BUSINESS
INNOVATIVE The Plafractor, a unique fermentation vessel developed by Biocon, is protected by worldwide patents.
asia
AFERMENTOR OF OOOD RESULTS Mazumdar-Shaw is leading Biocon's growth in pharmaceuticals and contract research JEAN-FRANÇOIS TREMBLAY, C&EN HONG KONG
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and around the office of Kiran Mazumdar-Shaw, the cool-headed chairman and managing director of Biocon, a group of biotechnology companies in Bangalore, India. Her sharp but harried assistant, Monica Robinson, runs traffic and keeps her boss on track. Everyone is vying for the chairman's attention. Mazumdar-Shaw has just returned from a trip overseas and is due to leave again in a few days. John Shaw, the Scot whom MazumdarShaw married in 1998 and who now acts as Biocon's director of international business, dashes in and out to consult with her on
pressing matters. Shefinds40 minutes for an interview with a reporter. She also attends to her mother and agroup ofrelatives eager to visit the famed corporation. Another caller is a clerk from a Bangalore travel agency who needs a signature for a client. Mazumdar-Shaw serves as the Irish Consul in Bangalore, and she issues the visas. There is less bustle away from the office. The business of conducting pharmaceutical research for foreign clients, harvesting enzymes, or producing U n approved pharmaceuticals through fermentation proceeds at a suitably unhurried pace. The scientists and technicians are focused. Informal chats in Biocon's
cheerful cafeteria reveal that morale is running high. These are portentous times for Biocon. Business is booming, as the decision to enter the generic pharmaceutical chemicals business is paying off handsomely Annual sales are approaching $60 million. Employment will leap from the current 800 to about 1,300 by September 2004. The group is expanding its facilities for research and production at a nearby site that is five times larger than Biocon's original location, where all the space is occupied. To help pay for all of this, Biocon plans a public stock offering. The Biocon group consists of several companies operating independently of each other. The traditional business, which began when Mazumdar-Shaw founded the firm in 1978, is making specialty enzymes that are mostly sold to foreign food companies. Two subsidiaries perform drug discovery research and clinical trials on a contract basis for foreign drug manufacturers. Through another subsidiary Biocon produces active pharmaceutical ingredients (APIs) for the U.S. and European markets. Although Biocon began the API business only recently, sales of APIs already account for most of the growth in the group. This is no small achievement, as India boasts of hundreds, if not thousands, of pharmaceutical chemical companies eager to sell abroad. Biocon's success is the result of a carefully considered strategy Mazumdar-Shaw notes, "We didn't do the obvious thing of going for antibiotics, which is what most of the companies in this part of the world would do." Instead, she says Biocon opted to apply its expertise in fermentation technology to develop new processes for complex pharmaceutical molecules that were about to lose their patent protection in the U.S. and Europe. She explains that focusing on the more complex products limits the competition that Biocon faces. BIOCON FOUND that statins, a family of cholesterol-lowering agents, best fit its plan. The firm developed a production process that is "a novel technology that has absolutely no infringing properties about it," Mazumdar-Shaw claims. Lovastatin, sold by Merck & Co. as Mevacor, went off patent in 2000, and Biocon entered the
Customers like the idea of a one-stop shop with capabilities to discover new drugs, test them, and find the most efficient way to produce them. HTTP://WWW.CEN-ONLINE.ORG
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BUSINESS market last year. Within six months, sales oflovastatingrewto $10 million, she says. "We have a whole statin strategy," Mazumdar-Shaw declares. Next year, simvastatin— another Merck drug, sold as Zocor—will go off patent. Other statins will later on become fair game for generics producers. Biocon has processes for them all. And in addition to statins, Biocon will soon begin manufacturing human recombinant insulin; it will be the first company in India to do so. One reason Biocon is confident about not infringing other companies' production patents is that it makes use of a production system, called the Plafractor, that is itself protected by worldwide patents owned by Biocon. Invented by Biocon, the Plafractor is essentially a solid-state fermentation vessel that also can perform the extraction of desired product. Most competitors have to use different vessels for fermentation and extraction. Mazumdar-Shaw says Biocon does not intend to license the Plafractor technology to other firms anytime soon and that, if it does, it will be to those that are not competitors. Biocon's enzymes unit, which represents about 20% of sales, puts it in the same business as the better known Western firms Genencor and Novozymes. One key difference, Mazumdar-Shaw says, is that Bio-
of commodity product that they sell to the starch and detergent industries. This, Mazumdar-Shaw says, partly explains why Biocon appears as a marginal player in the global enzyme business. Biocon branched out from enzymes in 1994 when it set up a subsidiary Syngene, to provide contract drug discovery servic es to foreign pharmaceutical companies. Syngene has done very well since it was
It was a real blessing in disguise that the brewing doors were shut to me and that I found a great new avenue in biotechnology. I am grateful that the brewing world did that for me." formed, Mazumdar-Shaw says, and that accounts for about 10% of sales. The con tract research business works by word of mouth, she adds, and Syngene has devel oped a good reputation for providing val ue for money "Many of our customers tell us that our skills are as good as, if not bet ter than, what they can get in the U.S. or Europe—and, of course, at a fraction of the cost." Syngene is located at the main Biocon site in Bangalore. A few miles down the road, another contract research company, Aurigene, is completing construction of
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L E A D E R S H I P Mazumdar-Shaw made Biocon one of India's leading biotechnology groups.
con makes only specialty enzymes that are mostly used in food, brewing, and health care. She says the much higher enzyme sales of companies such as Genencor or Novozymes come from the large quantities 16
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Syngene's ability to maintain the con fidentiality of customers' intellectual p r o p e r t y has been d e m o n s t r a t e d , Mazumdar-Shaw says, by its decade of successful operation. She says this track record is more important than the issue of physical location. Syngene now employs 250 scientists, but this will grow to 4 0 0 by next year. At present, about a quarter of its scientists
its facilities. Aurigene is a subsidiary of the Hyderabad-based drug company Dr. Reddy*s, and it is setting up in Bangalore to convince customers that their intellectual property will not leak from Aurigene to its parent.
hold Ph.D. degrees, and many were re cruited back to India from U.S. and Euro pean universities. Syngene has expertise in synthetic chemistry, combinatorial chem istry molecular biology, and mammalian cell culture. In 2 0 0 0 , subsidiary Clinigene was formed to perform clinical trials. Mazum dar-Shaw says customers like the idea of a one-stop shop with capabilities to discov er new drugs, test them, and find the most efficient way to produce them. LOOKING AT Biocon today, it's difficult to imagine its beginnings 25 years ago. Mazumdar-Shaw formed the company af ter a major setback. Returning from Aus tralia—where she had become a master brewer—Mazumdar-Shaw could not get the job she wanted in an Indian brewery Even though her father, who had en couraged her to follow in his footsteps, was the brewmaster for United Brewery, the company would not let her brew The maledominated brewery execs, she says, were "happy to allow me to manage their labo ratory or to be head of quality control, but they were very reluctant to allow me to head their brewing operations." United produces Kingfisher, India's leading beer. She formed Biocon India in 1978 as a 70-30 joint venture with Biocon Biochemicals, an Irish producer of enzymes. Working out of a garage, MazumdarShaw, who had studied biology before beer brewing, originally focused on sim ple tasks such as extracting enzymes from papaya. Business somehow grew from these im probable efforts. N o t lacking in vision, Mazumdar-Shaw made the ambitious pur chase in 1983 of the 20 acres on which Bio con is still located. At the time, she didn't expect ever needing more than 10 acres, HTTP://WWW.CEN-ONLINE.ORG
but the 20 -acre piece was within her budget. Back then, the site was served only by a small road; today the road has four lanes and heavy traffic. One of Biocon's most important technological breakthroughs came as early as 1984. Mazumdar-Shaw and her research team figured out a fermentation process for Koji enzymes, which at the time were available only from Japan and were quite costly Biocon's immediate goal was to export Koji enzymes to the U.S. and Europe, where they are used in food production. But by discovering how to produce Koji, Biocon also learned to master solid-state fermentation, something that is more tricky than the more widespread submerged fermentation methods. Mazumdar-Shaw says this breakthrough paved the way for development of the Plafractor, and for the company's subsequent entry into the pharmaceutical chemical business. In 1989, Unilever suddenly entered the picture. Through its specialty chemicals business, the Anglo-Dutch group had acquired Biocon Biochemicals and therefore the 30% stake in Biocon India. Mazumdar-
Shaw resisted Unilever's overtures to increase its stake in Biocon India. The partners nonetheless formed two 50-50 specialty enzyme ventures in Bangalore that were funded by Unilever but making use of Biocon's know-how The Indian company credits its relationship with Unilever for the adoption of world-class business practices, particularly in the area of health and safety IK OTHER WAYS, though, the partnership with Unilever was restricting Biocon's moves. Biocon gained "independence" from foreign companies when Unilever's specialty chemicals business was sold to ICI in 1997 Akey player in the negotiation was Shaw, who personally acquired Unilever's 30% stake in Biocon that year and later became a board member. Before joining Biocon, Shaw had spent nine years heading the Indian operations of a British textile company Mazumdar-Shaw says ICI remains a favored customer of Biocon. But it is since Shaw replaced Unilever as an owner of Biocon that the Indian group has registered its fastest growth. The Biocon group is now almost entirely owned by Mazumdar-Shaw and her hus-
band. The Industrial Credit & Investment Corp. of India, one of India's leading financial institutions, acquired a 10% stake when Unilever left as an investor. And a few key Biocon employees also own some shares earned through a stock option plan, but they cannot sell the shares on the open market because Biocon is not yet listed anywhere. This will change when Biocon seeks a listing on the Mumbai stock exchange later this year, Mazumdar-Shaw says. She has few choices on where to list, because Indian laws require Indian companies that go public to list first in India. The primary purpose of the listing, she says, is to raise funds to finance the company's expansion. Most of this expansion is taking place at a 100-acre site in Bangalore near its current location. Mazumdar-Shaw has come a long way since the late 1970s, when she formed Biocon because she couldn't get a job as a master brewer. "It was a real blessing in disguise that the brewing doors were shut to me and that I found a great new avenue in biotechnology" she says. "I am grateful that the brewing world did that for me." •
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