Indian biotechnology firms are steadily moving up the value chain by offering research and development services for global pharma companies to aid drug discovery and manufacture.

Companies are offering services in drug discovery and validation based on pathway analysis (that is, analysis of how toxic or radioactive substances reach humans), genomics (study of gene sequences in living organisms), proteomics (large-scale study of proteins) and translational research (clinical investigation with human patients or volunteers).

"These specialised teams are led by scientists of Indian origin, who have returned from the West following long stints in this field. They have set up their own companies or have joined existing firms here," said Joseph Manoj Victor, senior research analyst-healthcare, Frost and Sullivan.

Earlier, Indian biotech companies only provided low-level R&D services in drug discovery. The preclinical and clinical services were offered at 40 to 60 per cent of the cost incurred in western countries.

Pharma companies across the world, which are suffering from a research drought, see these India-based services as complementing their outsourcing model. They are, therefore, entering into partnerships, involving significant cost arbitrage and quick turnaround time.

"The opportunities provided by the Indian biotech compnaies have compelled global pharma firms to take the partnerships to the next level. They sign co-development agreements, under which the Indian companies will take a drug through the pre-clinical and clinical development stages, and will be paid on milestones achieved and will also be given a share of revenues," Victor said.

"Co-development agreements are leading to interesting models," said Kiran Mazumdar-Shaw, chairman and managing director, Biocon [Get Quote] group. "Today, global pharma firms seek partnerships with companies in India and China based on intellectual property (IP) sharing, which involves carving-up markets and sharing licensing revenue."

A startup firm, Connexious Life Sciences, has signed an agreement with the Danish pharma company, Rheoscience, to discover drugs for obesity and type-2 diabetes using a biology-based system to screen new molecules.

Some companies have gone the extra mile to set up dedicated R&D facilities for their partners.

For instance, Biocon's contract research subsidiary, Syngene International, has set up a dedicated centre for Bristol-Myers Squibb (BMS). This centre -- built and staffed by Syngene -- will contribute significantly to BMS's global drug discovery and early drug development work.

"Along with drug discoveries, companies such as ReaMetrix and XCyton Diagnostics are looking at alliances to bring down the cost of diagnostics in India," said Shrikumar Suryanarayan, director general of ABLE-India.

"This model is evolving and has led to a few garage startups develop portable medical devices including heart and blood pressure monitoring equipment," he said.