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BIOTECHNOLOGY

THE WHIPPING UP OF CREAMY LAYER

CHAIRMAN’S OPENING REMARKS

PRESENTED AT THE 48th NATIONAL COST CONVENTION


OF THE
INSTITUTE OF COST & WORKS ACCOUNTANTSOF INDIA
19TH JAN 2007
K V BALASUBRAMANIAM
MANAGING DIRECTOR - INDIAN IMMUNOLOGICALS LTD
IS BIOTECH REALLY CREAMY…AND SAUCY ?
IS BIOTECH REALLY CREAMY…AND SAUCY ?

Answer would be :

“don’t really know”….. by……agriculture biotech


“maybe” ………………..by……industrial biotech
“definitely yes………....by……pharma biotech
IS BIOTECH REALLY CREAMY…AND SAUCY ?

Reasons:

“don’t really know”….. by…..agriculture biotech


Strong resistance from environmentalists
“maybe” ………………by……industrial biotech
Promise of bio fuels and bio materials still on paper
“definitely yes………...by……pharma biotech
Already tasting the cream
WHY IS PHARMA BIOTECH SO GUNG HO ?

Past research -> Patients differentiated, but not medicines.


30 % do not benefit from generalised medicines.
New research -> Medicines differentiated & personalised medicines

The key for this in biotech…..


……understanding life and what drives life at molecular level.

The result so far…..


100 biotech medicines
$ 85 bio market in $ 500 bio pharma market ( i.e 17%)
350 drugs in pipeline
Growing at 15% p.a as compared to market growth of 9 % p.a
WHY IS PHARMA BIOTECH SO GUNG HO ?

Fuelling this is..

Rising costs of medicines due to rising research costs


$ 1.1 bio to develop new drug
Need block buster drugs with sales potential of 2 bio in 3-4 years
New drugs… “old wine in new bottle ?”
Drying up of product pipeline
Biotech offers a paradigm change
Niche segments to start with, but potential busters.
IS PHARMA BIOTECH SO SAUCY ?

Not really…

Understanding life is itself complex, let alone develop drugs

Is not about making a better mouse trap


It is discovery research all the time

Regulatory pathway tedious


….and also hazy and evolving
Research expensive
Intellectual property ( IPR) thickets to overcome
Long lead time to marketing approvals
A COST ACCOUNTANT’S ROLE IN PHARMA BIOTECH
RESEARCH
Few companies keep correct track of research costs per product or
activity….. Put sense into researchers
Research is a collaborative effort…..Build a cost base for research
choices
Research is with unpredictable outcomes…..decision trees and analysis
MANUFACTURE
Direct costs low, indirect costs high………It’s all about proper overhead
allocation
MARKETING
International markets, different regulatory approvals…. cost of market
entry and potential benefits not analyzed
Pricing decisions not so much on costs of making, but costs of
treatment ( individualized)……customer differentiated & treatment costs
THANK YOU