BioInvest Conference discusses on investment trends following global meltdown

The two-day Bioinvest conference 2008 held in Mumbai, captivated the delegates' attention with heated deliberations on topical issues like investment trends of financial institutions following the global meltdown, investment trends for start-ups and the unveiling of DBT's new initiative.

It was a convergence of the who's who from the biotechnology and the banking industry at the two-day BioInvest conference organized by the Association of Biotechnology-Led Enterprises (ABLE) with BioSpectrum as the media partner. It brought together stakeholders from all segments of the industry, to deliberate not just on general issues like the opportunities and challenges confronting the biotechnology industry but also topical issues like the global meltdown and its repercussions, US President-Elect Barack Obama's biosimilar plans and policies, the biofuel revolution and the unveiling the Department of Biotechnology's (DBT) latest initiative-the Biotechnology Industry Partnership Programme (BIPP) which could give a major fillip to an industry reeling under a credit crunch. However what raised eyeballs and captivated attention was the discussion on investment trends, financial crunch, and slow down of the industry following the global meltdown.

Talking of credit crunch, there were varied opinions amongst experts from financial institutions and analysts tracking the inflow and outflow of monetary funds into the industry. The usual opinion went that the biotechnology industry is a sector majorly dependent on private equity and venture capital funds. Hence the ripple effects of the global meltdown could be observed over a period of three months. Start-up health care and drug technology firms are struggling to attract funding as venture capital and private equity firms shy away from high-risk projects with long gestation periods in the wake of the global economic downturn. Kiran Mazumdar-Shaw of Biocon Ltd said large private sector funding for technology start-ups will remain tight for some time. The global economic downturn and a lack of confidence in riskier projects have led venture capital and private equity firms to shift their focus to established companies to take advantage of their current low valuations. "New funding is going to be tough for start-up companies now, unless the entrepreneurs are ready to either grossly undervalue their companies or ensure easy exit options," said Dr KK Narayanan, president of the Association of Biotechnology Led Enterprises. One entrepreneur at the conference, who has embarked on a bio-active research project for treatment of hypertension, said he could not find a funding partner as many firms either bargained for a discounted valuation or for easy exit options. He didn't want to be identified as he's still negotiating with fund houses. Aditya Kapil, Principal, VenturEast Funds said, "Investors can gain from the low valuations, but only if they are able to identify technologies that can give significantly big returns after taking the high risk and waiting for long." Consultancy firm, PricewaterhouseCoopers in India, who were the knowledge partners for the event also reiterated upon this point. "Innovation in the pharma and biotech space is going to be impacted heavily owing to lack of funding from venture capital and private equity companies," said Sujay Shetty, associate director (pharma and life sciences) at audit and consultancy firm, PWC, India.Private Equity companies are now looking at companies following derisking strategies. Said Jasmin Patel, Managing Director FIL Capital Advisors (India), "Private Equity firms are now looking at investing in medical devices, drug discovery, and diagnostics. Diagnostics for instance has a lot of prospects for potential growth in the future. A lot of innovation is churning up and we are ready to invest in that." Kapil further went to mention that as far as the global meltdown was concerned early stage companies would not be effected because initially they are not much dependent on market dynamics. He further advised, "If companies really need to attract investment funds, they need to have some very good science and promoters should have a good track record."

The event also saw announcements of new initiatives. The DBT's latest initiative- the Biotechnology Industry Partnership Programme (BIPP)- could provide a fillip for research, more so in light of industry facing a credit squeeze following the global financial crisis. The Rs 350-crore package will underwrite the risk of research and development of innovating molecules and processes. It will be open to all innovative biotechnology companies, who are looking to do research in agriculture, health, bioenergy and green manufacturing. The industry has welcomed the move, with participants at the BioInvest 2008 forum lauding it as a positive step by the government.

"The government broke the mindset of taking risks when it approved process patents. It is now up to them to try and fix the system and encourage people to take risks in research. The idea is to encourage and reward people who do innovative research," said Shrikumar Suryanarayan, director general of the Association of Biotechnology-Led Enterprises (ABLE). The BPII report states that 100 percent grant-in-aid support would be provided for Phase-I, II and III clinical trials of biotechnology-based research efforts and for limited and large-scale field trials in the case of agriculture products provided there is Indian innovation involved in technology development.

The grant would not include any capital investment. Small and medium enterprises (SMEs) as defined by the Small Business Innovation Research Initiative (SBIRI) would be preferred recipients of support. "With the current liquidity crisis, the government has to step in and support research. Otherwise there will be no research and five years down the line there will be a dearth of drugs," said an industry member.

Another initiative which came to the forefront was The Biotechnology YES (Young Entrepreneurs Scheme). This is an innovative competition developed to raise awareness of the commercialization of bioscience ideas amongst postgraduate/postdoctoral scientists. The programme is organized by the University of Nottingham Institute for Enterprise and Innovation and Biotechnology and Biological Sciences Research Council.

Nayantara Som