THE ROAD TO BIOCON INDIA LIMITED’S sprawling facility on the outskirts of Bangalore is clogged with traffic. Kiran Mazumdar Shaw, Chairman and Managing Director of Biocon fumes but refrains from lashing out at the government. After all, running India’s largest biotech company has taught her a thing or two about getting things done despite the numbing bureaucracy and regulations India is famous for. Shaw intends to take up the matter in a powwow with the stakeholders in the city.

It is this ability to deal with the madness that is the Indian bureaucracy combined with a vision to convert India into the world’s biotech powerhouse that has seen Shaw build Biocon from a fledgling importer of industrial enzymes—with an investment of $3125—to a $52 million biotech company (Shaw bristles at any mention that Biocon is a contract research or an enzyme company), with contract research and clinical research subsidiaries. An account of Biocon’s early years is interesting.

After a degree in zoology from Bangalore University, Shaw chose an unusual subject to graduate in—malting and brewing technology. A brewmaster’s degree from Australia’s Ballarat College followed. In some ways, that career choice shaped her interest in biotech. After spending a frustrating three years in India, where ‘woman brewmasters were not easily accepted,’ Shaw accepted an offer by Leslie Auchinloss to set up an enzymes manufacturing unit for Biocon Ireland in India. Post a six-month training course at Biocon Ireland, the 25-year-old Shaw started Biocon India in a garage in 1978. She held 70% equity in the company, which started out producing two enzymes—papain and isinglass - from papaya and catfish.

In the 1980s, spurred by the need to innovate rather than be a mere manufacturer, Shaw started research on fermentation technologies to find better methods of manufacturing enzymes. The first blueprint for a fermenter was ready in 1989 and Biocon commissioned the first commercial plant in 1991.

Traditionally, submerged or liquid fermentation has been popular with fermentation companies because the processes are easier to contain and control. However, solid-state fermentation, which is harder to control, can give up to 20 times more yield. Moreover, some microorganisms grow well in the solid-state. Shaw had to work with fungi and so set about learning solid-state fermentation. At Biocon, the team designed a new reactor that could contain the microorganisms well and the contents could be mixed while fermentation was in progress. Additives could be added or taken out without disturbing the fermentation process and the entire process consumed less energy.

The reactor—christened Plafractor—turned out to be Biocon’s cash cow for a few years. The company received a U.S. patent for it. Biocon was banking on its reactor to drive its revenues—considering almost $20 billion worth of drugs made through fermentation. The irrepressible Shaw was already looking for the next big avenue of growth.

Growth for a biotech company is largely organic which is why few VCs (atleast in India) are willing to bet their money on biotech startups. “Biotech companies take a long time to mature,” says Shaw. “There are three distinct phases of development. In the first stage, the company invests in the infrastructure and the people. In the second stage, the companies invest in research and development. Only in the third stage do they actually begin to see the commercialization of their research and development efforts. Few VCs or indeed companies are willing to go through that extended cycle.”

Shaw found another way. Even as she was completing Biocon’s turnaround from an enzyme company to a fermentation company to finally a biopharmaceutical company, Shaw made a foray into contract research by setting up India’s first contract research company, Syngene in 1994. Syngene now employs over 250 chemists and biologists, working on custom research for a variety of customers such as Surromed, Glaxo, Astra Zeneca and BMS among others. In 2000, Shaw ventured into clinical research outsourcing by setting up Clinigene. Her decision was validated when the College of American Pathologists accredited the institution. Shaw claims Clinigene’s unique registries in diabetes and oncology are beginning to generate interesting medical leads in terms of biomarkers and oncology trials. It’s recent tie-up with Strand Genomics and the Indian Institute of Science is also expected to lead to interesting discoveries. The current focus at Clinigene is to establish a human pathology unit that will enable Biocon to attain strong clinical capabilities.

Shaw harnessed Biocon’s well known research capabilities in providing custom research to biotech companies while Biocon itself could harness its fermentation technology to focus on the biopharmaceutical business.

Shaw, 49, has an excellent reputation of getting things right the first time. Her first foray into uncharted waters—developing solid-state fermentation technology—was an unqualified success. She repeated this success with Syngene and Clinigene. Her latest plan is to partner biotech companies based in the U.S. in not only research but also the actual development molecules.

Partnership
Partnership and IP sharing is not a new concept in the biotech and pharmaceutical world. There have been a few well-publicized instances of companies sharing IP where the outsourced researcher receives a license fee from the outsourcer. But these have largely been between companies in the U.S. and Europe where cost margins do not differ significantly. However, in India they do, and this is why biotech companies in the U.S. are betting big on India. And as India’s pioneering biotech company Biocon claims it will figure top of their list.

“Biotech companies in the U.S. are well aware of the talent pool. Also, the cost arbitrage factor is not lost on them. So increasingly, we have had offers to partner with them in an IP sharing arrangement where Biocon would get a license fee for the IP generated. This is the next step after custom research because we also make use of our manufacturing skills as well,” Shaw says.

Ernst & Young India head (health sciences industry practice) Utkarsh Palnitkar agrees, “Global alliances and harmonization is the key to market success.” At a recent biotech seminar, E&Y Americas Biotechnology Director, Michael Hildreth said, “The biotech industry is undergoing a radical shift. Companies recognize that ten-to-fifteen year timelines to profitability are no longer acceptable for many investors. Biotech is evolving much the same way the information technology industry did. Companies are finding it more cost-effective and beneficial to integrate virtually by forming networks of alliances through which each player contributes an essential element in the development of high-value products and shares in the rewards.”

Future Plans
The latest buzz about Biocon is an impending IPO. The company that has so far thwarted investors and resolutely driven expansions from accrued profits and debt raising, now plans to list in the Indian markets by the year-end to fund future growth. Of more immediate focus is commercializing human insulin, and Streptokinase. Another important focus is a humanized monoclonal antibody for head and neck cancers, a joint development program with a Cuban institute.From beer-distilling dreams to biotech expertise, Shaw has emerged a strong player in the global markets. And with sound business plans, the veteran CEO is building new businesses a bit differently than has been seen in the near past—the old fashioned way.