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Biopharma Startups in India and China – Do They Exist?

So we all know about the amount of biopharma investment going into places like China and India – right? But it’s important to keep the categories straight. There’s manufacturing, which is its own thing, and there are service organizations, which are a very large part of the market. But neither of those are doing their own R&D. What part of the investment in these countries is going to what we’d think of as traditional venture capital and local research?
There’s an article in Nature Biotechnology that tries to answer this question (and it’s not an easy one). Here’s the take-away:

. . .data on sources of venture capital (VC) that are supporting such innovative biotech startups are unclear because existing investment metrics include not only innovative enterprises but also manufacturing or service firms lacking R&D capability. The quality of published data is also poor, with only one study on healthcare VC activity in China providing data for a single quarter in 2008
and it does not separate innovative ventures. Here, we present a data set of life sciences VC in emerging markets to inform government innovation policy and VC investment strategy. Our data suggest that life sciences VC activity is low in the emerging economies we studied, despite growing levels of activity in that sector and in those regions.

The authors are basing their conclusions (on China, India, Brazil, and South Africa) largely on their own fieldwork, rather than relying on what’s in the press, which is probably a wise decision. They found 116 firms backed by 148 financing deals, which may sound like a lot, but the total amounts aren’t too impressive yet. Their estimate is that since 2000, about $1.7 billion has been invested, which (by comparison) would be considered a strong quarterly figure in the US. Most of these firms (about 70) are Chinese, and most of the rest are Indian (Brazil and South Africa are round-off errors). The outfits doing the fund-raising are also quite concentrated; there are some big players in both countries, and there’s a scattering of everybody else. A lot of the money is from home as well. The great majority of these firms, as it turns out, are targeting oncology (a full 90% of the Chinese ones, for example).
So what are we to make of all this? These numbers are about as good as anyone is going to see, but they’re probably still incomplete. At any rate, it seems clear that the amount of money going into new biopharma companies in these countries is still very tiny by industry standards. There are surely several reasons for this – lack of a “startup culture” being a big (albeit vague) one. That covers a lot of ground, including physical infrastructure and fewer experienced investors. It’s not like India and China have a long history of funding small new medical research firms – it takes a while to get the hang of it, for sure (assuming that anyone ever does!)
One possibility is that the innovative research being done in these countries is being done more inside the walls of the large international firms that have set up shops there. What I think people have been waiting to see is whether these will eventually lead to more smaller companies spinning out. And then there’s the other source of many startups in the US and Europe, academic labs. My impression has been that the academic research culture is very different in China and India from what we’re used to in the US, and this is surely having an effect on the whole venture-capital-based world there, too. Eventually, though, the combination of the universities and the talent pool from the larger companies might cause something to happen.
But since no one’s quite sure how to make a Boston/Cambridge or San Francisco Bay, it’s hard to say what these countries should be doing differently, or whether any such recommendations would even be feasible. Efforts in the developing parts of Asia to make such things happen by fiat have not gone well – does anyone remember Malaysia’s big push into the area? Here’s a 2003 story on it – “Biovalley” was going to be the next big thing. Just a few years later, it was clear that it wasn’t quite working out, and current information is rather hard to come by. India and China (and their investors) surely don’t want to go through that experience. Letting things develop on their own, without too much over-targeted encouragement, might be the best course.

17 comments on “Biopharma Startups in India and China – Do They Exist?”

  1. I don’t know about China but to my knowledge the startup culture for pharma/biotech is virtually non-existent in India. Until very recently Indian academics were not even allowed to profitably consult, let alone start their own companies. The equivalent of the Bayh-Dole act still does not exist in India although there have been some developments in that direction a few years ago. It’s going to take at least decades before the kind of garage startup culture that distinguished innovation in the US takes root in India.

  2. A couple of years ago we produced a report on “Innovative Drug Discovery in Emerging Markets” (linked in my name above, $$ to read).
    Using a fairly stringent definition of “innovative drug discovery”, and with searching based largely on a combination of patent analysis and the Medtrack database, we identified just 47 companies across Brazil, Mexico, China, India, and Russia that we considered met our criteria for being profiled.
    Undoubtedly we missed some (Russia was particularly opaque), but the conclusion that domestic cultures of innovation are yet to firmly take hold is hard to argue against.

  3. anon says:

    I went to one of those Chinese Drug Discovery Conferences that we all get the e-mails about. Mixed reviews on the conference, lots of no-shows, but overall it was a pretty good experience.
    I did see a few talks and posters about start-up company efforts that were not merely CROs. The high-tech Park near Shanghai seems big-Pharma and CRO-dominated, but some smaller operations seem to be setting up shop in less expensive cities such as Nanjing

  4. biologist says:

    you didn’t mention Singapore’s startup initiatives (A*Stat etc.) – what do you think of these, success or failure?

  5. darwinsdog says:

    I’ve seen several headlines about new drugs developed in China or similar such. At least one of these is approved for use in EU but I suspect a lot of the things called drugs are for domestic/china use and thus no regulatory review in the sense that the west thinks of it.

  6. bbooooooya says:

    ” the conclusion that domestic cultures of innovation are yet to firmly take hold is hard to argue against”
    Really? No “cultures of innovation” in China (printing press, gunpowder) and India (zero, Kama Sutra)?
    I’d buy lack of startup culture, but not lack of innovation.

  7. DatamonitorMark says:

    @6 bbooooooya: I was referring specifically to innovation in biopharma. Sorry I didn’t make that clear.
    And I should also clarify that my comment refers to innovation as judged on a global scale. Within those countries there are plenty of companies that are introducing known drugs to their domestic markets for the first time (which for the companies involved counts as perfectly valid innovation).

  8. chefen says:

    One part of the funding equation both you and the paper’s authors seem to be neglecting is Government support. Both National and local goverment bodies in various regions in China are supporting start-ups by providing lab space essentially free of charge on Science parks built on the old-fashionmd ‘if you build it they will come (or we will make them)’ planned development principle.
    If you only think in Western (or capitalist) terms you will never see the full picture.

  9. Dylan says:

    I’m most familiar with India, but in that context I think you are right that most of what we consider innovative R&D is being done in small groups within the larger pharma companies. There has also been a move to a hybrid model by some of the service companies, doing later stage research for hire to subsidize their internal early stage R&D work. Even still, very little if any of this work is what you would think of as cutting edge. The focus seems to be on incremental improvements aimed at older, validated targets.

  10. zorkbirder says:

    I work with several research Biology CROs in China that run weekly screening assays to refine SAR of Med Chem compounds. In 2011, none of their business came from China pharma companies, now about 25% of the work they do is coming from China start-ups. From my conversations, it seems that mostly these new Chinese companies are pursuing fast follow-on, “me too” compounds based on a recent innovative drugs.

  11. JC says:

    Yes, your outsourced building blocks/libraries available for resale within 6 months.

  12. ToivoS says:

    Waaay OT, but am eagerly waiting to see Derek’s and other pipeline regular’s reaction to the latest sur2in result that came out in Science today from the St Clair group.

  13. Moses says:

    @ 6, bbooooooya –
    Cultures change over time. If the only examples of innovation you can think of from India and China are printing, gunpowder, the zero and a specific book it doesn’t say much for those countries now. All your examples are centuries old.
    What important innovations can you suggest from the last 100-200 years?
    (If you think the Kama Sutra is innovative, please google images for the Suburban Baths in Pompeii)

  14. simpl says:

    I would agree with biologist that Singapore can be taken seriously. I would also point to Lonza, which supplied custom chemicals, but has spread to generics and biotech.
    A common thread is the Teva approach, moving from me-too production to some higher value R&D niche.

  15. chaitanya says:

    I am now quite familiar with Biopharma Start-ups in India – I agree with most of the conclusions that no one knows what it takes to build Boston/Cambridge or Bay area and again even for those places the transformation was not overnight….but would like to point one major aspect that may differentiate “new-age” Indian biopharma Startups is their cost-savy (ness).
    Let me explain….biotech start-ups are capital intensive and though it is not uncommon in USA that people might bootstrap the companies but those examples are very few even in USA. Now considering the average personal savings a scientist (or a team of scientists) might have in India compare to in USA it is even unlikely that he/she will bootstrap a biotech company. But going against the oddest of odd I do see bootstrapped biotech start-ups in India where founder rent laboratory spaces in government run incubation facilities, buy bio-reagents and equipment from their savings (And it is not because entrepreneurs want to do that but there are only a very few life-sciences focused VC funds in India and making situation worse that too do not have an appetite of putting investment what NIH small business grant can provide in USA in first 18 months of operations of the company). So where it takes the Indian biotech entrepreneurs….they became much focused, very cost-savy and they spend every penny after evaluating multitude of factors (in absence of which, I found a reason why, many biotech start-ups could not deliver to their promises in USA). Readers are free to pick on the above line that innovation is about exploration and modern cutting-edge scientific work is multidisciplinary and in absence of a) money, b) culture of innovation and c)’qualified’ talent pool how would Indian start-ups will stand out? And I see the answer in the ‘cost-savy’ attitude of the founders of start-up (it is coming from past social background of not having much and surviving in little and in current scenario largely driven by lack of overall eco-system). Because it is god damn their own hard earned money they use it wisely by a) digging deeper into literature, using as many web-based freeware (they do make sure they are updated and well-accepted), critically analysing the problem in hand, crazily collaborating with people in academia (somehow Indian Government >> and hence academia have more money) and then conducting only fewer experiments that can take them to answer, b) innovating at every aspect to get the answer in cost-effective way, c) learning more and more themselves about the subject because they cannot afford hiring decorated CVs.
    Yes, what I wrote above all looks like the learning that we got from our graduate studies in science/ management but its not what we learn but what we execute matters….and they all get executed because again …even if one experiment is taken lightly it takes the entrepreneur’s bike (for Indian readers bike = ‘a bicycle’) away that they are planning to buy (not because they love non-polluting commute but next month they have to pump the cost of the gas (for Indian readers gas = ‘petrol’) into start up to increase its survival by one month).

  16. utbiotech says:

    If Gov. focus on it, it will be dead very soon in China, and Gov. can be rich through “building”..and then nothing can be left..

  17. MS says:

    derek i hope, you know that the patent act came into force only in 2005 in India and is still only 2013.No one would in their right sense start a research program without being able to patent the product which is why you dint see pharmaucetical innovation. Example Suven LifeSciences with product patents on CNS molecules
    Whether innovation exists, a drug typically takes 10 years to complete clinical trials alone, so I think it is too early to comment on whether any innovative product is going to come into market place. An academic bench scale research to commercialisation culture does not exist and the brightest minds do not intend to pursue a phd degree in research in India, instead we prefer to do a PhD in the US , as it pays good stipends and help gain Exposure to international markets.
    The govt is not very supportive of starting industries either and had a strict licensing regime until the 90’s that killed any entrepreneural spirit.

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