516 ENTREPRENEURSHIP CASE
Mazumdar-Shaw anticipated some sharp
questions about the viability of expanding
the company’s drug discovery activities and
the action plan for managing this transition.
She needed to build a strong case for contin-
uing along this trajectory when so much was
at stake.
GLOBAL BIOTECH INDUSTRY
The discovery of recombinant DNA tech-
nology, in 1973, marked the beginning of
modern biotechnology. Since then, the range
of applications of biotechnology covered
agriculture (as in genetically modified
foods), industry (bio-fuels and bio-
enzymes), and medicine (diagnosing dis-
eases and designing new drugs). The use of
genetic engineering in developing health
care products had brought about a paradigm
shift in the global pharmaceutical industry.
Drug manufacturing processes based on
chemistry were gradually giving way to
those based on biology. It was estimated that
by 2025, bio-drugs would replace 70 per
cent of conventional therapies.^3 “Designer
drugs” based on biotechnology were expect-
ed to gain ground. They were considered
more effective than one-size-fits-all synthetic
drugs because they attacked the underlying
genetic cause of a disease.
There were 4,416 biotech companies
worldwide in 2004 (see Exhibit 2). Although
Europe had the largest number of biotech
companies, 78 per cent of global biotech rev-
enues were generated in the United States.
The global biotech sector employed 183,000
professionals and had revenues of $54.6 bil-
lion in 2004.
INDIAN BIOTECH INDUSTRY
The turnover of the Indian biotechnology
industry had crossed the $1-billion landmark
in March 2005. The top 20 Indian biotech
firms had a combined turnover of $641 mil-
lion, amounting to about 64 percent of the
country’s industry sales (see Exhibit 3).
Nearly 60 percent of India’s biotechnology
products were exported. There were 280
biotech companies in India in 2003, employ-
ing 11,800 scientists. The Indian biotech
companies fell into three categories: those
building on bedrock biotech products, such
as enzymes, to move into molecules (e.g.
Biocon); migrants from related sectors, such
as pharma; and start-ups occupying niche
spaces based on a specific skill set. A bulk of
their revenues came, as in Biocon, from
generics.
A generic drug was the equivalent of an
originator pharmaceutical product, differing
only in price. It contained the same active
pharmaceutical ingredient (API) as the orig-
inal and was manufactured to the same stan-
dards of quality, safety and efficacy in plants
approved by regulatory bodies. A generic
drug, however, typically cost 20 percent to
80 percent less because the product was not
burdened with legacy expenses of research,
development, clinical trials and marketing.
Using less expensive alternatives of both
non-active ingredients (such as colorings,
starches and saccharoses) and packaging
materials, a generics maker could also reduce
prices by leveraging process efficiencies and
low-cost advantages.
The Indian generics market consisted of
more than 10,000 small companies produc-
ing less expensive copycat versions of patent-
ed drugs and selling them both locally and in
countries that had limited patent protection.
An industry analyst observed:
All drug companies, big and small, use the
generics platform to move into drug discov-
ery. The generics platform provides a steady
stream of revenue with which to finance drug
discovery. The main lure of generics is the
ready market and instant cash gratification it
provides.Biocon was among the 74 manufacturing
facilities in India certified by the U.S. Food
and Drug Administration that together sold
more than $1-billion worth of generics per
annum in the competitive and regulated U.S.