indian biotechnology industry - portfolio analysis
TRANSCRIPT
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Submitted by Group 9
Group member Roll number
Bhavna Sharma 2011PGP593
Debojyoti Burman 2011PGP615Himanshu Agarwal 2011PGP649
Mudit Kalra 2011PGP732
Nitin Kumar 2011PGP758
Saindani Pranit 2011PGP844
Suchit Singh 2011PGP899
Indian Biotechnology
Industry
Portfolio Analysis
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TABLE OF CONTENTSBiotechnology Industry in India .................................................................................................................... 3
Introduction .................................................................................................................................................. 3
The Indian Advantage ............................................................................................................................... 3
Firms reviewed: ............................................................................................................................................. 5
1. Bio-pharma sector................................................................................................................................. 5
1.2 Serum Institute of India Pvt. Ltd. ....................................................................................................... 5
2. Bioinformatics Sector: ........................................................................................................................... 5
2.1 Ocimum Biosolutions .................................................................................................................... 5
2.2 Strand Life Sciences ...................................................................................................................... 6
3. Bio-Industry Sector: .............................................................................................................................. 6
3.1 Novozymes .................................................................................................................................... 63.2 Advanced Enzymes ....................................................................................................................... 7
4. Bio-Services Sector: ............................................................................................................................... 7
4.1 TransAsia ....................................................................................................................................... 7
4.2 Quintiles ........................................................................................................................................ 8
5. Bio-Agri Sector: ..................................................................................................................................... 8
5.1 Rasi Seeds ...................................................................................................................................... 8
5.2 Monsanto India Ltd. ...................................................................................................................... 8
Plotting the GE/McKinsey Matrix: The Approach ......................................................................................... 8
Analysis of GE matrix: ................................................................................................................................. 11
Budget 2012: Implications .......................................................................................................................... 11
Appendix ..................................................................................................................................................... 12
List of References ........................................................................................................................................ 15
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Biotechnology Industry in India
IntroductionIndia is emerging as a significant player in the global biotech industry. Biotechnology is deemed as a
revolution throughout the world. Scientists, through Research and Development (R&D) are continuing to
develop cures for diseases that have affected people since time immemorial. With its large population
of over a billion people India creates almost a perfect environment for biotech companies to shift bases
here. In addition, the Indian sub-continent, which occupies only 2.4% of the total surface area on earth,
has the most diverse species of flora and fauna. Also increasing prosperity raises the demand for
healthcare services.
The Indian Advantage
Promising potential to be a global player in the arena of biotechnology Innovation opportunities: Public funding for product innovation and research in the biotech
sector and focused R&D activities by private biotech firms.
The sector has experienced significant growth in government spending since 1985 withconstantly increasing budgetary allocations to the biotech sector
FDI investment up to 100 per cent is permitted via the automatic route Large pool of skilled and cost competitive manpower Well developed and integrated scientific infrastructure Advanced chemical synthesis technologies Manufacturing practices conforming to US and EU norms Diverse biological resources Globally recognized as a producer of low cost, high quality bulk drugs and formulations.
In the year 2010-11, this industry
earned revenues to the tune of US$
3927.6 million growing 21.5 percent
over the last years revenue of US$
3233.2 million. The emphasis
between exports and domestic sales
has also witnessed minor shifts
ranging between two-to-five
percent. The exports across
segment made up 51 percent of the
overall revenue contributing a total
of US$ 2015.7 million. The ratio
between exports and domestic sales
stands at 51:49, which is a sign of a robust industry.
1
1.4
1.82.1
2.5
3
3.6
0
0.5
1
1.5
2
2.5
3
3.5
4
2005 2006 2007 2008 2009 2010 2011
CAGR~23.8%
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The biotechnology sector can be divided into 5 sub-sectors namely:
Bio-Pharma Sector: It is comprised of 130 companies involved mainly in the production ofvaccines, therapeutic drugs and diagnostics. The Indian bio-pharma sector is export-driven, with
exports accounting for more than 58% of revenue.
Bio-Services Sector: A number of global companies are now looking at India to conduct largescale global trials. While low costs and large patient pool still remain the crucial deciding factors
for attracting these companies, skilled investigators and emphasis on quality are some of the
rising factors contributing to the segments growth. The bio-services sector contributes a total of
22% to Indian Biotech sector and it widely consists of clinical research, contract manufacturing,
contract research and consultancy.
Bio-Industrial Sector: The modern use and application of biotechnology for the sustainableproduction of industrially useful products like bio chemicals, biomaterials and bio-fuels from
renewable resources, using living cells and/or their enzymes. This results generally in cleanerprocesses with minimum waste generation and energy use. Enzymes which constitute a major
segment of this sector, are used in industrial processing of starch, distilleries, alcohol, textile &
garments, leather processing as well as for supplementing healthcare products.
Bio-Informatics Sector: Bioinformatics is the field of science in which biology, computer science,and information technology merge to form a single discipline. Bio-informatics deal with the
creation and maintenance of extensive electronic databases on various biological systems; it is
the smallest part of the current domestic biotechnology industry.It can play important role in
critical areas such as data mining, mapping and DNA sequencing. There is also opportunity in
functional genomics, proteomics and molecule design simulation. Major Products and Services
include Database Services, Integrated research application software, Biotech software services.
Bio-Agri Sector: BioAgri is the biotechnology applied to agriculture. It is the use of organisms orparts of organisms to improve the agricultural products and processes. Selection of desired
characteristics, domestication of plant species, and mechanics of cell biology come under this
sector. In India, BioAgri is further classified into hybrid seeds, transgenic crops, bio-pesticides
and bio-fertilizers.
For further insight into the market breakup of the sub-sectors refer appendix at the end of report.
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Firms reviewed:
1. Bio-pharma sector1.1 Panacea Biotech: It is the second
largest vaccine producer in India.
Major products offered include
Vaccines, Diabetes Management
Products, Anti pyretic, Anti renal
management drugs. Revenues
totaling $20 million were recorded in
FY 2011 with a growth of 32%. The
firm has been in news for the losses of
INR72 crores after its vaccine
pentavalent was delisted by WHO. It
heavily invests in its R&D facilities and expects to enter branded generics in emerging markets
like Africa and Eastern Europe. The sales figures for 2008-11 are as shown.
1.2 Serum Institute of India Pvt. Ltd.
It is the worlds largest producer of Measles and DTP
vaccines. Major products offered are various anti-
viral and anti-bacterial vaccines like NASOVAC,
Tubervac, Anti-cancer and Hormonal products. It
amassedrevenues of $216 million in FY11 with agrowth of 16%. Its efforts have been constantly
lauded by WHO for its efforts in research in this area.
The adjoining graph displays its sales figures.
2.
Bioinformatics Sector:2.1 Ocimum Biosolutions
It is the leading global genomics firm
providing information solutions. Important
products and services include Microarray
services, Comprehensive genomic reference
databases, life science lab information
0
200
400
600
800
1000
1200
FY08 FY09 FY10 FY11
Sales (INR)
Sales (INR)
0
10
20
30
40
50
FY09 FY08 FY07 FY06
Sales(INR)
INR Sales
65
41.447.57
65 60
0
20
40
60
80
2010-11 2009-10 2008-09 2007-08 2006-07
Revenues of OCIMUM
BIOSOLN
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management, other research consumables. In 2011 the company recorded revenues of $13 million.
It has witnessed low growth. The firm manages worlds largest gene expression databases.
2.2 Strand Life SciencesThe firm is a pioneer in discovery research
informatics. Core strengths of the firm includedata mining, predictive modeling, bioinformatics
and computational chemistry. The revenues of
$10 million in FY11 and it witnessed a record
growth of 40% in last five years. Clients include 5
out of top 10 pharmaceutical companies of the
world.
3. Bio-Industry Sector:
3.1 NovozymesIt is the largest supplier firm of industrial
enzymes and microorganisms in India
specializing in enzymes and microbes for
manufacturing of detergents, food, feed,
textiles, leathers, oil, alcoholic beverages
and bio-fuels. Revenues to the tune of
$230 million were earned in FY2011 due
to a growth of 16%. The firm recently
acquired Biocons enzyme business for
$155 million.
42
35 35
20
10
0
10
20
30
40
50
2010-11 2009-10 2008-09 2007-08 2006-07
Revenues of STRANDLIFE SCIENCES
0
100
200
300
2010-112009-102008-092007-082006-07
NovoZymes SouthAsia
Revenues
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3.2 Advanced EnzymesIt is the pioneer in plant, animal and microbial
based enzymes like human healthcareenzymes, animal healthcare, food processing
and industrial processing enzymes. The
company recorded revenues of $154 million in
FY11 and saw a record growth of 26% in last
five years. The company caters to worldwide
markets and has 50% export share just from US
markets.
4. Bio-Services Sector:4.1 TransAsia
The company is recognized as a leading player in the diagnostic world. It provides Diagnostic
Services and Biochemistry Analyzers for hospitals. Revenues of $20 million were recorded in FY 2011
with a growth of
32%. McEvoy
and Farmerreport on IVD
industry in India
(2006) ranks
Transasia as the
# 1 Company in
the Indian
Diagnostic
Industry. It has
the largest Sales
and Installation
base with over
20,000installations all
over the country.
0
50
100
150
200
2010-112009-102008-092007-082006-07
Advanced Enzymes
Revenues
0
100
200
300
400
500
600
Transasia Biomed Tulip Quintiles India
2010-11
2009-10
2008-09
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4.2 QuintilesThe firm is a global pioneer in pharmaceutical services like Biostatistics, Central Laboratory Servies,
Clinical monitoring, Data management offering a functional service provider. The company revenues
equaled $99 million in FY11 and it registered a growth of 23%. The only global CRO with its presence
in India verified by US FDA
5. Bio-Agri Sector:5.1 Rasi Seeds
The company is one of the leaders in cotton hybrids and maker of one of the most successful BT
cotton varieties, cotton hybrids, maize hybrids, pearl millets and vegetables. The company amassed
revenues of $74 million in FY 2011.
The firm is known for heavily
investing in its R&D facilities in the
recent past. The firm has been innews recently for a Rs.10 crore
outlay in Attur for R&D in virus
resistant and transgenic seeds.
5.2 Monsanto India Ltd.The firm is a pioneer in chemical
weed control and is a market leader
in rice herbicides, weed herbicides like Roundup, Maize seed hybrids like Dekalb. The company
earnedrevenues of $75 million in FY11 and witnessed a record growth of 106% in last FY.Firm has
made some aggressive acquisitions in past and plans to establish many more breeding stations andlaboratories. Recently in news for opposition to its melon patent which violated patent laws.
Plotting the GE/McKinsey Matrix: The Approach
The GE/McKinsey Matrix identifies the optimum business portfolio as one that fits perfectly to the
company's strengths and helps to exploit the most attractive industry sectors or markets.
Thus, the objective of the analysis is to position each SBU on the chart depending on the SBU's
Strength and the Attractiveness of the Industry Sector or Market on which it is focused. Each axis is
divided into Low, Medium and High, giving the nine-cell matrix. The following methodology has
been adopted to calculate various parameters.
0
200
400
600
800
2007 2008 2009 2010 2011
Revenues(in Rs. Crores)
Revenues(i
n Rs.
Crores)
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Business Strength Methodology followed
Market Share Ratio of revenue to total market size of the
sector
Profit Margins Ratio of Net Profit to Sales
D/E ratio Ratio of total debt/ Total Shareholder's
Equity
Percentage of expenses
on R&D
Percentage of expenses that were spent on
research
Cost of capital Taken as weighted average cost of capital
Brand Awareness (1 to
10)
Subjectively calculated based on secondary
research
Product Quality (1 to 10) Subjectively calculated based on secondary
research
Industry Attractiveness Methodology followed
Market Growth CAGR in last 5 years
Market Size Total Business done by the sector as a whole
Profit Margins of top 5 players Average profit margins of the top 5 players
Competitiveness HHL Index has been used to calculate
competitiveness of the sector
Calculated using sum of s^2 for top 3 firms
where s is share of that firm
Growth in Exports CAGR of export revenues of the sector in last
5 years
Regulatory Regime (1-10) Subjectively calculated based on secondary
research on support given to the industry
Ease of entry (1-10) Subjectively calculated based on secondary
research
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The following table shows the calculation of the indices used in the plotting of the matrix.
Sector Company Name Business Strength Industry Attractiveness Size (Revenues)
Bio Agri Rasi Seeds 1.627204074 78.351 370
Monsanto India Ltd. 1.8 78.351 369.56
Bio Pharma Panacea Biotech 1.66938 180.609 967
Serum 1.9 180.609 1080
Bio Industry Novozyme 1.68736 19.368 254
Advanced Enzyme 2.33643 19.368 154
Bio Services Quintiles 1.1 111.596 476
Transasia 1.23 111.596 364.5
Bio Informatics Ocimum Biosoltions 0.877676667 11.505 65
Strand Life Sciences 1.26969 11.505 42
The GE matrix was plotted as shown below:
Rasi Seeds
Monsanto
India
SerumPanacea
Novozyme AdvancedEnzyme
Quintiles Transasia
Ocimum
Strand Life
Science
IndustryAttractiveness
Business Strength
Bio Agri
Bio Pharma
Bio Industry
Bio Service
Bio Informatics
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Analysis of GE matrix:
Bio-Pharma:This sector dominates the biotech sector. Industry attractiveness is high andbusiness strength is
moderate to high. Launch of many similar products is expected in two years. It is expected togrow at 25%.
Bio-Agri:This segment is one of the fastest growing segments. In last 5 years its market share increased
from 5% to 14%. It has revolutionized the farming space with the launch of Bt Rice, Bt maize, Bt
Tomato and Bt Cauliflower. The sector needs more investments in R&D and acceptance of
products among farmers.
Bio-Informatics:This is the smallest segment of biotech industry. It barely has 2% of market share in overall
industry. Most of the companies in this segment are small scale. Many big companies like TCS
and HCL have forayed in this segment. Indian companies need to establish a good reputation to
protect client data.
Bio-Industry:This segment has slowest growth rate of 12%. Most of the Indian companies do not have their
own R&D division. They are importing the enzyme and selling in India. This sector needs more
investment in order to strive for high growth
Bio-services:This segment is growing at a rate of 20% and is expected to continue the same growth rate in
future. The segment is facing competition from small home grown companies. Mandatory
registration of all clinical trials in India will lead to a rise in the number of global companies
outsourcing clinical trials to India.
Budget 2012: Implications
Following is an analysis to see the impact of the latest budget on the biotechnology sector. Considering
the significance of this constantly growing sector on the Indian economy it is only sensible to analyze the
effect of the policy changes.
Expectations of the Industry:
Reduction of Excise duty from the present level of 10% to 4% Reduction of services tax by 5% from existing 10.30% Non inclusion of agrochemicals in the list of Free Trade Agreements (FTAs) Permit tax free import of R&D equipments to the tune of 25% of export earnings
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States should be prevailed upon not to levy VAT on agrochemicalsBudget Outcome:
Basic customs duty is being reduced from 10% to 5% on probiotics (cost-effective means ofcombating bacterial infections)
This year it has been decided to make common infrastructure in agriculture markets, soil testinglaboratories and capital investment in fertilizer sector eligible for Viability Gap Funding under
the Scheme to support PPP in infrastructure
Increase in the allocation for the initiative of Bringing Green Revolution to Eastern India (BGREI)scheme from 400 crore in 2011-12 to 1000 crore in 2012-13
Agriculture Credit: The target for agricultural credit in 2012-13 has been raised to 5,75,000 crorewhich represents an increase of 1,00,000 crore over the target for the current year
Sum of 200 crore for incentivizing research with rewards, both for institutions and the researchteam responsible for such scientific breakthroughs
Appendix
The appendix has been included to offer additional insight into the sector breakup into the 5 subsectors.
Bio-Pharmaceutical sector
accounted for the largest
chunk with 61.7% share. Bio-
Services and Bio-Agri
followed with a share of 18.8
and 14.4% shares
respectivelyBio-Informatics has the least
share but its one of the most
rapidly rising sectors owing
to Indian IT expertiseFigure 1: Market break-up by revenues 2010-11
61.70%
18.80%
14.40%
3.60%1.50%
Bio-Pharma
Bio-Services
Bio-Agri
Bio-IndustrialBio-Informatics
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Bio-Pharma contributes most
to exports followed by bio-
services. Outsourcing has
opened up further avenues ofgrowth for biotech. India is a
good base outsourcing because
of its cost effectiveness.
Expertise in bioinformatics can
play a significant role in critical
areas like data mining and
mapping
Figure 2: Export share among sub-sectors 2010-11
Figure 3: Exports of biotechnology products in $ billion
Revenues from biotech exports valued at $1.8 billion in FY2011, constituting 52% of biotechindustrys revenue. As shown we can see an annual growth of 18.7% over 2007-2010 in export
driven revenues.
0
0.5
1
1.5
2
2.5
3
3.5
4
2008 2009 2010 2011
CAGR~18.7%
62.50%
33.70%
0.80%1.70% 1.20%
Bio-PharmaBio-Services
Bio-Agri
Bio-Industrial
Bio-Informatics
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Figure 4: Domestic business growth of biotech industry, FY11
In domestic sector, India offers a suitable population for clinical trials because of its diverse gene
pool, which covers a large number of diseases. Owing to a huge agricultural economy, India has a
huge opportunity in the agri-seeds and agri-chemicals. Lifestyle diseases are set to account for a
greater part of health care market. Rising per capita income and middle class population is yet
another contributor to growth.
Figure 5: Export business growth of biotech industry, FY11
25.80%
96.80%
28.10%
8.10%
-6.80%-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Bio-Pharma Bio-Services Bio-Agri Bio-Industrial Bio-Informatics
21.10%
16.10%19.10%
28.10%
43.40%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
Bio-Pharma Bio-Services Bio-Agri Bio-Industrial Bio-Informatics
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