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In India, New IP Regs, Gov t Strategy Expand New Market for BCW Firms

Last December, Invitrogen CEO Greg Lucier told analysts to "think India for research."

Clearly, Invitrogen is. The Carlsbad, Calif., company has named Uday Matrubutham, a senior scientist of Indian extraction, as associate director of R&D. He has moved to Bangalore to manage a research and development facility that is expected to become operational this month. The facility will employ 20 scientists for research in functional genomics and bioinformatics, the company said. Further details were not available.

The work to be done in Bangalore "is very labor-intensive and it makes no sense anymore to do that here in California," Lucier told analysts. "It's not really about taking away work from California because we've got so much more work to do. It's really about changing the mix of what is going to be done here versus what is done in India." Lucier did not specify Invitrogen's immediate goals for India.

Invitrogen's India offshoring strategy is an example of the varied approaches that many of the 15 BioCommerce Week Index companies are using to conduct business in India. Some, like Invitrogen, are bringing on board new employees for labor-intensive work that will be managed locally. Others, such as PerkinElmer, are outsourcing by hiring locals to sell their products into the India market. There is no risk-free strategy for selling into India, but it is clear that it is an important emerging market.

While Lucier sidestepped the prickly concept of outsourcing with his observation on taking work from California, it is clear that Invitrogen and other BCW Index companies are looking to India to accelerate their businesses: The country, with its well-educated, primarily English-speaking workforce and relatively inexpensive labor, represents an emerging market for their goods and services.

India Facts
India is home to some 20,000 pharmaceutical companies and another 800 biotech companies. The country produces a stream of 2.5 million university graduates in information technology, engineering, and biology every year, and another 1,500 PhDs in biosciences and engineering.

India Changes

India has recently given the BCW Index companies more to think about. Within the last two weeks, India's parliament has recast the country's patent laws to align with global standards. With these steps, the economic incentives for the country's large pharmaceutical sector have also changed dramatically. Meantime, the government has issued a draft document outlining a broad national strategy in biotechnology development.

Previously, India's patent laws did not protect new molecules, but did protect processes, which fueled a generic drug industry that simply reformulated drugs patented elsewhere in the world for sale there. It is widely believed that the changes in India's patent regime, which will now protect new molecules, will encourage the country's pharmaceuticals sector to begin researching and developing new drugs and to begin investing in genomic instruments such as microarrays and mass spectrometers. None of these are manufactured in India today by the BCW companies.

On the biotechnology strategy front, the draft proposal, issued last Thursday for a six-week comment period, aims to establish a national biotechnology regulatory authority and prioritize research in molecular and cellular biology, neuroscience, molecular genetics, transplantation biology, genomics, proteomics, systems biology, and RNAi, according to the government. If this framework is accepted, it could contribute, with the new IP laws, to turn India into a growth market for high-end molecular biology instruments. (click here to view PDF document of India's draft proposal)

This two-pronged strategy aims at building on its success in information technology as a provider of outsourced software development services and accelerating the nation's ability to operate in the global marketplace.

Agilent

India "is currently one of LSCA's fastest growing countries of business," Christina Maehr, spokeswoman for Agilent Technologies' Life Sciences and Chemical Analysis unit, told BioCommerce Week. "We already sell our chemical and pharmaceutical QA/QC technologies to India. In the coming year, we look to expand that to include our [Integrated Biology Solutions business unit] products, such as microarrays, which we would most likely provide through a distributor"

Since its 1999 spinoff from Hewlett-Packard, the India division of Agilent Technologies — Agilent Technologies India Ltd. — has gone from doing $2.9 million a year in business to $23 million in 2004, according to published reports. In March, Sanjeev Dhar was named country manager for Agilent's LSCA division (see related article).

Agilent is the largest biotechnology equipment supplier in India, according to data published by BioSpectrum, an Indian publication. The publication said Agilent is the No. 1 "biosupplier" in India, with locally generated revenues of $169.6 million during the two years spanning 2003 and 2004. Agilent is followed by Becton Dickinson India with $168.6 million; Thermo Electron with $162 million; and Lab India, an Indian company that sells PerkinElmer and Applied Biosystems products there, with revenues of $154 million. Bio-Rad is rated No. 7 over the two-year period with $86 million in revenues. Data is not available for India sales from GE Healthcare and Waters, who also have significant direct presences in India.

PerkinElmer

In May, PerkinElmer entered a joint venture with Lab India, as majority investor, taking a 51-percent stake in the company to consolidate its previous sales network of dealers, David Spaight, vice president of global marketing for PerkinElmer's Life and Analytical Science division, told BioCommerce Week.

Lab India was founded in 1982 and has been a PerkinElmer distributor for 20 years. The company has exclusive India distribution rights for both PerkinElmer and ABI products.

With 180 employees in India, PerkinElmer sees India as a $150 million to $200 million a year market, Spaight said. On its website, Lab India said it sells PerkinElmer's gas and liquid chromatography equipment as well as spectrometers and LIMS. For ABI, the company sells LC/MS/MS systems, DNA/RNA and peptide sequencers, and PCR and sequencing reagents and chemicals.

"The growth there [in India] has been tremendous, it's been one of our fastest growing areas over the past year," Spaight said. "As part of our joint venture, we now have a large service organization on the ground and are well-positioned with a number of offices across India."

Spaight declined to disclose specific revenue numbers for PerkinElmer in India.

Sigma-Aldrich

Chemical-maker Sigma plans on constructing a new manufacturing facility in Bangalore in conjunction with its existing sales and distribution operations, but has cancelled plans to establish a 10-acre laboratory production facility in the ICICI Knowledge Park near Hyderabad.

The company, which signed a letter of intent for the new construction at BioAsia 2004, opted not to build in the Hyderabad area because it could not obtain a lease term longer than 25 years.

"Lease length was apparently a last-minute, very-disappointing-to-us, issue," Sigma CFO Mike Hogan told BioCommerce Week.

Waters India

Waters India has been a wholly owned subsidiary of Waters since 1998.

India and China have both been growing at double the corporate growth rate and represent 10 percent of Waters $1 billion in annual revenues, said Gene Cassis, a Water spokesperson, declining to disclose additional numbers.

In its recent resetting of first-quarter revenue expectations, the company said that sales in Europe, China, and India were down (see related article and BCW 03/31/2005).

In India, sales are more weighted to pharma than industrial applications, he said.

— Mo Krochmal ([email protected])