Intellectual Property

Biotechnology in India: the Next Wave through Strategic R&D and Intellectual Property Rights

Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Presentation plan
India is making its presence felt in the global biotech market. Intellectual Property Rights offer both opportunities and threats to Indian biotech companies and research institutions. Indian biotech companies must increase their focus on strategic R&D and IPRs.

Slide Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Presentation plan
India is making its presence felt in the global biotech market. Intellectual Property Rights offer both opportunities and threats to Indian biotech companies and research institutions. Indian biotech companies must increase their focus on strategic R&D and IPRs.

Slide Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

India has appeared on the biotech radar

Indias share in the global biotech market is currently about 2%. Sales of biotech products in India are growing at a CAGR of 8.4%.
4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5

nolli b $ i

0.0 1997 1998 1999 2000 2001

Source: A Report on the Indian Biotechnology market Mindbranch.com

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Indian biotech companies are active in many sectors.

Distribution of Indian biotech companies across different segments
1% 12% 8% 24%
Agro-biotech Bioremediation Biopesticides Biodiagnostics Enzymes

Major Players
Monsanto

4% 6% 5% 18% 6%

3% 4% 9%

Human health Vaccines Bioinstrumentation Veterinary Contract research Bioengineering Other

Biocon Nicolas Piramal Cipla

Biocon

Agro-biotech (including seeds) is the largest sector with 42 companies

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Total number of companies = 175

Source: Biotech India 2003

Major Indian biotech players are actively involved in research

Major Indian companies, with their R&D expenditure expressed as a percentage of their revenue, and their key line of research:
COMPANY R&D/REVENUE (%) LINE OF RESEARCH

Workhardt Zydus Cadila Torrent Pharma Ranbaxy Biocon Dr. Reddys Labs Cipla Sun Pharma Average

10.5 7.5 6.4 6.0 5.0 4.4 4.0 4.0 5.9

Genome technology Genome technology Pharmaceuticals Pharmaceuticals Enzymes Therapeutic proteins Vaccines Pharmaceuticals

Sources: A Report on the Indian Biotechnology market Mindbranch.com & Biotech India 2003
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The government is also supporting research through various agencies.*

AGENCY BUDGETARY ALLOCATION * (RS. CRORE) 1407 1399 912 779 147 136 58

University Grants Commission (UGC) Indian Council of Agriculture Research (ICAR) Council of Scientific and Industrial Research (CSIR) Department of Science and Technology (DST) Indian Council of Medical Research (ICMR) Department of Biotechnology (DBT) Department of Scientific and Industrial Research (DSIR)

The total budgetary allocations amount to ~ Rs. 50 billion

*Total research budget allocations of agencies Source: Status and Development of Biotechnology
in India: An Analytical Overview Sachin Chaturvedi RIS Discussion Paper
Slide

Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Presentation plan
India is making its presence felt in the global biotech market. Intellectual Property Rights offer both opportunities and threats to Indian biotech companies and research institutions. Indian biotech companies must increase their focus on strategic R&D and IPRs.

Slide Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

The Indian patent regime is changing

India needs to comply with the TRIPs agreement by 2005. Drugs will become patentable as products, and not just as processes. Important changes in the Indian Patent Act:
Before 2005
Only process patents

After 2005
Product and process patents
for pharmaceuticals, food products, and agrochemicals

Patentable subject matter

for pharmaceuticals, food products, and agrochemicals

Term of patent

Process patents for these inventions Process as well as product patents for have a term of 5 to 7 years. these inventions will have a term of 20 years. Provision for EMR grant to companies filing product patents Product patents will be issued. Hence, there is no need for EMRs.

Grant of EMRs

First Indian EMR granted to Novartis for Glivec in November, 2003

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 in light of these changes, Indian biotech companies face a number of opportunities and certain threats as well
STRENGTHS
Trained manpower and knowledge base Good network of research laboratories Rich biodiversity Well-developed base industries (e.g., pharmaceuticals, seeds) Extensive clinical trials and research Access to vast & diverse disease populations

WEAKNESSES
Missing link between research and commercialization Lack of venture capital Relatively low R&D expenditure by industry Doubts about the ability of Indian products to meet international standards of quality

OPPORTUNITIES

THREATS

The large Indian market can be captured by Existing business models will not work. gaining IP protection. Fresh investments need to be made in new There will emerge new revenue streams from directions (strategic R&D set up, IP protection). patent licensing and litigation. Strong IP protection increases the lucrativeness of India as a destination for contract research.

Sources: Biotech India 2003 Evalueserve analysis

Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

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New opportunities are emerging for Indian biotech companies

Indian companies can partner with foreign players to enter into collaborative R&D efforts as an initial step towards developing an R&D focus. Revenues from patent licensing and litigation can re-define existing business models completely, and shift them to a higher value-generation plane. India will become a highly lucrative option for contract research once strong IP protection legislation is introduced. Indian companies can introduce entry barriers for foreign players in the Indian market by using IP to protect their own innovations.
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Collaborative R&D

New revenue streams

Emerging business opportunities

Capturing the Indian market

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 however, the opportunities are accompanied by certain threats as well.

Current scenario
By reverse engineering, Indian pharmaceuticals companies have circumvented existing process patents, in order to produce patented drugs.
For example, consider that a company has a process patent for a drug in India. In the present scenario, an Indian company may easily circumvent the patent by altering the existent drug manufacturing process. The Indian company may sell this drug in the local market at lower rates, or may export it to countries with no patent for this drug.

Post 2005 Scenario

India will issue process and product patents for drugs. Once a company obtains a product patent for a drug in India, no other company will be authorized to manufacture the drug in India. Therefore, the existence of companies producing patented drugs by circumventing the production process of these drugs will be endangered.

We need to shift to R&D-pivoted business models in the Indian Biotechnology industry.

Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Slide 1

Presentation plan
India is making its presence felt in the global biotech market. Intellectual Property Rights offer both opportunities and threats to Indian biotech companies and research institutions. Indian biotech companies must increase their focus on strategic R&D and IPRs.

Slide 1 Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Indian research organizations need to redefine their R&D approach.

Ideation R&D IP protection Value extraction

An idea-centric lifecycle of an invention

Ideation

Early-stage valuation

R&D

IP protection

Value extraction

Strategic R&D
A value-centric lifecycle of an invention
Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

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Strategic R&D transfers research from a vicious cycle to a virtuous cycle

The Vicious Cycle The Virtuous Cycle

Large unvalued Intellectual Capital

Noncommercial Ideation
Valuation

Valued Intellectual Capital

Ideation

Valuation Huge R&D expenditure

Strategic R&D IP Protection Commercial Technology

IP Protection

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Evalueserve client example 1: Identifying areas for strategic R&D

Identify possible opportunities

Evaluate opportunities

Identify high value opportunity areas

Invest in R&D in high value opportunity areas

A case study on strategic R&D of a pharmaceutical company:

Hematology TA: large market size and a high growth rate Large number of disease areas in the Hematology TA Analysis of current treatments Analysis of trends in R&D and IPR Competitors in the space Analysis of competitor strengths Identification of disease areas with low IP density Identifying high potential disease areas with a low IP density
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Investing in R&D in high opportunity areas Licensing in existing technologies

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Evalueserve client example 2: Extracting value from the output of strategic R&D

Maximize IP protection

Study the market and technology space

Analyze the market opportunities

Identify value extraction routes

A case study on the use of strategic R&D for capturing a niche area:
Client wanted to identify a strategy to commercialize a technology related to the cardiovascular tissue engineering domain. Evaluation of potentially competitive technologies in the technological domain Analysis of market opportunities in the technological domain Identification of immediately competing technologies Identification of the advantages and disadvantages of competing technologies vis-vis the clients technology Development of a business plan for commercializing clients technology Identifying possible routes such as commercialization, licensing, and partnering for extracting value from the invention

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Evalueserve client example 3: Maximizing the scope of IP protection for your inventions
The invention: An invention related to a new bypass surgery graft The process:
EVS analyzed the invention, performed a prior art study, and identified different claimable embodiments of the bypass surgery graft. EVS claims various embodiments of the graft in the patent application.

The result:
The patent covers almost all the different embodiments of the invention. The patent erects entry barriers so that competitors cannot bypass it without infringing on it.

A well-protected invention has higher value-generation potential compared to a loosely-protected invention.

Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

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India must develop an IP focus.

Develop an IP-centric strategic R&D focus. Obtain strong IP protection for your inventions. Develop products and build Brand Equity. Extract value from protected inventions by identifying and encashing the right value extraction routes (licensing, commercialization, crosslicensing, etc.)

Slide 1 Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Intellectual Property

Biotechnology in India: The Next Wave through Strategic R&D and Intellectual Property Rights

Evalueserve, 2004. All Rights Reserved - Privileged and Confidential