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Life sciences will be at the top of investors’ list

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Life Science Vision Capital, (part of LSV Consortium) is a venture creation and investment firm exclusively working in the field of digital healthcare and life sciences. It makes initial investments at levels from early seed capital to early clinical development stages of medicines and platform technologies. Recently, along with Aster DM Healthcare and Social Alpha, it established XHealth Innovation Labs, an industry-led incubator and accelerator. Shu Joshi, Managing Partner, LSV Capital Partners explains how the novel coronavirus pandemic has enabled us to look at things with a new perspective, why life sciences industry is less susceptible to market dynamics during recessionary periods and how it can become a growth engine for India’s economy, in an interview with Lakshmipriya Nair

The coronavirus pandemic has made it evident that we need to fortify our defence against current and emerging diseases. What kind of new opportunities will it open up for the start-ups in the life sciences sector? Which will be the major areas to focus on? 

I think it would be fair to say that the world is waking up to new realities every-day amid the lockdown gloom. The pandemic induced crisis has enabled us to look at things with a relatively new perspective. It has propelled us into recalibrations, innovations and new ways of engaging, personally and professionally.

One direct beneficiary of the ensuing crisis is digital healthcare and the life science sector. New opportunities in life science and digital healthcare sector range from telehealth to remote patient care to digital therapeutics to newer algorithms for improved insights on patient awareness, on diseases, adherence to treatments regimen, disseminating real-time information on developments in therapy areas etc. Pharma companies have also started collaborating with start-ups after recognising the potential of digital platforms, mobile apps, and social media for giving scientific detailing. We see a huge potential of deep tech space (AI, deep machine learning, NLP) where tech-enabled solutions can expedite the rate of drug discoveries and applications include everything from gaining deeper data insights, computational and model-based engineering, virtual analysis, and digital continuity to reduce cost and streamline operations. It is abundantly clear that these differentiated offerings must align with an appreciating virtualised economy and where the service is as important as the physical product.

Another major opportunity is in global bio-reagents space. The availability of novel technologies such as highly personalised and predictive throughput screening, pre-disease and biomarker identification, gene therapy and genome editing for earlier disease detection, and rapid POC diagnostics is driving the demand for reagents. The popularity of DNA chips, proteomics, and combinatorial chemistry in drug discovery area will further boost reagent usage and this global biotechnology reagents market is expected to grow by $37.87 billion by 2025.

The stark reality is that COVID-19 has revealed to the world that drug discovery, releasing self-diagnostics/POC kits, conducting clinical trials, and launching therapies happen in slow motion. Fighting the pandemic requires much faster processes. At the same time, there are significant opportunities for life sciences companies to drive digital innovation and offerings beyond traditional therapies that inform health decisions, improve efficacy, and drive better patient outcomes.

How has COVID-19 emphasised the need to converge R&D, start-ups and industry in the life sciences sector?

From academia to businesses and clinicians, the sector has never been more at the forefront of society. COVID-19 has highlighted some gaps where we need to be better prepared. However, it has also seen some of the best in the industry. Life sciences companies and the healthcare sector in general, are under pressure to increase R&D productivity in therapies and drugs, regardless of whether they are traditional pharma, med-tech, or new entrants focused on consumer health. Whether it’s the manufacture of drugs, heart monitors, or delivery of digital health platforms the common thread for life sciences companies is to accelerate digital transformation to drive innovation. What COVID-19 has done is that it has brought the entire life science ecosystem together and has made it stronger by highlighting the weaknesses. One such weakness is the dependency of pharma supply chains for precursors or raw material from china which I believe is something that must have worried every generic/API promoter in the country at some point in the past two months. You can take the example of testing kit/swabs or PPEs for which the country was dependent on external players – now because of the pandemic, now the entire production requirement is fulfilled by our local manufacturers.

COVID-19 has proven that we haven’t spent enough on life sciences and the digital healthcare sector. Specifically talking, what India needs to do is create close industry-government collaboration and couple that with a rapid addition to its life sciences workforce to tap the post-COVID opportunities. Time is now to further strengthen the life sciences sector to meet the demands of the future and this will require a multi-dimensional approach. One such initiative is X Health Innovation Labs, where we are collaborating with global partners to incubate 20 start-ups companies in life science, digital healthcare, and med-tech space. We aim to incubate 100 companies in the next five years.

How could this be the ‘best of times or the worst of times’ for the life sciences sector? What do the startups in this sector need to do to make it the former?

The COVID-19 pandemic has caused life sciences organisations to adjust to supply chain and clinical development disruptions and financial challenges that would have previously been unthinkable. On one hand, this pandemic is lowering the demand for chronic treatments, narrowing the bandwidth of healthcare providers, disrupting global supply chains and internal business operations, and affecting the wellness of employees but on other hand, life sciences companies are not just the recipients of these seismic shocks. They are also solutions providers, with rapid diagnostic testing and treatments today, and the development of vaccines in the midterm. I would say every pandemic point out the weaknesses in any ecosystem. Start-ups need to understand the pain points and target them with cost-effective solutions.

Post-COVID-19, is it likely that life sciences will lead the success stories coming from India? If yes, what will be drivers of this trend?

Absolutely, I believe in that. Look, life science companies are long-term investments requiring patient capital and in many cases, these investments are well hedged/placed to see through dips in the market. The pandemic has distributed the funding equilibrium, however, as we continue to battle the pandemic it is important to start to look forward at what trends will arise and their impact.

  1. Increased M&A activity – Life science has always been a comparatively active market for M&A but as market caps decrease it will present an opportunity for cash-rich pharma to acquire new assets.
  2. Regulatory overhaul – Updated regulatory pathways to boost innovation and speed to market. Post COVID-19 we may see a shift in how clinical trials are designed, conducted and monitored, an area where India can become a global leader.
  3. Public sector investment in facilities and services – The pandemic has highlighted gaps where we need to be better prepared. The government’s efforts to boost sector were warmly welcomed but will only be effective if we have the right facilities so increased public sector investment in life science incubation parks, bio-science labs is a must. This may also create unique joint-venture opportunities between the public and private sectors.
  4. Life science real estate developments – These are long-term propositions. These centres need to be sustainable over the long-term and as such, they should be able to manage bumps in the market. Many of India’s largest upcoming life science projects have continued development throughout the pandemic.
  5. Diversification of portfolios towards alternatives: The repercussions from this pandemic will be felt harder in some sectors than others. As investors and developers begin to reassess their portfolios, they will begin the search for alternative, growth sectors, of which life science and digital healthcare should be at the top of their list.

Actually, the good part is that the life sciences industry is less susceptible to market dynamics during recessionary periods. We have seen it in the past. Its business has been driven primarily by its intrinsic innovation cycle during the past three recessions.

What are the challenges in this sector that prevents large scale investments in life sciences startups? How can investments in this arena be de-risked to a certain extent? What will be the role of both, government and the private stakeholders in doing so? 

There is no doubt that life science is a tightly regulated sector and the government has a huge role to play. In India, we have several regulators across different ministries looking over the sector. The National Pharmaceutical Pricing Authority (NPPA) is the authority to set the prices for major bulk drugs and formulations and is within the Ministry of Chemicals and Fertilisers. The Ministry of Health and Family Welfare manages the safety, efficacy, and quality of drugs and medical devices through the Central Drugs Standard Control Organisation (CDCSO). In the same ministry, the National Health Portal (NPH) of India is working on Electronic Health Record (EHR) standards, which will also be governed by the Personal Data Protection bill which is handled by the ministry of electronics and IT. They are working on National Electronic Health Authority (NEHA) which was set up at the National Institute of Health and Family Welfare (NIHFW). All life sciences research is conducted under the guidelines established by the ICMR, the Ministry of Science & Technology and the Department of Biotechnology and grants are dispersed by other nodal bodies. Not to forget the AYUSH Ministry along with NITI Aayog also plays an important role in the life sciences sector. The provisions of the new Personal Data Protection Bill will make it possible to develop a secure electronic health record (EHR) for every individual so that their necessary healthcare eligibility, data, and payments/insurance are available as required. Large local data lakes will enable AI and computational biology to develop therapies targeted for the Indian genome. The government needs to untangle this complex framework to promote easy venture building in the country.

The second challenge in the absence of an academia-industry collaboration structure. How often do you get to hear stories that XYZ University spun off a successful corporate entity in the life science space? How many life science graduates/PhDs learn to commercialise their bioprocess research? There is a strong need to connect academics and industry in a global research-and-venture-driven environment and life science start-ups should work closely with various regulators and policy-makers through empowered working groups to drive up investment, growth, and jobs.

The list is long but I hope you get the idea.

What needs to be done to ensure that more original research and innovations in life sciences emerge from India in the future?

We need more government coordinated policies with outset capacity to mend the funding gap and getting the workforce ready for the global challenges. A significant level of government and private funding (we are discussing funding worth thousands of crores of rupees) is required to drive original research culture in India. The government could create an expert panel that can select the top 20 research areas such as biosensors, personalised medicine, genomics, computational biology, virology, epidemiology, neuroscience, stem cell research, etc. Multi-year research grants could then be provided to top scientists (in India or collaboration with international academicians) to pursue their research and train graduate and postgraduate students. Once this funding requirement is covered, research productivity could then be judged on objective global metrics like high-quality citations, impact factors to ensure accountability and quality.

We also need to back new life sciences enterprises with venture capital financing. The government has established a Rs 10k crore fund-of-funds to support venture capital funds. It might be possible to allocate a significant fraction of this money solely to life sciences funds so that funds can provide the necessary financing and support to life sciences start-ups since the incubation period and exit cycles are longer in life sciences in comparison to other venture-backed industries.

To sum-up, I would say we need a four-pronged approach. As a first approach, we need to ensure that there must be a close industry-government collaboration to develop and fine-tune regulations to promote fast growth for the sector. Secondly, we should consider whether we are providing enough financial support for sector growth. Thirdly, we have to ensure that we rapidly build up our life sciences workforce so that we can have enough talented people available for both the health care and the life sciences sectors and as the fourth approach, we must leverage the fast-emerging cross-sector cloud and network ecosystem to connect all our life sciences activity.

I, very strongly, believe now is the perfect time for the Indian life sciences sector to take advantage of these circumstances to not only protect citizens but also become a growth engine for India’s economy.

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