Reality retold : Two patents and imminent funding is taking the company into the penultimate round of its race

Conventional wisdom says that it is difficult to build product companies in India. This is especially true of biotechnology, where the gestation periods are long and investments high. It is no wonder that pure drug discovery companies have not come up in India. Who will give a start-up a hundred million dollars, even in stages, and then wait for 10 years for the fruits to fall? Once again, this is conventional wisdom drawn from the US experience and then translated to India. Are there other ways of building a drug discovery company in India?

Four years into existence, Gangagen Biotechnologies is an unusual company even by Western standards. In the year 2001, it started trying a game many Western companies have given up; using phages (viruses that attack bacteria) as drugs to treat infection. The idea was okay in terms of science, but it did not seem like a good business proposition. It may not have been easy for such a company in the US to raise money. But Gangagen did it in India, and easily too. ICF Ventures invested $2 million in the company, but after persuading it to register in the US. End of Round One.

The next job was to build some intellectual property. Gangagen did that too. It filed for a patent in the US within a year; this patent solved a problem that stood in the way of using phages for treatment. Phages get inside bacteria, multiply exponentially, and then come out scattering bacterial toxins. Through a piece of genetic engineering, Gangagen made the phages remain inside the bacterium after killing it (See 'The Virus That Heals', BW, 17 November 2003), thereby not letting the toxins out.

It then filed for another patent which worked out a method of using the dead bacteria (killed by the phage) as a vaccine. Three more patent applications followed, each one a commercially relevant innovation. The most recent one tries to use the tail of the phage, instead of the whole phage, to kill the bacteria. This is because it found recently that the tail is enough to recognise the bacterium and kill it. The head is purely an instrument of self-propagation for the phage, a fact that need not bother drug researchers. End of Round Two.

A few weeks ago, the US Patent Office issued the first patent. It issued the second one this week. Two patents may not mean much in other areas, but phage therapy is an area where it is difficult to get patents. A phage is a naturally occurring organism, and by itself cannot be patented. This is the reason why many companies turned away from phage therapy. This is also the reason why it is difficult to raise funds for a phage therapy company.

Gangagen raised another $2 million from angel investors in May 2003. It formed another company in Canada, Gangagen Life Sciences, to use phages for non-medical applications. This company tried to treat - using phages - naturally-infected cattle just before slaughter, and found that it eliminated Escherichia coli from beef (this infection is a major problem in the West). Gangagen Life Sciences formed a joint venture with the French firm Lallemand to take the product through field trials to the market, hopefully by the end of next year. End of Round Three.

Gangagen Biotechnologies now needs money to take the product through human clinical trials. ICF itself is now leading a set of investors who will put in $2 million, and the Hyderabad-based APIDC-VCL will also chip in with some funding. The company needs $5 million to work comfortably. The funding is expected to be through in a month or two. Gangagen will then begin the penultimate round, of making quality material for the clinical trials, and then the trial itself. It hopes to break even by the year 2009. It would have taken eight years and $9 million of funding to reach this stage. By Western standards, this is a paltry sum. Should we turn conventional wisdom on its head?

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