Indian Scientists Return Home As Economy Moves a Step Up - WSJ article

Indian Scientists Return Home As Economy Moves a Step Up
Original Research Replaces Rote Work, Allowing Firms To Lure Talent From U.S.

By PETER WONACOTT
December 14, 2006; Page A1

PUNE, India -- For more than 20 years, Rashmi Barbhaiya lived a comfortable life in New Jersey as a researcher for drug maker Bristol-Myers Squibb Co., commuting from his five-acre suburban estate in a blue Mercedes.

Now, in a move that hints at a big shift in the global pharmaceutical business, Dr. Barbhaiya is back home in India. He's still trying to discover new drugs, but he's doing so with an all-Indian-born research team at a company he founded in this center of Indian high technology.


As big drug companies shut down some research facilities in the U.S. and other rich countries, labs in India and China are increasingly picking up the slack. Eli Lilly & Co., Wyeth and GlaxoSmithKline PLC all have outsourced chemistry work to Indian firms, and Novartis AG announced last month that it is building a research center in China with at least 400 scientists. Meanwhile, Bayer AG said last month it is closing a major research facility in the U.S.

Merck & Co., which shuttered research labs in England and Japan at the end of last year, has a new outsourcing partner: Dr. Barbhaiya. His company, Advinus Therapeutics Ltd., agreed with Merck last month on a deal under which the Indian researchers will help Merck discover new drugs for metabolic disorders such as diabetes.

India was long a virtual pariah state among Western pharmaceutical companies because it let domestic companies sell copies of foreign drugs so long as they tweaked the manufacturing process. But in early 2005 the Indian government promised to heed the World Trade Organization's patent principles. The new Indian laws have encouraged U.S. and European companies both to sell their products in India and form research tie-ups.

The return of people such as Dr. Barbhaiya is an important indicator of progress in the Indian economy, which has averaged growth of 8% over the past three years. The country is beginning to lure back top-notch scientists and engineers who once saw opportunity only in the U.S. or Europe. A growing number of Indian companies are putting emphasis on original research and innovation, rather than performing rote tasks for companies in the West.


Outsourcing giant Wipro Ltd. says it has designed an entire chip for an American computer gaming company and car-navigation gear for a European parts supplier. Wipro says it does the work for a fraction of what its customers would spend if they did it themselves.

Pawan Goenka, a former research engineer at General Motors Corp., came back to India in the early 1990s and now is president of the automotive group at local vehicle maker Mahindra & Mahindra. He estimates the company spent $120 million designing a sport-utility vehicle, or one-fourth the budget for a similar vehicle in the U.S. Recently, Dr. Goenka brought in a new research chief from Ford Motor Co. to work on hybrid vehicles.

India's high-tech companies still face challenges. A shortage of funds afflicts all but a handful of elite universities. For Indians living abroad, that has dimmed the appeal of an academic post back home and deprived the country of a chance to deepen its talent pool. Infrastructure remains creaky, although luxury apartments, fitness centers and specialty coffee shops have sprung up around Indian business parks to smooth the transition for returnees accustomed to the West.

Indian companies such as Ranbaxy Laboratories Ltd. have long competed internationally in generic drugs, drawing on their skill in copying foreign products learned under India's old patent regime. Now Indian companies are increasingly conducting clinical trials, performing contract chemistry work and, as Dr. Barbhaiya's journey shows, carrying out original research aimed at discovering new drugs.

As a boy growing up in Ahmadabad, in the western Indian state of Gujarat, Dr. Barbhaiya couldn't bring himself to accompany his father, a cardiologist, to work because he couldn't stand the smell of hospitals. He went into pharmacology instead, earning a doctorate at the University of London and landing a job at Bristol-Myers after postdoctoral stints in the U.S.

For more than 20 years, Dr. Barbhaiya helped Bristol-Myers select and test promising drugs for AIDS, depression and cancer. He worked on the AIDS drug Videx, introduced in 1991.


In 2001, Ranbaxy made him an offer to become head of research. The company, India's biggest producer of generic drugs, was stepping up efforts to discover its own products. At 49, Dr. Barbhaiya took early retirement from Bristol-Myers and headed home. Among his first hires was a former colleague at Bristol-Myers, Kasim Mookhtiar, who became Ranbaxy's head of drug discovery.

One of Dr. Barbhaiya's passions is discovering drugs for diseases that are prominent in poorer countries but rarely get attention from Western drug makers. He recalls a dinner after the Videx success in which his father urged him to set his sights on diseases prevalent in India. "He said at best he could help 20 patients in a day, while what I did could help thousands," recalls Dr. Barbhaiya, a burly man with steel-grey hair. "I had tears in my eyes."

Dr. Barbhaiya steered Ranbaxy into a pact in 2003 to develop an antimalaria drug with the Geneva-based Medicines for Malaria Venture. The drug is now in midstage clinical trials.

However, the two former Bristol-Myers scientists, who had never worked in India's pharmaceutical industry, bristled over the difficulties of doing original research. Dr. Mookhtiar complains that it could take up to six months to procure a key chemical from the U.S., as an order wended its way through Ranbaxy's purchasing department as well as U.S. and Indian customs. He says he could email a similar request at Bristol-Myers and receive the chemical within 24 hours.

While the delay was partly the fault of governments, Ranbaxy's bureaucracy reflected an "old-fashioned" penny-pinching mentality that was suitable for a generics business, where margins are tight, but not for innovative research, Dr. Mookhtiar says.

Dr. Mookhtiar also says Ranbaxy researchers were too focused on adapting drugs already on the market instead of trying to anticipate what would be useful 10 to 15 years down the road. Drug discovery requires a "long-term thinker and a long-term planner," he says. "I have to have a deep knowledge of what's in the pipeline." In 2004, Dr. Barbhaiya left Ranbaxy and Dr. Mookhtiar soon followed.


Ranbaxy's chief executive, Malvinder Mohan Singh, denies the company is slowed by bureaucracy and says its scientists continue to do innovative research. Mr. Singh says Ranbaxy has the biggest research and development budget among Indian drug companies, amounting to 9% of sales, or about $110 million last year.

Although no Indian company on its own has yet delivered a new patented drug to the global market, several have drugs in midstage human trials. Dr. Reddy's Laboratories Ltd., another major generics company that has embarked on its own research, says it plans to begin final-stage trials of a diabetes drug soon.

Looking to run his own show, Dr. Barbhaiya found a backer in the Tata Group, a prominent family-owned conglomerate. The Tata family was looking for someone to turn a small agrochemical laboratory in Bangalore into a center for clinical research. Indian firms are doing a brisk business carrying out human trials of drugs for Western companies that want to take advantage of the large Indian population and low costs.

Dr. Barbhaiya agreed to run the Bangalore facility, but he also wanted funding for a modern drug discovery lab. The result was Advinus Therapeutics, a company whose new-drug research would be powered by Indian scientists returning from the U.S. and other countries. (The name Advinus is shorthand for "Advantage India U.S.," says Dr. Barbhaiya.) In August, Tata Chairman Ratan Tata inaugurated Advinus's $12 million drug-discovery center in Pune, a city surrounded by green hills two hours southeast of Mumbai.

Dr. Barbhaiya chose to place his new venture in one of the hot spots of new Indian industry. Once a sleepy "pensioner's paradise," Pune has become a center for technology and bioscience companies that attract returnees. Billboards for new fitness centers and soon-to-be-built luxury apartments with names like Omega Paradise and Whistling Palms reflect the rising living standards of the returnees. Their new Hondas and Toyotas share beat-up roads with farmers on bicycles. Scientists at Advinus say that while they earn a bit less than they would at U.S. drug companies, India's cost of living is cheaper, and there's also the appeal of helping the country push into new economic and scientific frontiers.

Across the street from Advinus's lab is the corporate campus of an icon of the new India: Infosys Ltd. The software-outsourcing company is finishing construction of a large domed building that is supposed to resemble a computer mouse.

The changes in India are evident in Advinus's fledgling corporate culture. Dr. Barbhaiya has tried to cultivate a relaxed atmosphere among Advinus researchers, in contrast to the clear hierarchy at Indian generic-drug makers.

The lab is run by the jocular Dr. Mookhtiar. As a graduate student at Florida State University, he once greeted his adviser amid a cloud of liquid nitrogen wearing Dracula teeth and small pieces of red-streaked plastic foam stuck to his eyes -- a prank designed to show how overwork had made him slightly deranged, he says. The adviser wasn't amused. Dr. Mookhtiar recalls being told to grow up.

The heart of the Advinus lab is a big coffee machine surrounded by lab tables. In the mornings, scientists gather around the conference table to bat around ideas.

"Sometimes I'm sitting in a meeting and for a moment I think I'm at Pfizer," says Koushik Das Sarma, 36, who worked at the New York-based drug maker after research stints at Purdue and Duke universities. Dr. Sarma and several other returnee scientists at Advinus say they long hoped to come back to India but didn't want to leave the front lines of research.

Dr. Mookhtiar says his team has selected 11 established drug "targets" -- biological processes that, if disrupted with a drug, might treat disease. The 11 targets are in obesity, diabetes and cardiovascular disease, he says. Because the targets are well-known among specialists, some companies are ahead in designing drugs to hit them, but the Advinus scientists hope their drugs will work better or have fewer side effects. Because they have just gotten started, none of their compounds have been tested in humans yet.

Dr. Mookhtiar says he dived into research on obesity because he was intrigued by why some people became fat and stayed fat. "I just smell french fries and gain two pounds," says Dr. Mookhtiar, patting his belly. "Why is that?"

Write to Peter Wonacott at peter.wonacott@wsj.com1

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Indian Passport Law Reflects Global Trend WSJ article

Pledging Allegiances:
Indian Passport Law Reflects Global Trend
By BARRY NEWMAN
December 15, 2006; Page B1

HOBOKEN, N.J. -- Sudhir Parikh is about to become a citizen of India. Again.

Dr. Parikh, a 59-year-old allergist, arrived in the U.S. 32 years ago and became an American citizen in 1986. By Indian law, his citizenship of India lapsed the instant he took the oath. But this year India had a change of heart about its fallen-away citizens. With some hesitancy, it has become the biggest and latest addition to a lengthening list of countries that allow their citizens to be citizens of other countries at the same time.

"Economically speaking, it's profitable, and emotionally it feels good," Dr. Parikh said between patients at his storefront office here, one of 25 practices he owns in the New York area. As a citizen, the doctor will be able to invest in India's high-return economy almost as if he lived there -- and India, of course, will benefit from getting his money. Dr. Parikh and his wife, also a doctor, and their two American-born children had no qualms about filling out a form on an Indian-government Web site and paying $275 for their new status.

"I'm as connected to India," he says, "as I am to the U.S."

In an ever-more global world, dual citizenship has become commonplace. In 1996, for example, seven of 17 Latin American countries allowed some form of it; by 2003, 15 did. India's change in policy means every major country whose nationals migrate to the U.S. now allows dual citizenship except for China, South Korea and Cuba. Although the U.S. just last week announced a new naturalization test redesigned with questions to lend a deeper meaning to the act of becoming a citizen, it, too, allows its citizens to hold passports of other countries.

Dr. Parikh's commitment to two countries may be as hard for some native-born Americans to countenance as bigamy. In the U.S. and Europe as well, immigration-policy struggles are colored by questions about terrorists and the loyalties of undocumented dishwashers alike. To some social conservatives, dual citizenship is a blow to patriotism. Stanley Renshon, a political scientist at New York's City University and author of a new book, "The 50% American," calls it "the civic equivalent of a one-night stand."

But globalists see it instead as a ticket to unimpeded labor mobility and a check on the power of nationalism. "I can understand why the dilution of national identity is lamented, but it's irreversible," says Peter Spiro, a professor of international law at Temple University. Dual citizenship, he says, has spread at "an explosive pace" because governments are "playing it as a mechanism for keeping an economic hook on their diasporas."

The trick is to sink the hook deeper than the first immigrant generation. That's why India has offered its new citizen status to foreign-born children and grandchildren, as well. Dr. Parikh plans to use his new rights to buy or build a medical college in India to teach young Indian-Americans who can't get into U.S. medical schools.

"Our children will have the social and emotional bonding very important for any culture to continue," he says.

Of the 20 million ethnic Indians abroad, 14 million are citizens of other nations, either because they were born there or immigrated and naturalized. Until now, because of security worries dating back to India's 1947 independence and partition from Pakistan, these people were denied Indian passports, and have needed visas to visit their ancestral homeland. If they stayed longer than six months, they had to register with the police. Most intrusively, they were forbidden from owning real estate.

It wasn't the friendliest way for India's government to stay in touch with its diaspora or to tap its substantial wealth. Indians abroad send more money home -- $22 billion in 2004 -- than any other national group, including the overseas Chinese. But India wants more, especially in the form of direct investments.

So last January, it invented a hybrid species of national affiliation: Overseas Citizenship of India. It's available now to anyone who was an Indian citizen post-1950, and to their children and grandchildren wherever they were born. The new status continues to shield overseas citizens against double taxation, while granting visaless entry for life, unlimited stays with no police reports, and the freedom to buy any property but farmland -- not to mention, cheap rates officially reserved for citizens at hotels.

What it doesn't grant is the vote -- the result of a compromise between India's economic promoters and some of its politicians who worry about Hindu and Muslim extremists tipping elections from abroad. Nevertheless, Krishnan Varma, consular minister at India's embassy in Washington, says that applications for Indian citizenship from around the world so far number "well into the hundreds of thousands."

Not everyone is in a rush. Statistics don't show how many of the two million Indians in the U.S. have naturalized here, but some who have taken U.S. citizenship are standing pat. Sunil Wadhwani, 53, immigrated 30 years ago and founded iGate, a Pittsburgh outsourcing firm that employs thousands of Indians in India. "But I made a commitment to the U.S.," Mr. Wadhwani says. "I'm not going to divide my loyalties."

People who become naturalized U.S. citizens still swear to renounce "fidelity to any foreign prince, potentate, state or sovereignty." But the oath is as outdated as its language; the U.S. makes no attempt to enforce it. The reasons, never officially stated, run from the acknowledgment that many potential citizens would be unwilling to renounce their home countries to the economic and political benefits of having a cadre of citizens who can freely live and work overseas.

People born in the U.S. can take a second citizenship if they qualify elsewhere. While it's impossible to know exactly how many Americans have an extra passport in their pockets, Prof. Renshon of City University puts the number of U.S. citizens who either hold or are entitled to hold a second passport at upward of 40 million. On the basis of ancestry, several countries -- notably Ireland, Italy and Israel -- positively encourage Americans to sign up. The U.S. doesn't expect to be informed. In fact, renunciation of U.S. citizenship requires an explicit declaration; otherwise, it is almost impossible to lose.

The personal advantages of having an extra passport can be substantial. An American with an EU passport, for instance, can live permanently in any of 25 European countries (expanding to 27 on Jan. 1) without jumping through the usual immigration hoops. However, for citizens of some countries -- Turkey and South Korea are two -- taking a second passport in another country might stir up issues of double taxation, and could affect retirement, inheritance and property rights. Such worries often dissuade permanent residents of the U.S. from naturalizing here.

India's new policy has helped soothe fears. Some Indians who were loathe to give up property rights back home are seizing on India's rules to naturalize in the U.S. now. For the first time, they will enjoy the benefits of citizenship, including a vote in U.S. elections and immunity from deportation. Sudha Acharya, 67 years old, has lived in the U.S. for 37 years and has only just decided to apply for citizenship. "It's good to know that having a U.S. passport will not cause problems," says Ms. Acharya, who runs a social-service agency in New York.

Recently Dr. Parikh helped put on a meeting for Indian-Americans from Gujarat at Royal Albert's Palace, a combination motel and wedding hall near New Jersey's Perth Amboy that looks like a Moghul fortress. Vayalar Ravi, India's minister for overseas Indian affairs, told 2,000 guests in the ballroom: "India's development is your opportunity. Stand up and say, 'I am an Indian. I'm proud to be an Indian!"'

Downstairs, in the restaurant, Dr. Parikh's daughter, Purvi, was eating dinner. At 24, she had just finished her second year of medical school -- at St. George's University in Grenada -- and was getting set to apply for her Indian citizenship online.

"I completely see myself as American, and Indian, also. I'm two people," she says. "But having that piece of paper -- it's psychological. People like that sense of belonging. I guess that's why they join clubs."

Write to Barry Newman at barry.newman@wsj.com1