Dangerous experiments

It has been a year since AstraZeneca announced its decision to shut down its research and development (R&D) centre in Bengaluru. All hopes of keeping the centre going in some form or other too have died, with the pharma company reportedly selling off the property to a software firm recently.

Apparently, the move was a part of the company’s plan to realign research with its corporate goals and not a case of downsizing. In fact, AstraZeneca is in the process of hiring scientists and researchers as it establishes a new global R&D centre at the science park in Cambridge, UK.

This centre would focus on oncology research as well as drugs for cardiovascular, metabolic, respiratory and autoimmune diseases.

This is very different from what the Bengaluru centre was engaged in — research into neglected tropical diseases, tuberculosis and malaria.

Clearly, continued investment in the Bengaluru facility had become untenable in the company’s new plans.

It is important to draw some lessons from this, given the fact that AstraZeneca R&D centre was a pioneering effort in life science research — much like the Texas Instruments facility which played a similar role for the information technology industry.

The R&D centre’s journey began in 1985 with the Scandinavian firm, Astra AB, establishing Astra Research Centre India (ARCI) in the vicinity of the Indian Institute of Science in Malleswaram, Bengaluru. Though it was fully funded by Astra, it was allowed to operate only as a non-profit society. This meant that Astra had to pay royalty for any know-how developed at this centre and profit made in India had to be ploughed back into research.

In its formative years, the focus was on developing important reagents used in molecular biology research.

The know-how was transferred to Indian companies and collaborative projects were taken up with other research centres.

After 1991, a wholly-owned subsidiary, Astra Biochemicals Private Limited, was floated to commercialise the technologies developed in Bengaluru.

The centre became a part of AstraZeneca following the merger of Astra AB and Zeneca PLC in June 1999. Though Hoechst Centre for Basic Research, established in Mumbai in 1972, was the first R&D unit set up by a multinational in India, it could not emerge as a model worth emulating.

The driving force behind Astra’s unique effort in India, as articulated by company officials in 1985, was to recruit high-calibre Indian scientific personnel for research given the shortage of such people in Sweden, in addition to low costs of doing R&D in India.

It is these very reasons that brought hoards of Fortune 500 companies in the late 1990s and the 2000s to set up their R&D units in Bengaluru, Hyderabad and other science clusters.

The ARCI model — doing R&D for the parent firm and networking with Indian institutions and companies — was carefully studied by several firms keen to take the same route.

It was also a model of how a developing country with a pool of qualified scientific manpower could develop corporate R&D culture, in contrast to public-funded research that dominated.

Most multinationals that have invested in R&D units in India have followed the model of independent research subsidiaries linked to the parent’s R&D set-up.

The demonstration of this model and its successful multiplication across several sectors has been the biggest gain of Astra’s pioneering effort in Bengaluru.

The success of foreign-funded R&D can’t simply be measured in terms of foreign direct investment (FDI). It has to be benchmarked against knowledge generation they do for parent companies — in the form of new patents, products, processes.

Publicly available data and other studies have shown that these units are indeed engaged in knowledge generation, and not just incremental product improvements, testing and other low-end services.

In addition, foreign R&D units are playing catalyst in developing an ecosystem for innovation and product development. The effect could be in the form of networking with academic and research institutions, ancillary development and spin-offs floated by employees. This has been amply proven by Texas Instruments in silicon design and software development, and to a great extent by the Astra centre in life sciences.

However, the engagement with the local economy may not be up to desired levels.

A study of over 100 foreign R&D units by the Indian Institute of Management, Ahmedabad, has pointed out that linkages of multinational-operated R&D centres with local companies and institutions are still limited.

As a result, knowledge spillover of foreign research units for the local economy too is limited. Till recently, the focus of much of foreign R&D units was on global goals of the parent body rather than on needs of the local and regional markets.

If the goal was to exploit local and regional markets, AstraZeneca would have continued its Bengaluru facility because, after all, it was working on local problems such as malaria and tuberculosis.

It is also time to reflect on how we engage with foreign R&D units. While India has a liberal regime in this sector encompassing tax incentives and other facilities for such units, we still don’t have a clear policy on promoting foreign investments in the R&D sector.

We should develop an explicit policy for this sector, which besides dealing with issues such as incentives, should also spell out how the country can harness benefits and spillover effects of foreign R&D units.

Till we have a definite framework on our engagement with such units, it is pointless to criticise AstraZeneca for selling its Bengaluru centre as real estate and not gifting it away for research to an Indian entity.

The writer is a Delhi-based journalist and author

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