Bangalore: One of the world’s largest investment banks focused on life sciences, the San Francisco-based Burrill and Co. is raising a $150-$200 million (Rs591 crore-Rs788 crore) India fund, which it expects to close in the first quarter of 2008. The bank is currently actively scouting for investment opportunities in India, and could make its first investment even before the Burrill-India fund closes by deploying capital from its global life science fund.
Calculated risks: Tania Fernandez, a director at Burrill and Co. says there is minimal, early stage risk capital in India.
“The Burrill-India fund will reach out to both domestic and international investors,” says Tania Fernandez, a director at Burrill. The objective of the fund, she adds, is to invest in the rapidly growing life sciences industry, both inside and outside India, and to increase “India content” in the global life sciences market place.
Burrill’s interest in India may signal that after ignoring the Indian life sciences industry for long, global investors are finally taking its pulse with the first few investments likely to be announced within the next three months.
MPM Capital, another California-based company which manages around $2.5 billion is expected to close one or two investments in India in the next few months. In April, Mumbai-based Reliance Life Sciences, made an undisclosed investment in MPM’s BioVentures IV fund, which has a corpus of $550 million.
Since 2005, when India adopted the new World Trade Organization-compliant patent regime, the Indian life sciences industry has gained currency globally because intellectual property (IP) is the backbone of this high-risk, slow return-on-investment sector. “I am not surprised that these investors are coming to India,” says Sanjiv Kaul, managing director at ChrysCapital, a New Delhi-based private equity firm that has $2.25 billion under management and is one of the earliest funds to have a core life sciences segment focused on India. Kaul adds that there will be more venture capital flowing into this sector in the near future.
That could help small start-ups and entrepreneurs because most funds operating in India seem to lack the risk appetite required to invest in early-stage enterprises and long-haul research start-ups. “Yes, it is true that there is considerable money in the country but a lot of money available in India today is really private equity capital, which is often directed towards market expansion plays,” says Fernandez.
There’s?“minimal,?early stage risk capital” in India, she adds, indicating that Burrill is open to well-calculated risks and the potential long time-to-market associated with really compelling life sciences ventures.
Such investments, by Burrill and others could change the dynamics in life sciences investment here. “Global investors can bring new networks of advisers, mentors, scientists, customers, and strategic partners,” says William Greene, a general partner at MPM. “The US and European venture capitals have a tradition of true risk equity investing—investing in technology and IP development in addition to growth equity,” he adds.
Burrill, which has invested in 70 firms so far and has close to $1 billion under management, is looking to invest $2-$10 million in any given Indian company, across different stages from early to mezzanine (mid-stage). Burrill plans to do syndicate deals in association with domestic investment partners in India. Such deals would involve lower risks for each of the investors concerned because they are investing smaller sums. The firm believes active syndicating is not popular in this country and sees an opportunity in this.
Being interested in the entire life sciences spectrum, Burrill is particularly upbeat on agricultural biology (or agbio) and is looking for companies that are leveraging technology to improve India’s agricultural productivity. “We feel we’ve not capitalized enough on the potential of agbio in the country. The Bt cotton story in India was a huge success,” says Fernandez. Burrill also claims to differentiate itself from other venture capital funds in that besides making conventional investments, it will dig out “hidden gems from the country” in terms of technology and scientific talent.
MPM’s focus areas include clinical and preclinical outsourcing, biotech NCEs (new chemical and biological entities) and biosimilars. “In India, we certainly are interested in growth stories, but also in helping entrepreneurs develop de novo (or new) technology and IP,” says Greene.
Both these investors are looking to play active roles and lead investments rounds that they pursue here. “It does take a rather magical mix of solid and well trained scientists, entrepreneurs, capital and environment, but just because Cambridge, Massachusetts, and South San Francisco have this, it does not mean it can’t exist elsewhere,” says Greene.
Still, some concerns remain: overseas venture capitals say India has done reasonably well to have a regulatory framework, but needs to develop its IP landscape with more clarity, and evolve “processes for product approvals”. Burrill thinks these have not been implemented rigorously and are subject to fluctuations, which can at some point discourage international investors.
Experts here say while an influx of foreign capital will cater to varied needs, from angel funding to buyouts and acquisitions, Indian entrepreneurs will have to reciprocate by rising up to global standards. “What remains to be seen is whether India can deliver,” says Kaul.