After patient nurturing over two decades, Reliance Life Sciences is investing in a new plant and looking to enter new segments. The biotechnology player could well be the next big thing from the Reliance stable

Reliance Life Sciences... would be graduating from making life-saving drugs mostly to treat patients in intensive and critical care to addressing unmet medical needs in rare genetic diseases

Mukesh Ambani
Chairman and Managing Director
Reliance Industries Ltd

It’s a scorching April afternoon in Dindori, about 45 minutes by road from Nashik. To make matters worse, we are outdoors at a dusty construction site. But the heat and dust don’t seem to bother the project teams that are focussed only on their deadlines. 

That’s because the teams have their task cut out. In barely a year, this place is set to become unrecognisable as the first phase of the fully integrated second manufacturing campus of Reliance Life Sciences (RLS)—the biotechnology firm fully owned by investment companies of Mukesh Ambani—is expected to be ready. Eventually, the project teams’ efforts are set to transform this undulating, rocky terrain into a picturesque location, with a lake to top it off. 

“Yes, it is an aggressive timeline and we are on track so far,” says the company’s President K.V. Subramaniam, as he takes us to an air-conditioned cabin (the ones you typically see at sites like these), providing us relief from the heat. The cabin offers a full view of the 160-acre campus housed in Maharashtra Industrial Development Corporation (MIDC) territory, in an area that is already a thriving business base for many marquee names of India Inc. 

Though the typical Reliance scale is evident, unlike with some of its illustrious sister concerns, here it is also mixed with caution—to paraphrase a Chinese proverb, this is a firm that is looking to cross the river by feeling for the stones. 

Incorporated in 2001, it has patiently nurtured its research and manufacturing capacity to become an end-to-end player, diversified its presence across segments, and now boasts of a portfolio of 43 products, and a workforce of 1,300. Thanks to this, it has outgrown its current 20-acre campus in Navi Mumbai, necessitating the Dindori project, for which it has earmarked Rs 4,400 crore—half of that amount is set to be utilised in the first phase. 

Explaining the rationale for the new facility, Subramaniam says, “This is a larger commercial scale facility for manufacturing plasma proteins, biosimilars, small molecule oncology products and vaccines. In phase II, there will also be commercial scale manufacturing facilities for gene therapy (a way to modify a person’s genes to cure diseases) and mRNA (a single stranded molecule carrying instructions to make proteins) products.” A biosimilar is a biological medicine that is highly similar to another that has already been approved by regulators.

Once these products get to even higher volumes in the market, there is the ability to expand the manufacturing facilities in the Nashik campus.       

The bet on higher volumes is a reflection of the dynamics of the biopharmaceuticals segment, which is growing at an impressive 25 per cent annually. 

With the campus coming up and a host of ambitious plans to go with it, the outlook is understandably buoyant. “Reliance Life Sciences, while continuing to strengthen the foundation it has created in medical biotechnology products, has taken up several novel initiatives in vaccines, peptides, gene and cell therapies, mRNA and oligonucleotides. In the process, it would be graduating its profile from making life-saving drugs mostly to treat patients in intensive and critical care in hospitals to addressing unmet medical needs in rare genetic diseases and disorders,” Mukesh Ambani, Reliance Industries’ Chairman and Managing Director, tells Business Today. Peptides are strings of amino acids that are called the building blocks of proteins.  

We make almost everything that we sell and the approach has been to continuously invest in manufacturing. The principle is to do it ahead of demand

K.V. Subramaniam
President
Reliance Life Sciences

Breaking It Down 

The buoyant mood is underpinned by a business that has been grown patiently and that is coming of age now. It has been nurtured with some basic guidelines that reflect the ethos of the group as a whole. 

Many years ago, Ambani told Subramaniam, “If you don’t invest in manufacturing, you will not get scale.” Mega projects like Reliance’s Jamnagar refinery or the one for petrochemicals in Hazira bear testimony to this reasoning. “We make almost everything that we sell and the approach has been to continuously invest in manufacturing. The principle we follow is to do it ahead of demand and that was one of the reasons for investing in a new campus,” he points out. 

But just what is the low-profile RLS all about? According to Subramaniam, 65, a three-decade veteran of the group, the company, predominantly, has a play in medical biotechnology-based products and services. “Most of the products we make are used in critical and intensive care in hospitals. You will not find our products in chemist shops,” he explains. 

“Biotechnology is where we chose to be,” says Subramaniam, picking his words carefully. It is an area with very good business potential, but for every success there are, quite literally, hundreds of failures. 

The company is clear about addressing unmet medical needs, and there is absolutely no room for error. “When you make a product, it goes into the body of a person who is critical. For instance, Reteplase (our product), is a clot buster for a patient [suffering from cardiac arrest], or albumin is for trauma, accidents or liver cases.” 

Besides, it is a long-gestation business. But as Vinay Ranade, the company’s CEO, puts it, “not as long as an innovator product and not as short as a generic product. Typically, we used to take four to five years and with stringent regulations for something like biosimilars, it is now at six to seven years.” An innovator product is one that has a new chemical entity that has received a patent on its chemical formulation or manufacturing process. Generics, meanwhile, are pharmaceutical drugs that contain the same chemical substance as a drug that was originally protected by chemical patents.

In terms of numbers, RLS’s revenues have zoomed 25 per cent on an annualised basis over the last five years, Subramaniam points out, while Ebitda (earnings before interest, taxes, depreciation, and amortisation) has jumped 42 per cent (see chart A Tightly Run Ship). The revenue for FY23 was around Rs 2,400 crore or about $300 million, “with a valuation of $2 billion”. 

The company has a portfolio of 43 products (30 more in the pipeline, all of them niche) across segments, which are prescribed by specialists and super-specialists. They are exported to over 50 countries (making up 38 per cent of revenues)—including highly regulated markets like the US and Europe, primarily for small molecules. “Our approach has been to develop products and take it wherever there is a market, as opposed to making it specifically for, say, oncology, cardiology and nephrology.”   

It’s not as if this ability to scale came overnight. Ranade says for over eight to 10 years the company grappled with getting its products right. “We would ask ourselves if we could develop it well. Now, we are confident about the manufacturing and controls aspects. You must be open and flexible to make improvements as you go.” 

A Few Big Players 

Those patient efforts are poised to help the company as the industry it is in looks to be at the cusp of a growth spurt. Consider these numbers: Globally, per research studies, pharmaceuticals is a $1.5-trillion market and growing by 4 per cent, while biopharmaceuticals is a $120-billion market, but growing twice as fast as pharmaceuticals. The Indian biopharmaceuticals market is a fraction of that at $300 million but growing at 25 per cent. And there are serious entry barriers at play here. “Biosimilars with extensive characterisation take time [to produce]. The manufacture of plasma proteins involves know-how and that is the reason that the industry globally is an oligopoly with 11-12 players,” explains Subramaniam. 

The uniqueness of the RLS model is that it has chosen to diversify across segments, though that means it has to contend with rivals. For instance, in biosimilars, there is Biocon (though RLS does not make insulin); Intas for plasma proteins; Natco and Dr. Reddy’s and others in small molecules; and, many in the sphere of diagnostics, a space that the company has recently entered. 

“There are a few companies in gene therapy. In the case of Reteplase, an even smaller number since it is difficult to manufacture,” Subramaniam tells BT. Besides, it is equally important to make the products affordable. Take gene therapy for instance. The pricing in the western world is between $0.5 million to as much as $3–4 million. “We want to bring down costs substantially and are working aggressively to deliver gene therapies in a very cost-competitive manner.” 

But when companies get the basics right, there is immense potential here, per experts. 

Utkarsh Palnitkar, an independent life sciences consultant, says the future is bright given India’s population. “Inevitably, the pace of activity on life sciences too will pick up. What is needed is the incentive to invest large amounts in R&D (research and development),” he says. The challenge is the high cost matched with the confidence that it will generate revenue. “India needs three to five big examples of out-licensing to bring a certain level of confidence. The number of clinical trials is slowly increasing and that is a positive.” A lot of money goes into developing novel products and these have inherent risks because “a molecule can get rejected at any stage of development”. 

There is work to be done here, though, and perhaps a fair bit of investment. Rajesh Pherwani, Founder of Valcreate Investment Managers, a portfolio management services firm, says, “A lot of research needs to be done to develop and get approvals in developed markets.” For an Indian company to launch its own product in the US and EU, the outgo is significant. “It may require investments of $100–200 million per product till commercialisation. Gross margins are very attractive in the US, but R&D is a big investment to be made upfront for backend benefits.”   

Closer home, the potential may take some time to translate into numbers because biosimilars adoption is still a while away in India. “Biocon (the company has a tie-up with Mylan for regulated markets apart from having acquired its biosimilars business early this year for $3.3 billion) and Lupin are the only companies that targeted regulated markets in the early days of patent expiry (2020-24) and both are yet to rake in meaningful numbers. Dr. Reddy’s too has a pipeline but that will take time,” points out Pherwani. 

Emerging markets and the EU provide potentially easier pathways to launch, though the largest market is the US. There is also an immediate window of opportunity here because the value of patent expiries in the US is to the tune of $60 billion between 2020 and 2024 and another $10 billion in the EU. “The only way Indian companies can make a quick entry into the US is inorganically.” 

India needs three to five big examples of out-licensing to bring a certain level of confidence. The number of clinical trials is slowly increasing and that is a positive

Utkarsh Palnitkar 
Independent Life Sciences Consultant

Consolidation Time 

RLS is now looking to strengthen the existing areas of businesses, while scouting for new opportunities. “One is diagnostics, where we want to have an all-India laboratory-based network model. This is being incubated and we are starting off in a small way,” says Subramaniam. 

Then there is its vaccine play, a segment it ventured into after the outbreak of the pandemic. “Here, we want to be in both human and animal vaccines. Finally, there is a space in innovative technologies, where work is being done on several gene therapies, peptides and mRNA products.” The uniqueness of RLS’s model is that it is end-to-end. “Starting from research to manufacturing, we are present across the value chain. We took the decision to manufacture everything in-house and that means we can have our team of molecular biologists doing 10 molecules a year compared to, perhaps, one if it was outsourced,” says Venkata Ramana, the company’s Chief Scientific Officer. 

In many ways, the Covid-19 pandemic opened up a new world for RLS. “Though we are a biotechnology company, we took the decision to make a contribution. Work on a vaccine started and that is now in phase II [clinical trails],” explains Subramaniam. There were people who questioned the move but he saw a long-term play. “Covid-19 will be around in some form plus we are trying to integrate that vaccine with the one for influenza.” Besides, RLS did a lot of Covid-19 RT-PCR diagnostics and at the peak, the number was 35,000 samples tested each day. “In terms of products to treat Covid-19 patients, we had immunoglobin and bevacizumab. We got it right on forecasting demand and repurposed one of our manufacturing facilities to make larger quantities of immunoglobin,” he adds. 

Piecing it Together

The Nashik campus will give the company scale, which Dinesh Sathe, the Project Head, estimates will be four times what it is today. “We are working on a tight schedule and that kind of scale with high levels of productivity can pull down costs.”     

With the various pieces falling into place, RLS plans to enter the US biosimilars market later this year. The long-term vision is to create a diverse and deep biotech company. “With our breadth and depth of products, we must be able to make a difference to lives at an affordable cost,” sums up Subramaniam. 

For a group that has made a mark in almost every business it has entered, biotechnology could well be the next frontier.