|Biotechnology is the new hot investment opportunityand all eyes are on Biocon, the first Indian biotechnology company to float an initial public offering. The Rs 300 crore issue, listed on the National Stock Exchange, opened with a listing price of Rs 425 a share (face value Rs 5). Set up in a garage in 1978, Biocon is today a Rs 549 crore bio-pharmaceuticals major. CMD, Kiran Mazumdar-Shaw, spoke to Archana Rai about Biocons prospects. Excerpts: |
Why papain? How did enzyme manufacture come to attract your interest?
I graduated in malting and brewing from Melbourne University, following the tradition set by my father who was a brewmaster. There were issues around a woman entering the brewing industry, but brewing had always fascinated me, so I stuck it out. I knew about papain, a papaya extract that breaks down proteins and makes beer less hazy. But the challenge was to make a business out of it and other enzymes that facilitate fermentation. I started with a small set-up in the familys garage, and things moved on from there.
Was the tie-up with Biocon Ireland a landmark point?
Yes, the arrangement with Biocon Ireland set the business on firm ground. I wouldnt have survived without it. Remember, marketing is the big challenge in biotech. I thank my stars that I was not influenced by formal management education; my style has always been intuitive and unconventional. Even when our turnover was just Rs 20-30 lakh, we ploughed money into R&D. It worked. We won a patent in solid state fermentation technology. From then on, we moved from enzymes to biopharmaceuticals.
What prompted the product expansion?
Despite being a start-up, the focus at Biocon from day one has been global. After we came under the global Unilever umbrella after Unilever bought over my Irish partner, we were exposed to global best practices. In 1994, at the start of the software boom, we realised there was scope for custom research from India. So, we set up Syngene, our contract research organisation. That was a big mental shift. Till then, we had been doing contract R&D only for Unilever. Syngene proved that we could manage R&D services outside Unilever. We changed gears from enzymes to recombinant DNA. Frankly, I would have been bored making papain all my life.
Wasnt moving away from a proven business model a risk?
Our philosophy has always been business-led science. And our growth has always been organic. We have never gone off-tangent. Making enzymes using fermentation technology was our core business. We thought: if we could make enzymes, why not leverage the same basic technology to make statins. Hence our entry into microbially engineered statins (anti-cholesterol drugs).
What was the turning point for Biocon?
Buying out Unilevers stake in 1998. We couldnt have got into biopharmaceutical manufacturing or bulk drugs otherwise. We knew we had the technology to make that move. The decision to get into manufacturing statins took us from Rs 50 crore in 1998 to over Rs 500 crore this year (See Profit Booster Dose, 31 March 2004). It gave us a head start in the market for biopharmaceuticals, for drugs manufactured by the fermentation process.
Prices for statins are expected to soften by 2005, as more global capacities come up. How will you deal with this?
We have a cyclical model that allows one group of new products to come in as another fades. So, I expect that in five-six years, statins, which now contribute to 54 per cent of revenue, will make way for products like immuno-suppressants. We have a nine-year, multi-million dollar contract with Bristol Myers Squibb for supply of human insulin. Then theres the prospect of marketing our branded insulin in the domestic market. Were also working on our own molecules. In collaboration with CIMAB, the Cuban institute, we are working on mammalian cell culture capabilities, aimed at developing monoclonal antibodies for cancer treatment. We go into clinical trials in 2005. Thats our billion-dollar opportunity. We are investing $25 million in a biologicals facility in our joint venture. Our arrangement with CIMAB is through a 51:49 per cent joint venture, in which CIMAB has brought in technology in exchange for equity.
You spoke of an intuitive style of management. But going public means quarterly reporting commitments. How will you adapt?
Well, sound business sense has always held precedence in decision making. I am glad that companies like Google are talking of doing away with quarterly reporting for publicly listed companies. Quarterly numbers will never give an adequate picture of a scientific research company. Developing our own molecules is a huge opportunity, but it all depends on clinical trials; I cannot forecast those results. Investors must understand that biotechnology is not a short-term punting opportunity. Its for those interested in staying on for the long haul.