Case Study

BIOCON—INDIA’S OWN HOME-GROWN BIOTECH

COMPANY

(This case study is based on reports in the print and electronic media,
and is meant for academic purpose only. The author has no intention to
sully the image of the corporate or executives discussed.)

BIOCON—AN OVERVIEW

Biocon was established in 1978. As India’s leading biotechnology

company, it has evolved over the past 30 years from an enzyme
manufacturing unit to a fully integrated biopharmaceutical enterprise,
focusing on healthcare. It applies its proprietary fermentation
technologies to develop innovative and effective biomolecules in
oncology, cardiology, diabetology and other therapeutic segments.

Biocon’s success has been primarily due to the company’s expertise to

develop innovative technologies and products and to rapidly leverage
them to adjacent domains. This unique ‘integrated innovation’ approach
has yielded a host of patented products and technologies that have
enabled multilevel relationships with its global clientele.

Biocon India Limited and its two subsidiary companies, Syngene

International Limited and Clinigene International Limited, form a fully
integrated biotechnology enterprise specializing in biopharmaceuticals,
custom research, clinical research and enzymes (Fig. 2.4).

BIOCON’S PERFORMANCE

Biocon, as India’s own home-grown biotechnology company, has shown

exemplary performance since its inception in 1978 (Table 2.1). Its
integrated business model and the company’s excellent business strategy
have earned for Biocon exemplary performance, both in terms of profits
and ever-increasing value of its scrips.

 Biocon Ltd has posted a 44 per cent increase in its net profit at INR 475.1
million for third quarter ended December 31, 2006, compared with INR
327.9 million posted during the same period of the previous fiscal. The
 company earned a revenue of INR 8630 million, profit of INR 1080 million
in 2006–07, and grew 23 per cent in the first quarter of 2007–08.
 During the period, the Biocon scrip, after several months, rallied over 10 per
cent on both the bourses, closing at INR 410.25 on the Bombay Stock
Exchange (BSE) and at INR 410.45 on the National Stock Exchange (NSE).
It gained INR 75, touching an intraday high of INR 445.65 on the BSE.
 The revolutionary oral insulin programme has passed phase I human
clinical trials and is likely to enter phase II soon.

Fig. 2.4 Biocon’s Integrated Business Model (Source courtesy:

Biocon, www.biocon.com/biocon_aboutus_business.asp)

BIOCON IN NEWS RECENTLY   1, 2

Biocon has been very much in the news in recent times as shown below:

 New York Times called Kiran Mazumdar Shaw, the Chairperson, ‘India’s

mother of invention’ and The Economist gave her the title ‘India’s Biotech
Queen’.
 Biocon’s Syngene enters into research partnership with Bristol-Myers
Squibb on 14 March 2007.
 Biocon Limited unveiled comprehensive portfolio of renal therapy products
on 8 March 2007
 Biocon grants exclusive marketing license for BIOMAb EGFR for Pakistan
on 18 January 2007.
 Biocon Limited and Neopharma signed MoU for a joint venture on 5
January 2007.
 Biocon buys US-based start-up IATRICa Inc in a sub-$10 million deal.
  Biocon buys 70 per cent stake of the German pharma AxiCorp in a €30-
million deal to market its injectible insulin, generics, biosimilars and
biologics.

Table 2.1: Biocon—important milestones

197 Biocon India is formed—a joint venture of Biocon Bio-chemicals Ltd of Ireland and
8 Mazumdar Shaw.

197 Biocon becomes the first Indian company to manufacture and export enzymes to the
9 Europe.

198 Unilever plc. acquires Biocon Biochemicals Ltd of Ireland. It merges it with its subsi
9 International.

198 Biocon is the first Indian biotech company to receive US funding for proprietary tech
9

199 Biocon sets up its in-house research programme, based on a proprietary solid substra
0 technology, from pilot to plant level.

199 ISO 9001 certification from RWTUV, Germany, is given to Biocon's R&D and manu
3 in Bangalore.

199 Biocon establishes its subsidiary, Syngene International Pvt. Ltd to benefit from the g
4 outsourced R&D in the pharmaceutical sector.

199 The commercial success of Biocon's proprietary fermentation plant leads to its three-
6

199 Biocon enters biopharmaceuticals and statins, leverages its technology platform.
6

199 Biocon takes initiatives in human healthcare through a dedicated manufacturing facil
7

199 Biocon becomes an independent entity, after Unilever sells its stake to the Indian pro
8

200 Biocon commissions its first fully automated plant to produce speciality pharmaceuti
0 up another subsidiary, Clinigene to pursue clinical research and development.

200 US Food and Drug Administration (FDA) approves Biocon for the manufacture of lo
1 cholesterol-lowering molecule.
Biocon's proprietary bioreactor, the PlaFractorTM is granted US 2001 and world-wide

200 Clinigene's laboratory receives CAP accreditation.

2

200 Worldwide, Biocon becomes the first company to develop human insulin on a Pichia
3

200 Biocon's highly successful IPO in March 2004 (with a market value of $1.11 billion)
4 billion mark on the day of listing a record.

200 Syngene inaugurates its new research centre at Biocon Park in Bangalore.
4

200 The manufacture of INSUGENTM, the new generation bio-insulin, is launched in As

4 insulin plant by Biocon Ltd.

200 Biocon Ltd and Vaccinex, Inc. form a strategic partnership to discover and co-develo
4 four therapeutic antibody products.

200 Biocon Ltd signs a commercial agreement for delivering of insulin API in Asia, Afri
5 East.

200 Biocon Ltd launches India's first cancer drug BIOMAb EGFR.
6

200 Biocon sets up Neobiocon in a joint venture with Dubai's Neopharma. Also enters in
7 agreement with Abraxis Bioscience of United States to sell its Abraxeme, an anti-bre
India.

201 Biocon has planned to invest INR 100 million on upgrada-tion during the year, while
1 plans to invest around INR 2000 million in different sectors. The proposed Bangalor
a capital expenditure of INR 2000 million was invested, last year will give fillip to B
and development activities. The proposed Centre would have a capacity to accommo
The dedicated Centre would have several laboratories and function under the Biocon
dation of the Bangalore facility would enhance the focus on drug discovery to meet t
The company had plans for Investing INR 50 crore on its active pharmaceutical ingre
manufacturing facility in Hyderabad in two years. Biocon had already invested INR
facility. The company had commenced investment into the insulin programme with t
expected to be of the order of $100 million spanning over 3-4 years.
 201 Biotech has reported revenues of Rs 2087 core in 2011-12, an increase of 16 per cent
2 year. In March 2011 Pfizer scrapped a $350-million deal with Biocon to fund its insu
sell these in regulated markets such as the US and Europe. Bicon has been searching
for a global partner to take forward the research of its oral insulin.

Source: http://www.hindu.com/2011/04/22/stoies/2011042264831700.htm

BIOCON AND ITS SUBSIDIARIES

Biocon, has floated three subsidiary companies in the process of building

up an integrated business model and with a view to enjoying the benefits
of complete integration in biotechnology business.

Syngene is a 99.99 per cent owned subsidiary of Biocon Incorporated.

On 18 November 1993, its paid-up capital was INR 28.75 million. By way
of a restructuring, 99.9 per cent of the shares held by Kiran Mazumdar
Shaw, ICICI and a few other scientists were transferred to Biocon in
consideration for the issue of shares by Biocon to the shareholders of
Syngene on 31 March 2002.

Clinigene is a 100 per cent owned subsidiary of Biocon Ltd. It was

incorporated on August 4, 2000 with an authorized capital of INR 5
million. The paid-up capital of Clinigene was INR 500,000.

Biocon Biopharmaceuticals Private Limited (BBPL) is a joint

venture company of Biocon in collaboration with CIMAB SA, Cuba. The
equity participation by Biocon is 51 per cent. The joint venture
agreement was entered on 22 February 2002. The paid-up capital of
BBPL was INR 8.8 million.

PRODUCTS AND SERVICES

Kiran Mazumdar Shaw, the founder of Biocon, firmly believes that India
should make full use of her intellectual capital with a view rising high in
the value chain in a manner totally different from the Western model,
which did not take into account the affordability of medicines to the
patients. Besides, ‘India needs to leverage its affordable cost base to
deliver high-value innovation to global markets by building excellence
across the innovation chain, from discovery to product and clinical
development’.3 This is the policy perspective that trigged the growth of
Biocon over the past three decades. According to Sandeep Rao, General
Manager, Business Development, ‘Biocon’s impressive range of products
and partnered services continue to build a robust pipeline of biosimilar
and discovery-led biological programs in oncology, nephrology, diabetes
and autoimmune diseases’.4

Since the enzyme business of Biocon declined, Mazumdar Shaw

announced on 18 June 2007 that the company decided to sell the
division to the Danish firm Novozymes for $115 million (INR 4,715
million). Biocon will put some of the sale proceeds into R&D and some
for acquisitions.5

Biopharmaceuticals

Biocon manufactures a wide spectrum of biopharmaceuticals ranging

from small molecules to biological and dosage forms which include anti-
diabetic agents, anti-hypertensive and anti-inflammatory agents, anti-
oxidants, haemostatic agents, cholesterol-lowering agents, digestive-aid
enzymes, hepatoprotective, immuno-suppressants, nutraceuticals and
orthopedic agents.

Enzymes

Biocon manufactures and markets a broad range of industrial enzymes,

food additives and process aids which include amylases,
amyloglucosidase, cellulases, catalases, lipases, and proteases. However,
over the years all categories of enzymes have become less and less
significant in Biocon’s staple of biotech products. From close to 90 per
cent in the early 1990s enzymes’ share in the topline had dropped to 11
per cent in 2006–07. It has shrunk further to 5 per cent in the first
quarter of 2007–08.

Food Additives

Food additives manufactured and marketed by Biocon include

emulsifiers, hydrocolloids, natural colours, speciality fats and specialized
proteins.

SERVICES

Custom Research

Biocon subsidiary, Syngene, leverages its synthetic chemistry skills to

carry out custom research in early stage drug discovery and
development.
 Clinical Research6

Another Biocon subsidiary, Clinigene, conducts phases I–IV clinical

trials and longitudinal research to discover novel biomarkers. Clinigene
is a clinical research organiation that offers global biotechnology and
pharmaceutical majors strong clinical trial services, regulatory and
laboratory capabilities for clinical drug development. The value-added
services include patient registries and clinical databases in diabetes,
lipidemia, oncology, and cardiovascular diseases.

Biocon’s Corporate Social Responsibility (CSR) Activities

Biocon’s CSR activities centre around the Biocon Foundation that has
been established with the aim of identifying and implementing projects
that impact the social and economic scenario in the country. It main
focus areas are to provide quality healthcare and health education for the
betterment of Indian society.

Through its initiative, Biocon Foundation, by establishing Arogya

Raksha Yojana, aims to provide high-quality drugs at affordable prices
to the masses at all BioCare Pharmacies and participating clinics.

CLINICAL TRIALS AND DRUG TESTING IN INDIA 7

Any development of new drugs needs various tests before being released
in the market commercially. These tests are called clinical trials. One of
the main areas of Biocon’s research focused on developing oral insulin to
control diabetes, which also, like other medicines require extensive
drug testing. Biocon also conducts clinical trials, not only to test the
efficacy or otherwise of its own products, but also of others associated
with it through its subsidiary company, Clinigene. What are these clinical
trials and what are its impacts on people affected by these trials?

‘India increasingly emerges as a preferred destination for outsourcing

clinical trials—testing of new drugs on humans—and the country may
also be heading toward providing the greatest source of human guinea
pigs for the global drug industry.’8 Clinical trials come with a staggering
price tag. Worldwide, clinical research was estimated to be a $5–6 billion
market in 2002, and clinical research spending is expected to touch $20
billion by 2007. CMSInfo, Chesam, UK, reports that national spending
on clinical trials in America alone was nearly $25.6 billion in 2006 and
expected to rise to $32.1 billion in 2011—growing at an average rate of 14
per cent per year.9 ‘A recent presentation by the Drug Controller-General
of India said that the market value for clinical trials outsourced to India
was around $300 million, up 65% from 2006, and was expected to be
between $1.5 billion and $2 billion by 2010.’ But industry stakeholders
contest this claim.10

The business of clinical trials has increased multi-fold in recent times

since it offers the pharmaceutical industry the raison d'être and the logic
for obtaining governmental license to market their products. However,
human beings from developing countries are being used as guinea pigs
and are paid a pittance for the huge losses in health and life suffered by
them. This is because in countries like India, there are teeming millions
of people who are extremely poor and could be paid a small
compensation compared to the citizens of developed countries. The drug
industry has also involved uninformed, non-consenting people from
developing countries as human volunteers.11

The Indian Advantage

India’s most significant offering is cost savings. More than 40 per cent of
drug development costs are incurred in clinical trials and India offers
immense savings on that aspect. India has 40 million asthmatic patients,
34 million diabetic patients, 8–10 million HIV-positive people, 8 million
epileptic patients, and 3 million cancer patients, among other categories.
India’s 34 million diabetics account for one-fourth of the global diabetic
population and the number keeps increasing every year. The number is
estimated to grow to 57.2 million by year 2025. Pharmaceutical
companies often view this as ‘raw stock’.

There were reports of several trials that were conducted in government

hospitals where alone poor patients can afford to get treated. These
poorly funded government hospitals look at these trials as a source of
income to buy their equipment. Besides, there is no effective monitoring
mechanism for research and often regulations have to be diluted. Since
India possesses a huge target drug testing population and the country
encourages the outsourcing of clinical trials, pharmaceutical companies
from the West rush to India. India is also an attractive destination for
high-quality health services due to a variety of reasons such as low cost,
trained personnel and medical infrastructure. A huge population with
diverse untreated diseases: this is what people in the medical profession
call the ‘India advantage’.

‘In India particularly, unethical and illegal clinical trials are most
rampant and are conducted without fear because, say critics, there is no
law to safeguard the interests of volunteers, while regulatory authorities,
‘by design or default’ fail to take action against such trials.’ 12

Illegal Clinical Tests

A spate of unfortunate events over the past few years has brought to the
fore the rampant practice of conducting unethical and even illegal
clinical trials in India. This is causing immense concerns, triggering a
huge public outcry over the regulatory authorities’ failure to check such
practices, initiating even lawsuits.13 It has become more and more
lucrative. Asia Times, in an article on the subject, quoted the CEO of
Biocon (Kiran Mazumdar Shaw), who said that clinical research was
expected to touch $10 billion by the year 2005.14

Why Are Mnc Drug Companies Flocking to INDIA?

At the time of her independence, pharmaceutical research in India did

not rely on clinical testing. Medical scientists mostly reverse-engineered
drugs already developed in advanced countries. But everything changed
when India submitted to pressure from the World Trade Organization
(WTO) to stop the practice, and implemented rules that prohibit Indian
companies from creating generic versions of drugs patented elsewhere.

Now, multinational pharmaceutical companies have assured profits in

the Indian market, and the country has suddenly become a profitable
location for the expensive tests required for FDA’s clearance of any drug.
Though it is still too premature to predict how much the legislative
changes have boosted drug development, observers say the number of
studies conducted by multinational drug companies has sharply
increased now.

Regardless of where clinical trials are performed, the FDA requires the
same evidence showing that a drug is safe and effective before granting
its approval for any drug. It is the responsibility of the institutional
review boards at the medical institutions where the studies take place to
‘actively pursue issues of informed consent’.

It is a fact that multinational drug companies are resorting to illegal

clinical tests in India because of the ever increasing cost of drug research
both in Europe and the United States. In developing countries such as
India and China, governments are not too careful to ensure that such
clinical tests do not lead to human suffering and death. Even in cases
where such tests have led to deaths, the compensation paid to the
victims’ families work out to be a small fraction of what it would have
cost them in developed countries. According to Ashish Singh, Vice
President of Bain & Co., a consulting firm that reports on the healthcare
industry, ‘the total spending on outsourcing clinical trials to India could
top $2 billion by 2010’.15

Companies are attracted to India not only because of the huge patient
pool and skilled workers, but also because many potential study
volunteers are ‘treatment naive’, meaning they have not been exposed to
the wide array of biomedical drugs that most Western patients have.
Besides, doctors here are easier to recruit for trials because they do not
have to go through the same ethics procedures as their Western
counterparts. Moreover, in countries like India patients ask fewer
questions about what is going on.

UNETHICAL PRACTICES OF BIOCON

Though Biocon as India’s own home-grown biotech company has been

receiving rave reviews in the media for its innovative initiatives in
biotechnology, it has also attracted adverse critical comments for
underplaying ethical issues in its efforts to be a successful company. The
following ethical lapses have been reported in the media in recent times.
Biocon has accepted some lapses, justified some, while contested some
others. The following instances demonstrate how acceptable it becomes
for a successful organization to make compromises on ethical issues
when it is addicted to the pursuit of success.

Illegal Clinical Trials by Biocon

In 2004, Biocon and Shantha Biotech in Hyderabad came under scrutiny

for conducting illegal clinical trials that led to eight deaths.

It was alleged that Shantha Biotech failed to obtain proper consent from
patients while testing a drug meant to treat heart attacks. Biocon tested a
genetically modified form of insulin without the proper approval from
the Drug Controller General of India (DCGI) or the Genetic Engineering
Approval Committee (GEAC).

After the outcry against Shantha and Biocon, the Indian government
adopted stricter ethical guidelines for clinical research, but one cannot
be too sure that companies are abiding by the new rules.

Environmental Infractions16
Biocon decided in February 2007 to set up a INR 10,000 million
manufacturing facility at Jawahar Pharma City, a special economic zone
(SEZ) near Visakhapatnam, Andhra Pradesh.

Biocon has also decided to set up a centre on a 10-acre plot in the

Hyderabad biotech SEZ being developed by the Andhra Pradesh State
Industrial Infrastructure Corporation. The SEZ in Andhra Pradesh has a
state-of-the-art effluent treatment plant with marine discharge facility.
Andhra Pradesh has promised Biocon uninterrupted power and water
supply.

Andhra Pradesh has been keen to get Kiran Mazumdar Shaw to invest in
the state ever since it realized that the biotech major is unhappy over
Bengaluru infrastructure. There is a view among many that the company
is moving to Andhra Pradesh due to its inability to handle the pollution it
generates and protect the environment as required by the Bengaluru
Municipal Corporation.

However, the Andhra Pradesh government provides a common effluent

treatment for similar companies in its industrial estate. Biocon does not
show that the company is interested in protecting the environment, as its
first plant at Bengaluru is still running without the effluent treatment
plant.

Biocon Enhances Trade Operations in Bangladesh17

Biocon is on an aggressive drive in Bangladesh because of the country’s

increasing dependence on the lifestyle disorder drugs such as
cardiovasculars and anti-diabetics. Bangladesh, which is viewed as an
attractive destination for active pharmaceutical ingredients (APIs), has
been looking at leading Indian companies for its supplies, and
companies like Biocon have managed to stay ahead in the region. For
Biocon, 50 per cent of its earnings are from exports.

The company’s range of APIs is accepted by leading generics and

branded companies across the world and have also found favourable
acceptance in Bangladesh mainly because the products are
manufactured ‘under stringent standards’. Therefore, Biocon’s statin
portfolio, oral anti-diabetics and immuno-suppressants are on the list of
exports to Bangladesh.

The latest drugs from the company’s stables being Insugen, an r-DNA
insulin and BioMAb EGFR for head and neck cancer will see it being on
the export list.
Biocon has a reasonable presence with an advantage of being one of the
few companies with a product offering as variant as cardiovascular,
diabetes, and oncology, and has been a key exporter to the region.

It is easier for companies like Biocon to put up a plant in countries like

Bangladesh since the pollution norms are not strictly followed there.
Furthermore, clinical trials could be easily conducted without any
objection from the government.

Procedural Lapses at Biocon18

The Karnataka government referred the issue of Biocon Ltd’s lapses in

making methylcobalamin to the DCGI in 2006 for further action.
Methylcobalamin, a form of vitamin B12, is used to treat nervous
problems (neuropathy) among diabetics. Biocon holds a manufacturing
licence for methylcobalamin since June 2003 and was to follow a seven-
step procedure. However, the company skipped some steps and changed
the process by using an intermediate drug (dimethyl benzimidazole)
imported without licence from Auspure Biotech Ltd, China.

The State Drugs Controllerate found in January 2006 that Biocon had
cut short the steps and violated Section 18a (vi) read with Rule 78(b) of
the Drugs & Cosmetics Rules by not intimating the changes in the
standard operating procedure.

The State Drugs Control authorities cancelled the licence in late January
2006. On 10 February 2006, Biocon applied for a fresh licence and
received it in March. A Biocon spokeswoman said that the situation was
rectified and the company continues to make the drug based on the new
March licence. However, she argued that methylcobalamin in terms of
sales and revenue was a ‘very insignificant product’ to the company.

In its statements, Biocon said it had admitted to inspecting officials to a

‘procedural lapse’ in the manufacturing process. Also, import of an
intermediate from China does not need a licence. It had now stopped
importing the intermediate.

It stated that it had revised its production process and had commenced
the production of methylcobalamin. Accepting the fact that the company
had committed a procedural lapse as it had not updated the drug
controllers’ office about the changed process, they led the new process
seeking a fresh license. The company argued that the situation had been
rectified once the Karnataka’s Drugs Control Department issued a fresh
license in March 2006.
The above news indicates that the company is not keen on the
procedures and is willing to correct only when identified and informed.
Biocon would have continued with its old procedure violating the
guidelines of the Drugs Control Department of Karnataka, had it not
been identified during the routine inspection.

This also indicates that Biocon’s shift from Bengaluru to Andhra Pradesh
is not only for the effluent treatment facility, but for other reasons as
well.

CONCLUSION

Though many well-informed Indians are happy about the achievements

of Kiran Mazumdar and her biotech company Biocon, there have also
been several adverse criticisms against the unethical practices followed
by the firm. In the drug industry, it is important for a home-grown
company like Biocon to be innovative in its practices with a view to
making avaliable to the country’s poor medicines at affordable prices.
But while doing this, a company should not indulge in unethical
practices that tarnish the image of the country’s producers and their
products. This is a lesson we should learn from this case.

KEY WORDS

Biocon • Patented products • Joint venture (JV) • Memorandum of

Understanding (MoU) • Oncology • Diabetology • Cardiology • Multilevel
relationships • Global clientele • Unethical practices • Proprietary
fermentation technology • Effluent treatment plant • Clinical trials

DISCUSSION QUESTIONS

1. Discuss the singular characteristics of Biocon as India’s fast-growing

technology enterprise, while tracing its growth.
2. What are the problems associated with conducting clinical trials in India?
How has Biocon circumvented them?

FURTHER READINGS
Basu, I., “India’s Clinical Trials and Tribulations,” Asia Times, 23 July
2004, available at www.atimes.com/atimes/South_Asia/FG23Df03.html
BBC News, “Drug Trials Outsourced to India,” 22 April 2006, available
at http://news.bbc.co.uk/2/hi/south_asia/4932188.stm
Gulhati, C. M., “Debate: Should Clinical Trials Be Allowed in
India?” Business Standard, 18 February 2004.
––––––, “Needed: Closer Scrutiny of Clinical Trials,” Indian Journal of
Medical Ethics (January–March 2004) 12 (1), available
at www.issuesinmedicalethics.org/121ed004.html
Srinivasan, S., “Indian Guinea Pigs for Sale: Outsourcing Clinical Trials,”
India Resource Centre, 8 September 2004, available
at www.indiaresource.org/issues/globaliation/2004/indianguineapigs.h
tml