STUDIES CLAIM INDIAN SECTOR CONSOLIDATION, BIOTECH'S POTENTIAL

Two new surveys have highlighted both the growing trend towards consolidation in the Indian drug sector, and its potential in developing new biotech products.

The first study, conducted by PriceWaterhouseCoopers (PWC), claims that the new patent regime and rising costs could force local firms to merge and shift operations outside India. This is expected to follow global trends towards consolidation, driven by falling returns on R&D investment, divestments of non-core businesses and generic competition. As has already been evidenced by recent news reports, many Indian firms are likely to continue to seek foreign acquisitions, mainly in Europe.

A local survey by market watchers BioSpectrum has also highlighted the potential of India's biotech sector, valuing the industry at US$1bn. The trend here is also towards consolidation, although the PWC study notes that the sector is going through a period of "relative calm" as a number of companies focus on upcoming IPOs.

India now has about 235 biotech firms, with six now reporting annual revenues of over US$20mn. The top twenty firms had combined revenues of roughly US$471mn in 2004, implying year-on-year turnover growth of 30%. At this rate, according to the study, the sector could be worth US$5bn by the end of the decade. Exports account for about 40% of the sector's revenue, and the industry employs some 12,000 staff. Meanwhile, India's government is shortly expected to publish its National Biotechnology Strategy.