N E W SALSO IN THIS SECTION

Biotechs await IPO ‘boomlet’ p1116First Parkinson gene therapy trial launches p1117

EMEA struggles with need to restructure p1118News in brief p1125

Little science, big bucks p1127

NATURE BIOTECHNOLOGY VOLUME 21 NUMBER 10 OCTOBER 2003 1115

India approved two follow-on biologics—so-called biogenerics—in August, demon-strating the potential emergence of a world-reaching biopharmaceutical industry basedthere. The implementation of a global patentscheme under the trade-related intellectualproperty rights (TRIPS) agreement, dueJanuary 1, 2005, could still threaten thegrowth of this fledgling industry. Yet theindustry could benefit from an August 30World Trade Organization (WTO, Geneva,Switzerland) agreement that allows develop-ing countries to import cheap copies of essen-tial medicines, overriding internationalpatents.

Last August alone witnessed the phase 3trial clearance for Shantha Biotech’s(Hyderabad, India) Filgrastim (granulocyte-colony stimulating factor) for leukemia aswell as two marketing approvals—for BharatBiotech’s (Hyderabad) recombinant streptok-inase to prevent blood clots and Wockhardt’s(Mumbai, India) wosulin, India’s first bio-generic human insulin.

The surge of interest in follow-on biologicscoincides with the emergence of severalgeneric drug companies in India as potentialsignificant players in world markets (see Table1). The generic drugs currently marketed orunder development are from the 15 top sell-ing biopharmaceuticals that are off patent orwill come off patent in the United States andEurope over the next five years.

India does not currently respect westernpatents, so Indian companies have been ableto copy drugs without worrying about patentinfringement, but that will no longer be thecase when the TRIPS agreement comes intoeffect January 1, 2005.“Drugs patented before1995 [will be] off patent and drugs patenteduntil [the] end of 2004 can be produced bygeneric [firms],” says Khalil Ahmed, Shantha’sexecutive director.“Post 2005, we cannot copy[and will be forced to innovate ourselves].”

“Our preparation for the TRIPS regimebegan two years ago when we decided to set aseparate division for generics,” says Anil

Motibar, managing director of Kee Pharma(Mumbai, India). He estimates the domesticIndian generics market for pharmaceuticaland biotech drugs will triple to Rs.67 billion($1.5 billion) by 2005 “thanks to a number ofmolecules going off patent.”

However, Krishna Ella, managing directorof Bharat Biotech anticipates problems onthree fronts after TRIPS comes into effect in2005. He acknowledges that the markets forcopycat versions of first generation productsmay be limited given the threat of second-gen-eration products produced by the originalinventors.“As long as a company can continue

Indian biogenerics industry emerges

Table 1 Select Indian biogeneric firms

Firm Products on market Products in development

Shantha Biotech (Hyderabad) Hepatitis B vaccine; interferon (IFN)-α Insulin; granulocyte macrophage colony stimulating factor (GM-CSF);

granulocyte-colony stimulating factor (G-CSF); streptokinase; tissue

plasminogen-activating factor (tPA); erythropoietin (EPO); human growth

hormone (hGH)

Bharat Biotech (Hyderabad) Hepatitis B vaccine; streptokinase; lysostaphin Vascular endothelial growth factor (VEGF)

Dr. Reddy's Labs (Hyderabad) G-CSF Erythropoietin (EPO); IFN-β; hGH; tPA; IFN-γ; 5 other undisclosed

recombinant biologics

Ranbaxy (New Delhi) None Signed agreements to in-license IFN-α-2b, G-CSF and EPO

Wockhardt (Mumbai) EPO; hepatitis B vaccine; insulin IFN-α-2b

Source: BioCentury.

Human insulin is among the first biologic molecules to be copied by Indian biogeneric companies.

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1116 VOLUME 21 NUMBER 10 OCTOBER 2003 NATURE BIOTECHNOLOGY

The summer recess was enlivened by muchtalk of a mini-boom of initial public offerings(IPOs) in the biotech sector, although howmuch hard cash materializes from the excite-ment is still an open question. If it happens,an ‘IPO boomlet’ would be limited to firmswith products nearing market approval,should institutional investors decide to takethe lead.

The talk is prompted by the stock markets’continuing (though modest) recovery, inwhich biotech shares have participated. TheAmex biotech index rose 34% from January toAugust after a particularly marked secondquarter rally. As a result, private funds andventure capitalists locked into biotech invest-ments now see signs of an opportunity to exitvia the public markets.

“Stocks of small-cap biotech companies,especially those with late stage products indevelopment, have performed very well oflate,” says biotech specialist Eric Schmidt ofinvestment analysts SG Cowen (New York, NY,USA). “The valuations that these publiclytraded companies are receiving in the marketprovides headroom for private companies to

receive a favorable IPO valuation, yet still pro-vide aftermarket performance to investors.”

Thus, August saw several US-based biotechsannounce IPO plans (see Table 1). The finan-cial press abounded with rumors of otherimminent filings in the sector as NatureBiotechnology went to press. However, because

IPOs take at least a few weeks to complete, anyactual launches are not expected to occurbefore October.

Meanwhile, investors and biotech execu-tives alike are wondering whether this upcom-ing IPO window is real or a mirage. The firstpiece of evidence that it is real is that the cur-rent share rally extends beyond the biotechsector, prompting dozens of IPO announce-ments in recent months among other ‘techstock’ industries such as on-line trading,media and semiconductors.

Some companies in these industries havealready seen companies successfully goingpublic this year, such as Molina Healthcare(Long Beach, CA, USA), whose share priceincreased over 25% to $22 in the 75 days sinceits July 1 IPO. However, these successes are farless speculative than early-stage biotech out-fits, tending to have at least some revenue-gen-erating products. Extrapolating from this,most analysts agree that any ‘IPO boomlet’ inbiotech is likely to be strictly limited to firmswith products that are nearing marketapproval.

One key determinant will be the solidity ofthe stock market recovery as perceived byinstitutional investors. And some expert advis-ers are fairly skeptical, believing that thebiotech share rally is partly due to ‘beta shop-ping.’ Betas are stocks whose value follows cur-rent industry trends in an exaggerated fashion.Many public biotechs behave like this, soaringwhen the NASDAQ index increases slightly,only to dive through the floor when the indexfalters again, says Jesse Schulman of CapelThompson & Homer LLP (Twickenham, UK),which works with biotech companies on R&Dpartnering deals.

“This rally contains a strong element of betashopping, driven by US retail investors whoare now back in the biotech market in force,”

Biotechs await IPO ‘boomlet’

Table 1 Biopharmaceutical companies that have recently filed for an IPO

Company Amount of money Date filedto be raised ($ million)

CancerVax (Carlsbad, CA, USA) 115 Aug 14

NitroMed (Bedford, MA, USA) 100 Aug 20

Advancis (Germantown, MD, USA) 86.3 Aug 1

Pharmion (Boulder, CO, USA) 86.3 Aug 21

Aderis (Hopkinton, MA, USA) 75 Aug 27

TolerRx (Cambridge, MA, USA) 75 Aug 26

Xcel (San Diego, CA, USA) 75 Aug 22

Genitope (Redwood City, CA, USA) 69 Aug 6

Acusphere (Watertown, MA, USA) 65 July 1

Neurochemaa (St. Laurent, QC, Canada) 52 Aug 20

Sources: Company websites, http://www.ipo-fund.com/marketwatch/ipopipeline.aspaAlready listed on the Toronto Stock Exchange.

making medically significant improvementson a therapeutic protein, it may be able toretain an exclusive market indefinitely,” hesays. For example, Amgen’s improved treat-ment for anemia, Aranesp, has reached themarket before its current patent for Epogen(epoetin alfa) expires next year.

Indian companies’ advantage in cheap vac-cines for hepatitis or rabies may also be eroded,says Ella, by potential development of cocktailvaccines that promise delivery of multiple vac-cines in a single shot. He also fears that Indianbiogenerics firms may face difficulties inobtaining vectors and expression systems tocopy drugs whose patents will expire.

In order to gain market share, biogenericcompanies do not focus on providing merecopies of existing drugs; they are also trying toimprove manufacturing processes, which maythemselves bring new patents. For example,Bharat claims to have developed the world’sfirst cesium chloride-free Hepatitis B vaccinewith the discovery of a novel purificationmatrix, and Shantha’s expertise is in the use ofexpressions systems with the yeast Pichia pas-toris, which have a higher yield and thereforelower production costs than other yeasts.

Despite the uncertain future with TRIPSconstraints, Indian biogenerics could find richpickings under a new WTO agreement signed

in Geneva on August 30 that allows certaindeveloping countries—such as India, Brazil,and China—to override global patents in orderto export drugs to poor countries without adomestic manufacturing base, such as sub-Saharan Africa. Although the pact does notopen a complete global market to Indianbiotech firms, expectation of new exportopportunities has already pushed up theirshare prices.

But the Indian Pharmaceutical Alliance(IPA; Mumbai, India), which represents gener-ics firms in that country, feels the pact’s utilityhas been curtailed by “cumbersome proce-dures” that are meant to ensure that the drugsare not diverted to third countries, which is amajor concern of US biotech firms (Nat.Biotechnol. 21, 119, 2003). To reduce the risk ofsuch diversion, the exporting country must, forexample, obtain a license that covers only therequired quantities, and any WTO membercan object to any consignment. IPA secretarygeneral Darmesh Shah says, “All these [proce-dures] add undue risks to the generic supplier[on top of] the risk of uncertainty associatedwith the development process for [a] new mol-ecule. [Because of these procedures,] genericversions may not be readily available post2005.”

K S Jayaraman, Hyderabad, India

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