had never thought of
a n ent repreneu ria l
career. The traditional
route for her would
have been a PhD, some postdoctoral research, and then an academic career or
a job in the biotech industry. As a PhD
student at the International Centre for
Genetic Engineering and Biotechnology
in Delhi, she stumbled upon a unique set
of bacteria in insect guts that can make
a chemical called 2,3-butanediol. It is a
valuable industrial compound normally
synthesised using chemicals. When she
and her colleague won the second prize in
a national challenge for new technology
ideas, a thought struck her. If this work is
good enough to win a challenge, why not
use it to start a company?
It would not have been an easy path
even two years before, but the biotech
environment in the country is completely different now. Adlaka and her
batchmate Neha Munjal got help from
the department of biotechnology (DBT),
which had started a few schemes precisely to help entrepreneurs like them.
They nished their PhDs in 2013, and
formed a company immediately. It was
incubated inside Delhi University, got a
grant of `50 lakh from DBT, and set to
work on proving the commercial worth
of their idea to make 2,3-butanediol
from agricultural waste. The Indian
biotech system has become so friendly
over the years that any individual with
an innovative idea can now start a company, says Nidhi.
The DBT set up the Biotechnology
Industry Research Assistance Council
three years ago. Its Biotech Ignition
Grant scheme now provides entrepreneurs `50 lakh and mentorship over 18
months to prove technology ideas before seeking angel investment.
Since its formation, 140 entrepreneurs
have taken this grant, creating a spurt
in life sciences entrepreneurship in the
country. It has also come up at a time
when incubators, accelerators and angel investors are helping entrepreneurs
bold enough to start life sciences and
medical companies.
In 2014, life sciences and medical
companies bagged 12% of venture investment, as compared to negligible
amounts just three years ago. There
has been a big change for life sciences
startups in the past three years, says
Deepanwita Chattopadhyay, CEO of
IKP Knowledge Park in Hyderabad.
The energy in the system has gone
up signicantly.

In its 15-year history, IKP Knowledge

Park has incubated or provided research grants to 150 companies. Some
of them have gone on to become large
companies. Laurus Labs is now a
`1,000-crore company. GVK Bio and Sai
Life Sciences are also large companies.
But all three have come with a pedigree
that has a long history in the country:
generics or services.
A life sciences or medical product
company is yet to make it big anywhere
in India, despite a startup culture that
is 15 years old. But industry observers
sense a change in the air. This is a critical period for the biotech industry,
says Ramaswamy Subramanian, biologist and CEO of the incubator C-Camp
in Bangalore. If there are some big
exits one after another in the next few
years, nothing can stop this industry.
Subramanian thinks that repeated exits
are necessary to interest the venture capital community in the countrys biotech
and diagnostics industry. So far exits and
deals have been few and far between.
The French rm Sano bought Hyderabad-based Shantha Biotech in 2009
for $783 million. Another French rm,
bioMerieux, acquired a 60% stake in
the Hyderabad-based rm RAS Life
Sciences for 1.6 million in 2012. A few
licensing deals have also happened in
recent times from Connexios, Aurigene
and Curadev.
Such deals have not come frequently
enough to be considered the norm, and
so the big VCs are reluctant to invest in
life sciences. Entrepreneurs have struggled to go from angel investment or rst
round of VC funding to the second and
third rounds.
However, lack of VC money is not stopping entrepreneurs from setting up
companies around the country, even in
risky areas like drug discovery. Many entrepreneurs know that money is scarce,
and have business plans that assume
difculties in raising money beyond the
rst round of VC funding. Entrepreneurs in India know that they may not
get funded for a long time, says Rajeev
Maliwal, founder and managing partner of Sabre Partners, which has two
funds dedicated to life sciences and healthcare. Companies work on a shoestring
budget, supporting their angel investment
with government and other foundation
grants and, sometimes, services.
Curadev was started by Arjun Surya, a
biologist with over two decades of experience in Indian and overseas pharma
companies. Curadev focuses on cancer
and inammation, and has ve molecules in development, four of them
for cancer. It received `5 crore in equity
from family and friends and another
`5 crore from ICICI through a World
Bank programme as a technology development soft loan.
Curadev was also forced to change its
original business model and do some
research services to generate revenues. It searched hard in India and
abroad for funding, was offered a few
deals by private equity companies, but
on terms that were not acceptable to
the management.
Finally, early this month, it signed an
agreement with Roche that put it on a
healthy nancial footing: $25 million in
upfront payments and $530 million for
future milestones in research collab-

A large number of life sciences ventures are sprouting across
the country, rich in ideas and talent. But they will soon need venture capital
funding to realise their potential, says Hari Pulakkat

Nidhi Adlaka &

Neha Munjal

are developing
a bioprocess for
butanediol. Over the
next few decades,
chemical routes of
manufacture will
gradually be replaced
by more environmentfriendly biological


of Achira Labs:
Indian engineering
skills promise a good
diagnostics and
devices industry,
and it may aid the
traditional life
sciences industry by
developing devices
side by side with drugs


Drug discovery
startups in India will
go abroad frequently
in the next few
years: for research
partnerships, for
capital, and for access
to markets


Radha Rangarajan of Vitas Pharma, among the few drug

discovery startups formed recently. Drug discovery is among the toughest

businesses to be in, but it is vital for the biotech industry that at least a few
Indian companies succeed in this game

oration and developing two anticancer

molecules. We went through difcult
times, says Surya, but now we can
plan our future with condence.
It is the largest-ever R&D deal struck
by an Indian company with a multinational, and it has not escaped the notice
of the venture capital community. Nei-

ther has it escaped the notice of other

startups that have formed recently, and
are working like Curadev with small or
smaller teams and low budgets. They
would be hoping to emulate Curadev.
Take Radha Rangarajan, founder of
Vitas Pharma in Hyderabad. The company has just eight people but four

Ripe for Investment

When Anand Anandkumar set up
his company Bugworks in Bengaluru, to develop treatments against
antibiotic-resistant bacteria, he
was clear that it would be headquartered in Silicon Valley. As a
long-time resident of the US, he
knew it would be easier to raise
funding as a US company. It did not
stop him from looking for money
in India, but he gave up after several attempts. VCs in India want
to invest in areas they already
know, says Anand Anandkumar,
founder and CEO at Bugworks
Research in Bengaluru. In the US
they want to be rst in an area and
want to learn with the company.
Anandkumar has raised $700,000
for his company, and is in the
middle of raising larger VC investments from the US. It was easy for
him as he had worked in Silicon
Valley before returning to India.
But not so for a large number of
companies being formed now,
who would look for venture
capital in the next few years.
Unless they can attract funding
and expand, the current entrepreneurial enthusiasm can die down
quickly. History suggests that such
companies will struggle to raise
VC money, but there are signs of
change in the air.
Assistant professor at the Mas-

sachusetts Institute of Technology

(MIT), Shiladitya Sengupta, wanted
to pursue his commercial ideas in
India. In the past few years he has
set up three companies: Vyome
Biosciences, Mitra Biotech and Invictus Oncology. All the three have
raised venture capital, amounting
to more than `150 crore, without
too much difculty. If you have
good science with IP protection, says Sengupta,
I think it is possible
to raise money and
build a strong team.
In its most recent
round, Vyome Biosciences raised $8
million (`50 crore)
from Sabre Partners,
Kalaari Capital, and
Aarin Capital. It had
investments earlier from
Navam Capital. Many Indian
companies are now absolutely
ripe for investment in both and
late stage, says Rajeev Maliwal,
founder and managing partner
of Sabre Partners. But while the
rst cheque is still available, the
challenge is in the second and
third cheques. Sabre has two
funds focussed on life sciences and
healthcare, one $50 million and the
other $100 million.
Large VC investments are rare in


molecules under development. It has received `3 crore in funding from the Angel Investment Network, and some additional funding from the government.
Drug discovery is a difcult business,
involving high science and high risks,
but Rangarajan isnt perturbed. Unless tough science is done in India the

life sciences, with some exceptions. Connexios, a drug discovery company in Bangalore, has
raised more than `200 crore from
one investor: Nadathur Holdings.
Strand Life Sciences, founded in
2001, has managed to raise $20
million (`20 crore) in two rounds
so far. Investors come to India
with an expectation to exit in ve
years, says Strand CEO
Vijay Chandru. This
is because of our
services history, but
in life sciences they
need to have
more patience.
Services companies dominated in
the early round of
biotech startups. But
recent startups are
not in services, and they
need to create value quickly
to interest the VCs. Biotech
valuations are still not high, says
Ranjan Pai, CEO of the Manipal Education and Healthcare Group, and
one of the early investors in Indian
life sciences companies. Yet many
investors are hopeful. It is like the
early stages of the IT industry,
says Kumar Shiralagi, managing
director of Kalaari Capital. People
are returning from abroad and
there is talent available.

ecosystem will not come together,

she says. However, Rangarajan is also
spreading her wings far, by working
with some best institutions abroad, one
of them being Cambridge University.
We may be India-based, she says, but
we are not India-bound.
As they discover drug candidates for
development, drug discovery startups
in India will go abroad frequently in the
next few years: for research partnerships,
for capital, and for access to markets. The
number of drug discovery startups in the
country, though, can be counted on ones
ngers. The majority of new life sciences
companies are in areas like energy, environment, value-added chemicals, vaccines, agriculture and so on. They may
not be as ambitious as drug discovery
companies, but are lling niches that can
together form a sound foundation for a
large and varied industry.
In Pune, Abgenics Life Sciences uses
probiotics foods lled with good bacteria to deliver drugs. Abgenics was
founded by Sanjipan Banerjee, who was
a scientist at CSIR-Imtech in Chandigarh, and incubated inside the venture
centre at the National Chemical Laboratory in Pune. It got going with `5 crore
from individual investors, and then got a
$100,000 grant from Gates Foundation to
prove its idea. If it proves the idea, it will
get another $1 million. Abgenics has not
taken any government grants, a rare occurrence among biotech companies. We
did not work with the government, says

Lack of VC money
is not stopping
even in risky areas
like drug discovery.
Companies support
angel investment
with government and
foundation grants

are Key
Most software companies
are easy to start, provided
the entrepreneur has a good
idea and a team. All you
might need is a small ofce,
some computers, an internet
connection and some software. Starting a life sciences
company is a completely
different matter. You need
to buy expensive equipment
just to prove the feasibility
of your idea. Fortunately for
Indias life sciences startups,
many institutions have set up
incubators to help them.
Many startups mentioned
earlier would not have formed
if there were no incubators
around. Abgenics and Segull
Biosolutions were incubated
in the NCL Venture Centre in
Pune. Bugworks was incubated at the Centre for Cellular
and Molecular Platforms in
Bangalore. Vitas Pharma was
incubated in IKP Knowledge
Park and the University of
Hyderabad, where it is still
housed. I dont think we
could have done this kind of
work here if there was no incubation, says Vitas Pharma
CEO Radha Rangarajan.
In the past few years, incubators have come up in many
institutions in the country.
Incubators in IIT Madras
and Bombay have already
generated several companies. The NCL Venture Centre
is attached to the National
Chemical Laboratory, known
for a long time for innovation
in the chemical sciences. Some
universities University of
Hyderabad and University of
Delhi, for instance have incubation centres as well. Even
smaller universities have now
started thinking of incubators.
A vital part of the ecosystem
is now well established.

The majority of new

life sciences companies
are in areas like energy,
environment, valueadded chemicals,
vaccines, agriculture
and so on. They may
not be as ambitious
as drug discovery
companies, but are
filling niches
Banerjee, because we did not want to
share the intellectual property.
Other recent startups include the biogas rm Green Power Systems and the
genetic testing company Mapmygenome
in Hyderabad; the Pune-based Seagull
Biosolutions that uses viruses as a
platform to deliver anticancer drugs;
the Chennai-based XCode that provides
genetic tests for aging and other conditions; the Mysore-based String Labs that
generates omega-fatty acids from waste
from the silk industry. Green Power Systems is developing a process that provides biogas at a high rate from waste.
Mapmygenome provides genetic tests
to determine disease risk. Seagull has
a developed a product using the measles
vaccine virus that can kill cancer cells
without harming other cells.
Although separate at the moment in
developed countries, life sciences companies in India overlap somewhat with
diagnostic and healthcare companies.
This is partly because some venture capitalists have combined funds for both,
and partly because of overlap of skills
necessary to start them. Diagnostic and
devices companies need engineering as
a primary skill, but they are likely to be
developed side by side with life sciences
companies in the future, as clinical tests
have to often go hand in hand with the
drugs being developed for a disease.
The Bangalore-based Achira Labs is
a good example of this synergy. It was
actually born inside Connexios, a life
sciences company. Connexios wanted
to develop new markers for diseases
as well as tests for them, but soon spun
off Achira Labs for it to focus on using
existing markers. Achira is developing
tests for hormones thyroid and fertility using the emerging technology
of microuidics. Achira has done the
clinical validation for its tests. Multiplexing markers for several diseases
are necessary in clinical studies, says
Dhananjaya Dendukuri, CEO of Achira. Clinical development is an area
where diagnostics and biotech-pharma
companies exist side by side. It may not
be an accident that these companies
are being formed at the same time in
the country.