Since the implementation of the patent regime under the General Agreement on Tariffs and Trade/Agreement on Trade-Related Aspects of Intellectual Property Rights (GATT/TRIPS) in India on Jan. 1, 2005, the Indian biotechnology and pharmaceutical industries have metamorphosed, and in the past two years, have seen three significant changes:

• A higher comfort level among global pharmaceutical, biotechnology, and fine chemicals companies in working in India and with Indian companies
• An increased appetite of global investors (particularly venture capital and private equity firms) to invest in Indian fine chemicals, pharmaceutical, biotechnology, and contract-research and manufacturing services companies
• Eagerness and advanced capabilities of Indian executives to become global players, especially through inorganic growth.

India's position in pharmaceutical outsourcing

Global biotechnology and pharmaceutical companies are attracted to India for several reasons:

• Availability of English-speaking scientific talent
• A vertically integrated industry with a range of capabilities
• Experience and knowledge of current good manufacturing practices, good laboratory practices, and guidelines under the International Conference on Harmonization
• The highest number of plants outside the United States inspected and approved by USFood and Drug Administration
• Transparency and ease of doing business
• Lower cost

From the early 1990s to 2005, India's main attraction was from generics companies or fine chemicals companies, especially to source advanced intermediates and active pharmaceutical ingredients (APIs) or to carry out contract development of abbreviated new drug applications. India did not register on the radars of decision-makers at global biotechnology and pharmaceutical companies for innovation, collaboration, drug discovery, manufacturing of complex finished dosages, and licensing. During this period, the relationships between Indian and global companies can be categorized as lower-level procurement and nonstrategic. This situation was mainly attributed to the huge concern over the protection of intellectual property that loomed in the minds of executives at multinational biotechnology and pharmaceutical companies. Even though India was a signatory to the GATT/TRIPS patent regime, the actual implementation would not occur until Jan. 1, 2005, leading to a wait-and-see approach.

There also were relatively few options for partnering with India-based companies. Options included:

• Indian pharmaceutical firms focused mainly on generics, creating possible patent infringement or conflict-of-interest
• Pure API and fine chemicals companies with limited capabilities and capacities
• Government laboratories
• Less than a handful of pure contract-research and manufacturing companies.

In anticipating the implementation of the patent regime, Indian companies such as Nicholas Piramal (NPIL), Glenmark, Ranbaxy, Zydus Healthcare, and Dr. Reddy's Laboratories ramped up their capabilities in drug discovery for new chemical entities (NCEs) in a more significant and faster manner than anticipated. These companies followed various business models, including setting up wholly owned subsidiaries or divisions or investing in a new entity.

A new crop of companies focused solely on contract-research and manufacturing services also emerged. Examples included Syngene (a subsidiary of Biocon), Hikal, GVK Bio, Jubilant Organosys, Siro Clinpharm, Acunova Life Sciences, Chembiotek, Dishman Pharmaceuticals & Chemicals, and Research Support International Limited. These firms were pure-play service providers. Because they provided low or no conflict of interest with their own generics programs, they became lower-risk partnering options for global buyers. Global buyers had a choice in working with companies that could provide an individual set of products or services, such as Syngene's drug-discovery services, Siro Clinpharm's clinical trials, or Hikal's synthesis of APIs.