BackA rush for biotech parks, but will they all bloom?
A rush for biotech parks, but will they all bloom?
PremiumBiotech rush: The Bangalore Helix biotech park, which is expected to be inaugurated in three weeks, will be the first to open among more than 20 such parks in various stages of development and concept
Bangalore: Three weeks from now, the first phase of Bangalore Helix, Karnataka’s much-delayed biotech park and the country’s seventh, will be inaugurated, according to state government officials.
The park isn’t out of place in a state that has 183 of the 340 biotech companies in the country. It will be the first to open among more than 20 biotech parks that are in various stages of development and conceptualization—highlighting a biotech gold rush not so much among entrepreneurs wishing to enter a business that could be the next big thing, but among real estate developers and state governments.
The rush doesn’t make sense because experts say biotech companies would prefer to be located in a few geographic clusters. “Everybody comes to us for a biotech park," says Maharaj K. Bhan, secretary of the department of biotechnology. “But we try not to encourage them and point out the problems in their thinking."
It’s good that state governments are today thinking of knowledge parks, says Bhan, but eventually, the most productive parks would be concentrated in a few clusters, in Hyderabad, Bangalore, Pune, and a few other cities.
The presence of a large number of biotech companies ensures that Karnataka has at least some of the ingredients required for that network. And a first-mover advantage ensures that Hyderabad does too.
Hyderabad vs Bangalore
Hyderabad scored an impressive victory over Bangalore—the two cities are arch-rivals when it comes to attracting investments from information technology companies—when it started a biotech cluster called Genome Valley in 2003. The city is now expanding its biotech base even further. Genome Valley, which has two phases covering around 400 acres and hosts the Shapoorji Pallonji Biotech Park and ICICI Knowledge Park, will soon have a third phase—a 414-acre biotech park at Karakapatla, around 20km from Genome Valley. The third phase is being developed entirely by the Andhra Pradesh Industrial Development Corporation (APIDC).
“More than 80% of land allotment is over, both in the 100 acre special economic zone (SEZ) and 314-acre non-SEZ segments (of this)," says B.R.K. Sarma, a general manager at APIDC.
Will all of them do well? (Graphic)
Karnataka’s own 106-acre park has been delayed despite the head start the state enjoys in the sector. Biotech exports from Karnakata crossed Rs1,000 crore in 2006-07, when India’s total biotech exports were Rs2,200 crore, according to a survey by the Association of Biotech Led Enterprises, a trade body and Biospectrum, a trade journal. “The Karnataka government, although slow for a variety of reasons, now has a solid plan for the park," says G. Padmanabhan, a distinguished biotechnologist at DBT, former director of the Indian Institute of Science and a member of the Karnataka Vision Group on Biotechnology.
Even though the buildings on site don’t look ready, Karnataka’s IT and biotechnology secretary M.N. Vidyashankar says the first phase, built at a cost of Rs11.76 crore, will be inaugurated in three weeks. Located in Electronics City, it will house the Human Genetics Centre and the Institute of Bioinformatics and Applied Biotechnology.
Alexandria Real Estate Equities, a Pasadena, California-based real estate investment fund which has built nearly 170 biotech and science parks in the US, will then develop the next two phases of the Karnataka park in association with TCG Real Estate, part of Kolkata-based TCG Life Sciences (itself part of a group of companies promoted by serial entrepreneur Purnendu Chatterjee), at an estimated cost of Rs550 crore. Though Alexandria CEO Joel Marcus refused to comment, Vidyashankar says the developer has promised to get more than a dozen US companies to “set up their operations here". The Karnataka park, however, will have competition.
The state of parks
Gujarat has committed to build the largest single biotech park in India, spread over 650 acres in Savali near Vadodara. Besides the state government, TCG Real Estate, and Mumbai-based real estate development company Akruti City (formerly known as Akruti Nirman Ltd) are the promoters of the park.
“An investment of around Rs500 crore has been committed (to this project) in the next three-four years," says Akshay Saxena, mission director at Gujarat State Biotechnology Mission. That includes investments by the private developer and the cost of leasing around 45 acres of land.
“For the remaining area of around 600 acres, we expect investment of Rs2,500-3,000 crore in the next five years," adds Saxena. However, Gujarat is still “awaiting environment clearance from the Centre and SEZ notification".
“The companies cannot start their operation, even though they are raring to go," according to Saxena.
In Maharashtra, a 103-acre International Biotech Park (IBP) in Pune is already operational and the state has two more parks lined up. “An agri-biotech park in Aurangabad and another in Mumbai-Pune corridor will be built," says Prasanta K. Biswal, of TCG RE, which developed IBP in association with Maharashtra Industrial Development Corporation.
While the promoters say the Pune park is a “great hit", IBP’s own website seems to be frozen in time. One statement on the site estimates that the Indian biotech industry will touch $2 billion in revenues by 2002 (the industry’s revenues crossed $2 billion in 2006-07). And the site does not give any information on tenants; it lists only two names: Emcure Pharmaceuticals Ltd and Shreya Biotech Pvt. Ltd.
It isn’t easy to measure the success of parks. Some large parks remain incomplete for various reasons while smaller ones, such as the Lucknow biotech park, are not just up and running but have managed to attract enough companies. The Lucknow park was actually set up by the Union government but DBT’s Bhan does not want to replicate this. He prefers that industry take the initiative. However, the small 8-acre park at Lucknow has spurred biotech activities and even attracted some big builders.
P.K. Seth, chief executive of the Lucknow park, says the park has attracted more than five US companies that have set up facilities in it. More importantly, it seems to have provided a model for future biotech parks with its strategy of leveraging the presence of local research institutions to attract companies to the park.
Seth claims that real estate developer Ansal Properties and Infrastructure Ltd wants to build a 59-acre biotech park in its coming hi-tech city on Lucknow-Sultanpur road and Boston Investment Corp. wants to set up a 200-acre bio-pharma and biotech park on the Lucknow-Kanpur road.
Ansal API is waiting for its park to be notified as a special economic zone.
Measuring success
Will all the biotech parks that are coming up succeed? “It’s a demand and supply issue now. But if the government (state or Union) is a partner, and public money is going into such projects, then it has to decide whether it wants to have a blanket policy of encouragement or promote pockets of excellence," says Utkarsh Palnitkar, industry leader of health sciences at audit and consulting firm Ernst and Young in Hyderabad. Several biotech park promoters in the country are clients of Ernst and Young. Palnitkar says developers are taking a calculated risk when bidding for these projects.
The government, for its part, needs to look at the technical capabilities of companies wishing to operate from the parks. Palnitkar adds: “It’s important that a technical committee examines all aspiring tenants or there is a risk of biotechnology getting diluted."
That doesn’t seem to be happening. Even in the third phase of Genome Valley, no allotment has been made to any “exclusive international biotech players" and, according to APIDC’s Sarma, “no technical committee examines the applications". And Padmanabhan says although he hasn’t studied all biotech parks, the “possibility of real estate investment in the name of biotech park is real".
Not every state that has a park being developed will succeed, says TCG RE’s Biswal, who admits biotech is not just a land development activity.
Globally, such parks have had mixed results with some of them having a profound impact on the local economy, and some others proving damp squibs. For instance, the Research Triangle Park in North Carolina, US, and the Biopolis in Singapore, have been very successful. On the other hand, a 2004 study by Scott Wallsten of the American Enterprise Institute for Public Policy Research, a think tank, to assess the impact of such parks on job growth and venture capital in the US, found that on average such a park made no difference to the region’s economic growth.
Wallsten has not updated his study since then, but thinks that setting up biotech parks might prove helpful in an emerging economy such as India if it is accompanied by improved infrastructure and exemptions from the onerous regulations that businesses would otherwise face.
“However, there is always the risk of it becoming merely a fad," says Wallsten in an email interview.
“More often than not it simply becomes a boondoggle for whatever developer gets the construction contract and a nice tax break for businesses that move in," adds Wallsten. He says that if a business simply moves from outside the park to inside the park then the net impact of the park is zero, even though the park can say it attracted a business.
To avoid some of these issues, DBT is setting up a Biotechnology Industry Research Assistance Council (BIRAC), a society that will function along the same lines as the Software Technology Park of India which was instrumental in promoting India’s software industry in its early years.
“The industry should have come forward to set up this long ago but now we’ve initiated the process and within three months this should be instituted," says Bhan. BIRAC will be funded by the government, and will act as DBT’s industry arm.
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