Cellworks Group raises US$10 mn from US-based PE fund

Bangalore-based Cellworks Group Inc., which also has an office in California, has raised about $8-10 million (Rs41.44-51.80 crore) from a California private equity (PE) investor, details of which will be announced in the next few weeks, says its co-founder and chief executive Taher Abbasi.
Still, in a financing environment that is getting more challenging by the day, if an Indian biotechnology start-up raises close to $10 million in private equity it doesn’t necessarily signal an uptick in the biotech fortunes, rather this sets it apart from the rest as many of them begin to look for government money.

Challenges ahead: ABLE’s director general Shrikumar Suryanarayan. Abbasi, who has been negotiating this deal for some time, agrees that “investors are not issuing new term sheets and new deals are on hold”.

As the stock market in the US continues to fall, biotech companies have been hit hard—120 of the 370 public companies in that country have less than six months of cash, according to the US trade body Biotech Industry Organization’s 26 February report. In comparison, the Indian biotech industry seems slightly cushioned.

“Indian companies have a service model inbuilt in their business…it’s learn while you earn,” says Shrikumar Suryanarayan, director general of the industry body Association of Biotech Led Enterprises (ABLE). The few start-ups that engage in research and development, he adds, are cross-border entities which use the Indian arm for cost reduction as India continues to be an affordable innovation destination.

The true impact of the slowdown on the sector will emerge when the annual industry report is released in June by ABLE and the trade journal BioSpectrum, but experts think as the money supply gets tighter there’s a big opportunity for India.

“Pressure on cost reduction is not ruled out but it’ll overall be good as Indian bio-services will now become affordable to local start-ups,” says Suryanarayan. He draws parallels from the IT industry where services from leading vendors such as Infosys Technologies Ltd and Wipro Ltd were unaffordable to Indian technology companies until the dot-com bust in 2000-01 which eventually rationalized the rates.