Even six or seven years ago, the biotechnology landscape in India looked bleak. While the biotech revolution was sweeping the West, in India there was just Biocon in Bangalore. And it was largely confined to the areas of traditional biotechnology like fermentation, not in areas like recombinant DNA, which was what the rest of the world was concentrating on In the past five years, things have been changing rapidly. In 1996, a young Hyderabad-based upstart called Shanta Biotech came out with the country's first genetically engineered product -- a hepatitis B vaccine, which it developed exploiting the country's weak patent laws. Shanta Biotech was followed a year later by Bharat Biotech, another Hyderabad-based company, which also got into the hepatitis vaccine market, and pharma major Wockhardt, which too started manufacturing the hepatitis B vaccine.Other big names in the pharmaceutical industry are also getting into the fray: Dr Reddy's, Cadilla, Torrent, Wockhardt. DSQ Infotech, a leading IT company, wants to become as big in biotech, and is expanding DSQ Biotech in Chennai, Bangalore and the US. The Nagarjuna group, a big name in fertilisers, is equally keen on biotech and is building an expensive lab in Bangalore. 
Over the next couple of years, in fact, over Rs 400 crore of investment is expected to flow into the industry. And industry turnover, which was just about nudging Rs 50 crore last year, is expected to jump 10-fold in a few years. Says A.J.V. Jayachander, managing director of ICICI Ventures: "Things are just right in the biotech industry for a take off." ICICI itself is setting up a knowledge park outside Hyderabad, mainly to help start up biotech companies.Most Indian players started via the hepatitis B vaccine route -- which gave them a chance to learn the ropes -- before moving on to more complex technology and products. Shanta Biotech, for example, is planning to launch the anti-cancer drug interferon sometime this year. Bharat Biotech is also close to launching streptokinase, used for dissolving blood clots.Globally, the $300 billion global pharmaceutical industry is undergoing a tectonic shift, moving away from manufacuring processes based on chemistry to those based on biology. Companies in the West first started using recombinant DNA technology (or genetic engineering) to create healthcare products about 20 years ago. Since then, the importance of biotechnology in the healthcare industry has been rising rapidly. And in the future, the information available from the human genome project will determine new drug development considerably. The trend is clear. Companies that can use knowledge from the genome will dominate new drug development. And those that can control micro organisms will control drug manufacturing.India certainly has a lot of catching up to do. Drug manufacture is the bread and butter of the Indian pharmaceutical industry but it uses the chemical synthesis almost entirely. Even when micro organisms were used in fermentation, for example, they were all naturally occurring. Persuading genetically-engineered bacteria or fungi to make a drug in large quantities is an art Indian industry has not mastered. But now, finally, the technique seems to be taking root, opening up immense possibilities.Start with Biocon, the oldest. Set up by brewer Kiran Mazumdar in 1978, it focused on its core competence -- making industrial enzymes through fermentation -- for a decade and a half. But Biocon also mastered several important technologies, procuring and screening micro organisms, manipulating the conditions (temperature, PH) under which they flourish, the design of bioreactors and the downstream processing of products. In particular, it developed expertise in one largely neglected area: solid-state fermentation. Fermentation in the solid state is four to 20 times more effective than in the liquid state. Yet, globally, companies conduct submerged fermentation because the solid state is difficult to contain and control. Biocon has made a breakthrough: designing a reactor -- the plafactor -- which does both (containment and control). It has just been awarded a US patent on this.
Drugs worth at least $20 billion are made through the fermentation route. Biocon can do two things here: make the drug on its own, or license the plafactor technology to others.Plafactor's biggest strength is that it has excellent containment properties, necessary while making toxic drugs like cyclosporin. Containment is necessary also while working with genetically engineered organisms. No one else in the world has the technology to make drugs using genetically engineered micro organisms in a solid-state fermenter. That gives Biocon a powerful tool with which to enter genetic engineering. Says Kiran Mazumdar: "We are looking at all the possibilities, including using genetically modified organisms in the plafactor."There are several reasons why genetic engineering is so important to the healthcare industry. Take hepatitis B. The traditional vaccine contains the full virus derived from blood plasma, so there is a possible risk involved. The genetically engineered vaccine contains only a protein of the virus, which is produced using a micro organism. There is absolutely no risk of the virus becoming active.In fact, biotechnology has the potential to change the way drugs are made. There are a number of organisms which produce drugs naturally. They can be used in a fermenter to produce the drug efficiently. But quite often, the organisms which work well in the fermenter do not have the genes to produce the drug required. Here is where genetic engineering comes in. The idea is simple. Take the gene for the drug that you want from one organism and put it into the one you can grow in a fermenter, creating a cheap and powerful factory.This is why the world over, pharma companies are increasingly taking the bio route. In fact, no company making drugs or vaccines can afford to ignore recombinant DNA technology. Indian companies, about 20 years late, are hurrying to catch up.  Says A. Gowrishankar, deputy director of the Centre for Cellular and Molecular Biology (CCMB) at Hyderabad. "Indian industry learning to work with genetically modified organisms is comparable to our efforts in the space programme."
India has several labs like CCMB which have worked in areas of modern biology. But this expertise is not enough to make products on an industrial scale. So when Varaprasada Reddy, an engineer-turned entrepreneur who started Shanta Biotech, told Gowrishankar about his plans to make recombinant hepatitis B vaccine from scratch, he wasn't hopeful. "I told him that his chance of success were very low," says Gowrishankar. "But I also told him that I would be very happy if  I have to eat my words." Reddy succeeded and is now going on to more difficult things. "I was determined to succeed because a US company refused me the technology saying that it was too sophisticated for India." 
Shanta's next product is alpha interferon, which Reddy hopes to sell at a much lesser price (the product is now under clinical trial) than existing brands. A series of products are also under development: insulin, streptokinase, vaccines for hepatitis C and E and so on.Shanta's competitor, Bharat Biotech, is also developing a series of genetically-engineered products: streptokinase, urokinase, epidermal growth factor, third-generation (therapeutic) vaccines.
Bharat Biotech has, however, taken a different route. While Shanta does most of its own R&D, Bharat outsources quite a lot. Part of the vaccine development was done at the Indian Institute of Science (IISc), Bangalore. The Centre for Biochemical Technology (CBT) at Delhi has already transferred the technology for four genetically engineered products: epidermal growth factor (for the healing of wounds), staphylokinase (potential drug for dissolving clots), insulin and lysotaphin. Says G.S. Khatre, deputy director at CBT: "These products will be the first genetically engineered products from a national lab to reach private industry."Both firms invest heavily in R&D. Shanta spends 20% of its turnover in research, something quite in keeping with international norms. Bharat Biotech, being a late entrant (its vaccine was launched only a year ago), has made less money (Rs 24 crore so far), but still spent Rs 5 crore on R&D in the last two years. Moreover, it is setting up its R&D centre at the Indian Institute of Science, Bangalore. Says Krishna Ella of Bharat Biotech: "We intend to use the scientific expertise in the country to develop our products."The latest entrant in the biotech market is Wockhardt. Its R&D centre in Aurangabad spent Rs 120 crore in the last three years, 15% of which was on biotech research. It launched a hepatitis B vaccine early this year.In a few years, a large number of recombinant DNA products will hit the Indian market, all developed within the country. P. Babu, a physicist-turned molecular biologist, saw an opportunity a decade ago and decided to set up Bangalore Genei to supply the chemicals and equipment required by biotech researchers. Says Babu: "As a researcher I found it difficult to get enzymes at the right price. I thought there was a business opportunity here." Bangalore Genei makes the molecular equivalent of the surgeon's scalpel and needles. Till it came along, these products were imported. Babu now has a market share of 15%, in a total market of about Rs 20 crore. 
Since genomics (processing and analysing information from the genome) requires the use of information technology, many Indian firms think they can do well here. DSQ Biotech is already investing Rs 100 crore in large facilities in India and at San Diego in California. About 40 PhDs will work for the company in the US alone.But can Indian companies repeat the IT story here as well? There is one difference between IT and biotechnology. To do well in biotechnology, one has to be high up in the value chain. It's too early to take a call.