By Dr Jogin Desai

India is undeniably one of the top 12 biotechnology destinations globally and ranks as the third largest in the Asia-Pacific region. The nation’s bioeconomy, valued at over $92 billion in 2022, is poised for explosive growth, with projections reaching $150 billion by 2025 and a staggering $300 billion by 2030.

Our country is a major supplier of low-cost drugs and vaccines worldwide and leads in the biosimilar sector, boasting the highest number of approved biosimilars in the domestic market. Still, the pertinent question remains: What hinders India from becoming a top-tier biotechnology destination? The answer lies in the core of our biotech funding.

At present, BIRAC, established by the Department of Biotechnology (DBT), offers support and funding for early-stage startups and provides grants for initial research and development. This initiative has brought hope for biotech companies like us, empowering us to turn ideas into products that address critical healthcare challenges in today’s world. With grants of up to INR 5 million, BIRAC enables innovative ideas to progress from conception to proof-of-concept, serving as a vital catalyst for growth and success in the industry.

However, our ecosystem lacks a steady flow of venture capital. If we want to realise the economic potential of the biotech ecosystem, we need to recognise that there is a significant need and opportunity for private capital investments.

The Importance Of VC Funding In Biotechnology 

To transform their innovative ideas into market-ready products, VC money is and has been an important resource that ensures financial support and strategic guidance. For an early-stage biotech company, VC funds can provide access to capital, expertise, mentorship, network, and connections.

However, driven by the need to ensure a substantial return on investment, VC funds generally gravitate towards companies that address a large market and can achieve sales of hundreds of millions of pounds. Additionally, at present, biotech startups cannot list on capital markets in India unless they are revenue-positive; hence, there is a drain to markets such as the US and Hong Kong for capital raising. There is a need to plug this drain and retain innovation in India.

Why Does VC Funding Remain An Uphill Battle?

Indeed, it is a tough task to secure VC investments, but there are several reasons. We have seen how quickly the biotech industry paced during the COVID-19 days, and it is commendable how such young talents have participated in the same. But was it enough? What would have been the scenario if the companies slogging their days and nights for a cure/vaccine had more manpower? Despite the explosive growth in investment over the past few years, labour shortages in the biotech and healthcare industries persist.

Gone are the days when biotechnology was a foreign concept for Indian students. We are seeing a lot of biotech graduates keen to get into the mud, especially after the pandemic. The challenge is to turn these young minds into potential capital, and here, funding into the research and development ecosystem could be an instrumental tool. Adding on, despite the substantial investments and rapid development in this sector, the lack of adequate and advanced equipment remains a critical challenge. One of the other apprehensions for VC funding remains the notion of ‘slow returns’. Lengthy research and development cycles, extensive and much-needed regulatory approvals, and significant capital needs necessitate a cautious approach to ensure the safety and efficacy of new advancements. Consequently, while biotech offers immense potential for innovation, its growth and development typically occur at a more gradual pace.

What we need is an ecosystem that promotes VC funding, entrepreneurship, and the ease of doing business from all stakeholders in the industry. A thriving public-private partnership can bring the much-needed capital without any ethical compromises. There remains a silver lining, as the Indian biotech sector matures and demonstrates successful exits (acquisitions or IPOs), it could attract more VC interest in the long run.

Finding Funding = Finding Solutions

As per GlobalData’s Thematic Intelligence report, 44% of healthcare professionals worldwide are optimistic or very optimistic about a recovery in biotech funding over the next 12 months. This outlook comes after a significant decline in private biotech venture financing, which saw a drop of 43.2% in 2023 compared to 2022 and 52.3% compared to 2021.

Biotechnology companies, which can also be referred to as deeptech companies, are infused with science and technology and are building IPOs, and this focus shift from entrepreneurs has garnered more attention to the product's side. Many PhD holders are becoming entrepreneurs which is translating into more technology-fused science companies.

There are currently around 4,000 to 5,000 companies, which have raised approximately half a billion in domestic funds and an additional 30 to 40 percent from foreign direct investment (FDI), indicating that this sector is growing.

Investors have started to show interest, but many deeptech companies will only succeed with securing the next round of funding. Currently, there needs to be more subsequent funding for these companies. Therefore, they must prepare for the global market, whether in the US or Europe. From day one, these companies must establish a global foundation, including their outlook, processes, understanding of both US and Indian accounting gaps, and how they interact with talent. This is necessary because the local market and customer base are limited, and securing future funding takes time and effort. Thus, expanding across borders is mandatory despite being a significant challenge.

Indian biotech firms receive significantly less FDI compared to other sectors, forcing them to seek support abroad. This is concerning as it results in Indian companies contributing their labour and talent to foreign economies, strengthening them instead of India's. This trend not only hinders the growth of the domestic biotech industry but also represents a missed opportunity for economic advancement within India.

Conclusion

The future of this industry is potent enough to stretch its boundaries overseas and strengthen our economy even more. Overcoming the funding gap and nurturing talent will propel the nation to the helm of global bio-innovation. With that, India will ultimately transform into a world-class destination for biotechnology innovation.

(The author is Founder and CEO, Eyestem.)

Views are personal and do not represent the stand of this publication.