Animal House Final Findings 18may10

Pre-feasibility Study

for Setting up an

Animal House on

KAPL land situated

on Magadi Road,

Bangalore

May 2010

KIPDC

May 2010 Confidential 2

Disclaimer

- The study is based on responses from suppliers and producers from the industry as well

as secondary sources

- Frost & Sullivan does not take responsibility for any incorrect information supplied to us by

manufacturers or users

- Quantitative market information is based primarily on interviews and therefore is subject

to fluctuation

- The information available in the public domain has also been taken into consideration and

the same is used for the preliminary understanding of the project

- No part of this document may be given, lent, resold, or disclosed to non-customers without

written permission.

- Furthermore, no part may be reproduced, stored in a retrieval system, or transmitted in

any form or by any means, electronic, mechanical, photocopying, recording, or otherwise,

without the permission of the publisher.

For information regarding permission, write to:

Frost & Sullivan

Unit No. 641/642, 4th Floor,

Solitaire Corporate Park,

Chakala, Andheri(E).

Mumbai-400093,

India.

KIPDC


Contents

PART I – Identification of Existing Animal Houses in India and Understanding of their Business

Models ........................................................................................................................................... 7

Ownership and Business Model of Animal Houses in India..................................................... 8

Analysis of Business Sponsors – Recurring vs. New business .................................................... 9

Revenue Contribution ................................................................................................................11

New Business – Pre-Clinical Services .........................................................................................15

Types of Animal Houses in India ............................................................................................... 17

Type of Studies ............................................................................................................................ 18

Number of Animal Houses in India........................................................................................... 25

Value and Volume of Study Conducted................................................................................ 26

Project Component and Infrastructure Requirements ......................................................... 27

Infrastructure Required for an Animal House ......................................................................... 27

Regulatory Compliance............................................................................................................ 36

Regulatory Requirements for an Animal House ..................................................................... 39

Environmental Impact of an Animal House............................................................................ 41

Gaps in Facilities as Perceived by Sponsors ........................................................................... 42

Importance of Bangalore as a Suitable Location for Animal House .................................. 44

Benefits of setting up facility in Special Economic Zones (SEZ’s) ......................................... 49

Type of projects that can be sourced in India but are not there presently ...................... 66

PART II – Financial Viability Assessment comprising of CAPEX requirements and revenue

estimation .................................................................................................................................... 69

Built-up Infrastructure Requirements .........................................................................................70

Equipments Requirement...........................................................................................................72

Land Area Requirement.............................................................................................................73

KIPDC


Operational Costs of an Animal House....................................................................................74

Capital Requirement and Cash Flow Estimation for an Animal House .............................. 76

Case Study 1: AAALAC Approvable Small Animal House.....................................................76

Case Study 2: GLP Approvable Small Animal House .............................................................78

Conclusion....................................................................................................................................80

PART III – Land Requirement and Site Suitability Assessment for Setting up of an Animal House

...................................................................................................................................................... 81

Estimation of Land Estimation for setting up of Envisaged Project...................................... 82

Key Parameters for selection of a site for project.................................................................. 83

Cost Based Factors......................................................................................................................84

Broad Sensitivities for selection of Land....................................................................................87

Assessment of classification of project by pollution control board and bye laws / pre-

requisites for setting up animal houses.................................................................................... 88

Frost & Sullivan Recommendations.......................................................................................... 92

Go/ No-Go Decision ...................................................................................................................92

Proposed Animal House Model.................................................................................................92

Facility Infrastructure ...................................................................................................................93

Business Model .............................................................................................................................94

Suggested Ownership Model ....................................................................................................95

Land Requirement.......................................................................................................................96

Expenditure ..................................................................................................................................96

Annexure 1: Animal Types for an Animal House .................................................................... 97

Annexure 2: Products Offered by Animal Houses.................................................................. 99

Small Animals ...............................................................................................................................99

Large Animals ............................................................................................................................105

Annexure 3: India – Pharmaceutical & Biotechnology Industry Overview ...................... 108

India – Pharmaceutical Industry Overview............................................................................108

KIPDC


India – Biotechnology Industry Overview...............................................................................109

India BioClusters........................................................................................................................ 110

KIPDC


List of figures

Figure 1: Animal House Ownership

Figure 2: Business split

Figure 3: Clientele

Figure 4: Revenue Contribution by Client Types

Figure 5: Pharmaceutical R&D Expenditure, 2008-2015

Figure 6: Percentage of R&D budget allocation towards CRO activities by Sponsors, 2009-2015

Figure 7: Preclinical Services CRO market revenue forecasts (India), 2009-2015

Figure 8: Types of Animal Houses

Figure 9: Split of Animal Houses

Figure 10: Flowchart for Animal disposal

Figure 11: Regulatory Approval Process

Figure 12: Number of life sciences companies in Karnataka

Figure 13: Karnataka Industry segment

Figure 14: Client Profiles

Figure15: Clientele

Figure16: Business procedure of getting orders and supplying animals

Figure17: Clinical trials in India, 2008-2015 (e)

Figure18: Clinical trials by phases in India, 2008-2015 (e)

Figure19: Therapeutic split (Phase-wise) for the clinical trials in India

Figure20: Typical Animal House setup in India

KIPDC


PART I – Identification of Existing Animal Houses in India and

Understanding of their Business Models

KIPDC


Ownership and Business Model of Animal Houses in India

Animal Houses are typically understood to be enclosures where animals are raised and/ or bred

for the purpose of lab testing while ensuring animal comfort.

Animal houses can be large enclosures housing large animals like buffaloes, cows, horses, to

smaller establishments containing small mammals like mice, rats, guinea pigs, etc.

In India animal houses are either owned privately (independent animal houses), by government

organizations (stand-alone or as a PPP) or by Pharma companies.

Some animal houses in India are owned privately. These independent animal houses have the

objective of utilizing the animal house to breed and supply animals for studies, also in some

cases the animal houses have study areas where toxicology or pharmacology studies can be

performed for research studies.

Government owned animal houses are typically alliances between the government and

private organizations, like ACTREC. Such organizations are focused primarily on maintaining

animal houses for study of diseases. They also supply their specific animal strains on requirement

to other study centers, when required.

Pharma companies and Clinical Research Organizations also have their own in-house animal

areas, or vivariums, which are maintained for toxicology and / or pharmacology studies for their

own studies, or for studies contracted to them.

Figure 1: Animal House Ownership

Animal House

Ownership

Private Government

Associated

Pharma

companies/ CROs

KIPDC


Analysis of Business Sponsors – Recurring vs. New business

All multinational and domestic Pharma and biotech companies, along with Clinical research

Organizations and Medical Colleges/ Government R & D labs/ Research centers, etc. need to

perform some preclinical testing, safety trials and other routine molecule studies before

establishing the safety and efficacy of any product. For the initial preclinical testing, in most

cases where cell lines cannot be used, animal models are used. Due to this continual

requirement, such facilities generally maintain their own animal houses and raise the animal

strain depending upon their forthcoming needs. Sometimes, however when the need for animal

models is unprecedented or there is inadequate stock, they need to go out for private vendors

and buy animals from there.

Nearly all multinational companies (MNC) who have R & D presence in India, have their own

animal house for supply of animals for routine tests. Same is true with major CROs involved in

Pre-clinical testing. In such cases, they raise only those animals which will be needed the most

for experimentation purpose, while in case of privately owned animal house, they have to keep

sizeable stock of all types of strains ready so as to supply to the client when ordered. Now since

the cost of maintaining animal models as per the CPCSEA guidelines is costly and the animal

lifespan for mice, rat, etc. is low11, it sometimes becomes practically difficult to run a private

animal house with considerable profits.

MNC companies generally need to establish standard results globally and are somewhat more

involved into innovation products rather than Biosimilars or generics, hence they prefer sourcing

animals from their own Certified and internationally accredited animal house facilities. So, MNC

companies with presence in India limit their animal studies, or perform them within their

premises. This is because of the very few animal house facilities which are certified and

accredited at an international level.

Indian Companies/ CROs, may have a preferred tie-up or repeat business with a particular

privately-owned animal house and they may source animals from there on a periodic basis either

to maintain their standard stock by buying standard breeding pairs or directly using the animals

from the vendor for studies. That may again depend on the demand of animals used for the

study.

1 Typically, the lifespan of a rat is 2 years, of which the mature age which can be used for most

studies lasts 6-10 months

KIPDC


Figure 2: Buisness split

95%

5%

Repeat Clients New clients

For an animal house, the business usually comes from a set of clients who rely on the quality of

animals provided to them in the past. The animal house in that case becomes the preferred

vendor and the client becomes a repeat client whose demand can be estimated by the animal

house.

Approximately 5% of the customers are new customers who reach the animal house either

because

a. they have started a new study type, for which they do not have existing animals, or

b. because their preferred vendor is unable to supply them the complete animal lot size

required

KIPDC


Figure 3: Clientelle

10%

90%

International Clients Indian Clients

Since most animal houses in India are GLP certifiable, and do not have international

accreditations, the scope of servicing MNC companies reduces. Also, Indian companies prefer to

source their study materials from within India, which ensures easier follow up and feedback, as

well as a faster turnaround time.

As a result it can be seen that 90% of the existing clients of an animal house are Indian

companies, while only 10% are MNC or international companies. As more animal houses gain

international certifications, the ratio is expected to shift towards international clients.

Revenue Contribution

Animal houses supply animals and perform studies for pharmaceutical studies. For an Animal

House facility the main clients can be categorised as

1. Pharma Companies

2. Biotech/Biopharma Companies

3. Pharmacy Colleges

4. Research Institutes

5. Hospitals

KIPDC


Figure 4: Revenue Contribution by Client Types

Presently the distribution of clients between the given client types are provided in figure 3 above.

We expect the distribution to remain the same over the next few years, with Pharma companies

increasing in the total contribution to the toplines of existing animal houses.

Each of the client types are explained in details below.

Pharma Companies

For a typical independent Animal house facility majority of the clients are research driven

pharmaceutical companies. These companies are the ones who focus on New Chemical Entity

(NCE) research. Presently, almost 90-95% of these companies are local companies such as Dr.

Reddy’s, Ranbaxy, Glenmark, Zydus Cadila etc. The remaining are MNC pharma companies who

have an R&D division in India, companies such as Astra Zeneca, Bayer Schering etc.

The requirements range from animals for their own studies, and also to a limited extent also

involve the animal house in performing the study as well. This depends on the facility of the

animal house, its accreditations and prior experience.

Some of these companies require close to 1,000 animals (mice and rats) per month. Their

demand annually is more or less constant as they have a pre-determined number of molecules in

pipeline. This segment contribution is expected to increase over the next 5 years as these

companies are investing more funds in their R&D activity. This was confirmed by a recent Frost &

Sullivan survey of leading research driven Pharma companies in India.

The R&D expenses of Pharma companies are a direct indication of their focus on NCE research,

and hence their needs for studies to be performed for their new molecules.

KIPDC


Since local Indian Pharma companies are the main clients for animal houses, below is an analysis

of the research budgets of come Indian companies.

Figure 5: Pharmaceutical R&D Expenditure, 2008-2015

Apart from buying animals for studies, Pharma companies also outsource their studies to animal

houses which have facilities to perform such experiments. In such cases, we expect the financial

allocation of Pharma companies to be a part of their outsourced research budgets.

Below is an analysis of the outsourcing research allocation of Pharma companies, and our

expected budget allocation over the next few years.

Figure 6: Percentage of R&D budget allocation towards CRO activities by Sponsors, 2009-2015

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015

Mil

lio

n

US

D

Total Pharmaceutical R&D Expenditure, 2008 – 2015 (USD Million)

CAGR CAGR (2008(2008--2012)2012):11% :11%

• The R&D expenses of local companies has been increasing consistently over the past few years (10% yoy)

• The growth in R&D budgets for 2009-10 would have been higher, however it was impacted by recession and companies focusing

more on sales generation

• R&D expenses are expected to continue growth due to increased tax benefits as declared in India Fiscal Budget 2010

• R&D expenses have grown by 11% in the year 2007 to 2008 and are expected to grow at a similar pace over the coming years,

with Indian companies focusing on new drug development

• The R&D expenses of local companies has been increasing consistently over the past few years (10% yoy)

• The growth in R&D budgets for 2009-10 would have been higher, however it was impacted by recession and companies focusing

more on sales generation

• R&D expenses are expected to continue growth due to increased tax benefits as declared in India Fiscal Budget 2010

• R&D expenses have grown by 11% in the year 2007 to 2008 and are expected to grow at a similar pace over the coming years,

with Indian companies focusing on new drug development

75

5036.36

8.33

41.67

27.27

8.33

36.36

170%

25%

50%

75%

100%

2009 2012 2015

Less than 10% 11 % - 20 % 21% - 40% 41% - 60% 61% - 80%

Pe

rcen

tag

e o

f C

om

pan

ies

su

rveyed

KIPDC


Biotech/Biopharma companies

They are the second biggest clients for Animal Houses. This segment comprises of

Biopharmaceutical companies such as Biocon, Intas, Avesthagen etc, vaccine manufacturers such

as Serum Institute, Shantha Biotech, Bharat Biotech etc and Contract Research Organizations

such as Advinus, Syngene, Jai Research Foundation etc.

The Biotech Industry which is seeing a lot of encouragement and support from both the central

governments is expected to grow rapidly. Indian companies are gearing up for producing

Biosimilar drugs which require substantial R&D investment. This will be translated into increased

use of animals for both basic and toxicology research.

This segments contribution is expected to grow from 22% to about 25% or more over the next 5

years. The companies that will contribute to this growth will be the Small and Medium Biotech

companies, CRO’s are not expected to contribute significantly as they are self sufficient for their

animal requirements and prefer importing the animals rather than sourcing locally.

Medical and Pharmacy colleges

These are the third biggest segment. They will require small animals for their physiology and

pharmacology experimental purposes. They typically consume about 750-1000 animals. The

demand from this segment spikes during the exam months of March to May. This segment will

remain more or less constant or reduce slightly over the next 5 years.

• In 2009 17% of Sponsor companies surveyed allocate less than 10% of their total R&D budget for CRO activities, 75% companies allocate about 11 to 20% towards CRO’s and 8% companies allocate 20 to 40% for CRO activities

• By 2012, 50% of Sponsor companies surveyed will allocate 11 to 20% of their total R&D budget for CRO activities, 41% companies allocate about 20 to 40% towards CRO’s and 8% companies allocate 40 to 60% for CRO activities.

• By 2015, 36% of Sponsor companies surveyed will allocate 11 to 20% of their total R&D budget for CRO activities, 27%

companies allocate about 20 to 40% towards CRO’s and 36% companies allocate 40 to 60% for CRO activities.

• 90% of the companies that were surveyed said they would spend close to 20 to 60% of their R&D budgets on clinical research. These companies comprised all the MNC’s such as Astra Zeneca, Bayer Schering Pharma and Key Local companies such as Dr. Reddy’s, Biocon, Piramal Life Sciences etc. The remaining 10% of the comprised of small and medium companies that were surveyed, these include companies such as Titan Pharmaceutical, Aristo Pharmaceuticals

• This year on year increase in allocation of funds toward CRO related activities is an indication of the increased NCE work that is expected to be undertaken by companies in India.

• Companies doing research on New Chemical Entities require Animals both for Basic Research and also for Preclinical

Toxicology testing.

• This increased NCE research work will translate into good business opportunity for Animal House facilities

• In 2009 17% of Sponsor companies surveyed allocate less than 10% of their total R&D budget for CRO activities, 75% companies allocate about 11 to 20% towards CRO’s and 8% companies allocate 20 to 40% for CRO activities

• By 2012, 50% of Sponsor companies surveyed will allocate 11 to 20% of their total R&D budget for CRO activities, 41% companies allocate about 20 to 40% towards CRO’s and 8% companies allocate 40 to 60% for CRO activities.

• By 2015, 36% of Sponsor companies surveyed will allocate 11 to 20% of their total R&D budget for CRO activities, 27%

companies allocate about 20 to 40% towards CRO’s and 36% companies allocate 40 to 60% for CRO activities.

• 90% of the companies that were surveyed said they would spend close to 20 to 60% of their R&D budgets on clinical research. These companies comprised all the MNC’s such as Astra Zeneca, Bayer Schering Pharma and Key Local companies such as Dr. Reddy’s, Biocon, Piramal Life Sciences etc. The remaining 10% of the comprised of small and

medium companies that were surveyed, these include companies such as Titan Pharmaceutical, Aristo Pharmaceuticals

• This year on year increase in allocation of funds toward CRO related activities is an indication of the increased NCE work that is expected to be undertaken by companies in India.

• Companies doing research on New Chemical Entities require Animals both for Basic Research and also for Preclinical Toxicology testing.

• This increased NCE research work will translate into good business opportunity for Animal House facilities

KIPDC


Research Institutes and Universities

They contribute another significant chunk of clients. The contribution from this segment too is

expected to remain the same of decline slightly as most institutes are self sustained for animals.

Hospitals

Hospitals are a smaller segment and require the animals for raising antiserum and polyclonal

antibodies for diagnostic purposes. The demand from this segment too is expected to remain

constant

New Business – Pre-Clinical Services

The global pharmaceutical industry is nearing the patent expiration dates beginning 2012,

especially since blockbuster molecules are fewer in number and their R&D pipelines are scanty.

Also, though research has taken an upper hand, outsourcing has emerged as the new paradigm

in business with pharmaceutical companies minimizing costs and timelines by outsourcing part of

their research activities to competent organizations.

Multinationals are looking for ways and means to reduce cost, time and risks associated with

developing a drug. Therefore while outsourcing used to initially comprise only of non-core

activities, now it also encompasses activities that are technically intensive and possibly high

amount of confidentiality.

Once such area of outsourcing that is seeing a lot of activity is the Pre-Clinical Toxicology

services segment. This segment is still in a nascent stage and is one of the fastest growing

segments on the outsourced Contract Research Services industry and is expected to grow at a

CAGR of 34% over the next 5 years.

This presents an opportunity for an Animal house facility to move up the value chain from being a

supplier of Animals to a service provider.

Figure 7: Preclinical Services CRO market revenue forecasts (India), 2009-2015

0

20

40

60

80

100

120

140

160

180

200

Pre-Clinical Services 8.32 13.17 19.95 26.91 36.03 48.23 65.01 87.64 116.35 154.46

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Frost & Sullivan

USD million

Preclinical Services Contract Research Market: Revenue forecasts (India), 2009-2015

KIPDC


• Industry Size: The market revenue for 2009 was approximately 27 million USD. The revenues are expected to rise to USD

154 million by 2015.

• Phase of maturity: Market is in the Growth Stage

• Preclinical toxicology services have a CAGR of 34% through the forecasted period.

• India Advantage: Skilled manpower, low costs.

• Areas of Improvement: India still lags behind China in offering toxicological services. This mainly due to regulatory hurdles

that limit the experimentation in higher mammals. Experimentation in primates is still an area that is seeing a lot of debate

in India. Although the government has planned primate testing facilities on a Public Private Partnership basis, more needs

to be done to facilitate experimentation in primates.

• Industry Size: The market revenue for 2009 was approximately 27 million USD. The revenues are expected to rise to USD

154 million by 2015.

• Phase of maturity: Market is in the Growth Stage

• Preclinical toxicology services have a CAGR of 34% through the forecasted period.

• India Advantage: Skilled manpower, low costs.

• Areas of Improvement: India still lags behind China in offering toxicological services. This mainly due to regulatory hurdles

that limit the experimentation in higher mammals. Experimentation in primates is still an area that is seeing a lot of debate

in India. Although the government has planned primate testing facilities on a Public Private Partnership basis, more needs

to be done to facilitate experimentation in primates.

KIPDC


Types of Animal Houses in India

Animal Houses are typically understood to be enclosures where animals are raised and/ or bred

for the purpose of lab testing while ensuring animal comfort.

Animal houses can be large enclosures housing large animals like buffaloes, cows, horses, to

smaller establishments containing small mammals like mice, rats, guinea pigs, etc.

There is no particular classification of animal house types, but they can be classified either on the

basis of the type of animals or on the basis of function of the animal house.

One the basis of the type of animals sheltered in the facility, animal houses can be classified into

Large Animal Houses and Small Animal Houses. There may be some containing both small and

large animals, with common lab areas and separate animal housing areas.

Fig 8: Types of Animal Houses

Animal Houses

Small Animals

(Rodents - rats/ mice/

rabbits/ hamster)

Large Animals (Dog / Sheep/ Monkey/

Cat/ Horses/ Cows, etc.)

� Animal area enclosed in wirehash

� Free Run Area surrounded by proper fencing

� Open Shed for animal resting

� Breeding Enclosures � Testing facility

• Animal area enclosed in cages

• Random Monitoring • Testing facility • Breeding enclosures

As seen in Figure 7 above, animal houses for small animals which house rodents like rats, mice,

hamsters, rabbits etc., have indoor animal shelters. Such animal houses usually cater to studies

performed for pre-clinical to clinical drug development.

Animal Houses for large animals need to have shelters suitable for the larger animals. These

areas may be open air (dogs) or caged (monkey). Apart from this, they also need to have a free

run area for the natural frolicking activities of the animals as well as a shed area for resting of

animals.

Type of Studies

Animal housed can be used for different types of studies depending upon the permission granted

to the animal house.

Small animals are used for pre-clinical drug testing, study of diseases like cancer as well as

toxicology studies.

Large animals in India are usually kept for

- Commercial purposes like sera production (eg. Horses and sheep)

- Antibody evaluation and production/identifying target molecules on big animals those can

produce sufficient amount of antibodies when infected

- Nutritional studies

- General anti-venom studies

- Toxicology studies

On an average, nearly 300 horses are needed for studies related to antibodies production and

sera-based studies in large animals

Also, in a typical facility housing mainly small animals or rodents, nearly 50:50 ratio is

maintained between animals used in studies and animals used for breeding, where the bred

rodents are used for internal consumption.

KIPDC

2010 Confidential 19

The different types of studies performed in animal houses are mentioned in details below:

I. Preclinical Services

A] Pharmacokinetics (PK)

� Single Dose PK

� Dose proportionality studies

� Absolute Bioavailability

� Multiple Dose Pharmacokinetics

� Multiple routes of administration: Intravenous, oral, subcutaneous, intramuscular,

intraperitoneal and dermal.

� Tissue distribution

B] Efficiency Studies

� Acute efficacy screening models

� Chronic efficacy screening models

� Based on the project suitable animal models will be used for screening

� Development of new animal models

� Genetically modified animal models

C] Toxicology

� Abnormal toxicity

Abnormal Toxicity is a European Pharmacopoeia standard for assessment of biological

products. The test material is administered to mice and guinea pigs, which are then

evaluated for signs of toxicity.

KIPDC


Animals used: mice and guinea pigs

� Specific toxicity

� Pyrogen testing

A pyrogen is a substance (often bacterial) that causes elevation to an animal’s body

temperature. Pyrogenicity testing seeks to find any possible fever-causing contaminants in

items such as vaccines and injectable drugs. The rabbit pyrogen test, in use since the

1940s, requires the injection of the material into the rabbits’ blood stream and then

monitoring for temperature increases. The rabbits’ sensitivity to the test is greatly affected

by the strain of the pyrogen, as well as differences in age and gender

Animal used: Rabbits

� Safety and potency tests

� Biological assays

Bioassays are typically conducted to measure the effects of some substance on a living

organism and are essential in the development of new drugs, and in monitoring

environmental pollutants. For example bioassay test for pituitary , serum , glycogen etc.

Animal used: Rabbits, toads

• Potency assays

Potency assays are animal studies in which a defined animal model demonstrates a

measurable, physiological change in response to application of the drug.

Animal used: Hamsters, Guinea pigs

• Eye irritation test

Ocular toxicity is determined by applying a test substance for one second to the eyes of 6

test animals, usually rabbits. The eyes are then carefully examined for 72-hours, using a

magnifying instrument to detect minor effects. The ocular reaction may occur on the

cornea, conjunctiva, or iris. It may be simple irritation that is reversible and quickly

disappears or the irritation may be severe and produce corrosion, an irreversible

condition. The eye irritation test is commonly known as the "Draize Test."

KIPDC



• Systemic toxicity studies

• Male fertility studies

These studies are conducted to determine the adverse effect of any drug on the male

fertility. Semen parameters or reproductive organ histopathology and functioning are

observed.

Animal used: Rats, Dogs

• Female reproduction & Development toxicity studies

The reproductive toxicity testing is intended to determine the effect of substances on

gonadal function, conception birth and the growth and development of offspring. The oral

route is preferred.

Animal used: young adult rats

• Development toxicity is used to detect the potential of substance to produce embryo

toxicity and birth defects.

Animals used: Rats, Mouse, hamster and rabbits (young adult females)

• Female fertility study (Segment I)

• Teratogenicities study (Segment II)

Teratogenicties studies are conducted to investigate the incidence of birth defects in the

offspring when it is exposed to medicinal drugs.

Animals used: Rat

• Perinatal study (Segment III)

Animal used: Fetal and neonatal nonhuman primate, pregnant sheep, lamb, puppy, piglet

and immature rodents

KIPDC


• Local toxicity studies

Dermal toxicity study- Dermal toxicity tests determine the potential for an agent to cause

irritation and inflammation of the skin. This may be the result of direct damage to the skin

cells by a substance. It may also be an indirect response due to sensitization from prior

exposure.

There are two dermal toxicity tests: i) Primary Dermal irritation – Determines direct

toxicity. ii) Dermal Sensitization – Assays for immune hypersensitivity of skin.

Animal Used – Albino rabbits

• Vaginal toxicity study

Animal used: Rats, rabbits and dogs

• Rectal tolerance test

The method determined the tolerance of a site( rectum) which comes into contact the

medicinal product as a result of method of administration. Observation of the anal region

and anal sphincter, clinical signs and faces is carried out.

Animal used: Rabbits & Dogs

• Ocular toxicity studies

Ocular toxicity is determined by applying a test substance for one second to the eyes of 6

test animals, usually rabbits. The eyes are then carefully examined for 72-hours, using a

magnifying instrument to detect minor effects. The ocular reaction may occur on the

cornea, conjunctiva, or iris. It may be simple irritation that is reversible and quickly

disappears or the irritation may be severe and produce corrosion, an irreversible

condition. The eye irritation test is commonly known as the "Draize Test."


• Inhalation toxicity studies

Several groups of experimental animals are exposed for a defined period to the test

substance in graduated concentrations, one concentration being used per group. Where

vehicles used to help generate an appropriate concentration of the substance in the

KIPDC


atmosphere a vehicle control group should be used. Subsequently, observations of effects

and deaths are made. Animals which die during the test are necropsied, and at the

conclusion of the test surviving animals are sacrificed and necropsied as necessary. Acute

inhalation toxicity is the total of adverse effects caused by a substance following a single

uninterrupted exposure by inhalation over a short period of time (24 hours or less) to a

substance capable of being inhaled.

Animal used: Rats

• Allergenicity/ Hypersensitivity

Guinea pig maximization test - The Guinea Pig Maximization Test is a widely-used test in

the screening of contact allergens for the possibility that they may act as sensitizers in

humans.

Animal used: Guinea Pigs

• Genotoxicity

a. AMES - This test uses amino acid requiring bacteria of at least five strains of

Salmonella typhimurium and Escherichia coli to detect point mutations. Bacterial cells are

plated on agar lacking an amino acid required by the test strain, and then exposed to the

test compound in the presence and in the absence of an exogenous metabolic activation

system. The principle of this test is that it detects new mutations which revert mutations

already present in the test strains, and restore the functional capability of the bacteria to

synthesize an essential amino acid. The revertant bacteria are detected by their ability to

grow in the absence of the amino acid required by the parent test strain. Lack of bacterial

growth may indicate that test compound is non-mutagenic.

b. Micronucleus - This is a genotoxicity test system used for the detection of micronuclei

in the cytoplasm of interphase cells to investigate the mutagenic potential of a test

compound in vitro.

KIPDC


II. Laboratory Services

1. Surgical Services

• Cannulation – Jugular vein

• Customized surgeries

2. Histopathology Services

• Gross pathology

• Organ collection and preservation

• Tissue processing

• Embedding

3. Clinical Pathology Services

• Serum chemistry

• Plasma chemistry

• Hematology

• Urinalysis

III. Miscellaneous Laboratory services

• Drug Testing Laboratory Services as per IP, BP & USP

• Report in Form 39 of Drugs & Cosmetics Act

• Quality plasma & serum

• Bioassays – FSH, LH, HCG, Insulin, EPO etc.

• Vaccine toxicity testing

• Antibody production in rabbits and guinea pigs.

KIPDC


Number of Animal Houses in India Fig 9: Split of Animal Houses

The number of Animal Houses in India is estimated to be close to 1300. Of these, 70% are under

Medical Colleges and Research Institutes such as All India Institute of Medical Sciences (AIIMS)

New Delhi, Christian Medical College (CMC) Vellore, Indian Institute of Science Bangalore

National Center for Biological Sciences Bangalore, Center for Cellular and Molecular Biology

Hyderabad, National Institute of Immunology New Delhi.

20% of animal houses are present in the facilities of pharmaceutical Companies such as Cadila

Pharma, Dr. Reddy’s Labs, Ranbaxy Laboratories, Biocon, as well as International companies like

MSD, Novartis etc.

10% animal houses are with Contract Research Organisations such as Advinus Therapeutics,

Syngene, Jai Research Foundation, Raj Biotech, Intox Labs etc.

A few animal houses are also well known for their bred strains which they supply to other animal

houses. These stand alone animal houses include institutes like NTC, IISc, etc.

KIPDC


Value and Volume of Study Conducted

A typical small animal house with 5,000 animals can supply upto 2,000 plus animals on a

monthly basis.

The number of studies that can be performed with a number of animals depends widely on the

basis of the following criteria:

a) Strain and breed of animal to be used

b) Type of study

1. Therapeutic area for the study: this helps in identification of the strain of animal to

be used for the study, whether it can be a generic mouse type, or a specific mouse

with a glaucoma strain

2. Model used for the study: the model used for a study determines the specifics of

the study, starting with the number of animals, to the duration of the study and type

of experimentation to be performed

3. Number of animal groups to be used: this can vary from 2 groups of 3 animals

each, to 10 groups of 10 animals each or more

c) Duration of study – the study can be a periodic repeat study or a one-time study. E.g. The

effect of a molecule can be tested on a group of mice over a period of 3 months, while

another study may require a one time 2 week study

Thus, the volume of study performed by an animal house are difficult to estimate. However, it

has been observed that on an average, the leading animal houses in India starts around 30 new

studies on a yearly basis.

The value of each study similarly depends upon a number of factors, ranging from cost of animals

used for the study, to the complexity of the model used for the study. However, for a vanilla

toxicology study performed for a group of 15 rats, the study can cost as much as INR 3 lacs.

KIPDC


Project Component and Infrastructure Requirements

A typical animal house has a number of rooms and areas stipulated by the regulatory authorities.

Apart from these, they have to follow norms and processes which have to be adhered to ensure

certifications and compliance with norms.

The main component of this aspect, however, are the infrastructural requirements which ensure

that the animal house complies with the basic requirements on a long term basis and the animals

are in a comfortable and suitable environment.

Infrastructure Required for an Animal House

Animal houses need to have specific areas for different kinds of activities involved, to ensure

proper mental and physical care of Animals in the facility. In planning an animal facility the space

should be well divided for various activities. The animal rooms should occupy about 50-60% of

the total constructed area and the remaining area should be utilized for services such as stores,

washing, office and staff, machine rooms, quarantine and corridors. The environment of animal

room (Macro-Environment) and animal cage (Microenvironment) are factors on which the

production and experimental efficiency of the animal depends. Since animals are very sensitive to

environmental changes, sharp fluctuations in either: temperature, humidity, light, sound and

ventilation, should be avoided. Broadly, an animal house should have within its premises, or at

least easy access to the following facilities:

1. Animal Rooms

2. Service Area

3. Animal Runs

4. Storage Area

5. Health Labs

6. Personnel Area

KIPDC


7. Autopsy/ Test rooms

8. Incineration Facilities

9. Research Labs (not mandatory)

Each of the above mentioned infrastructural requirements are explained below in details.

Animal Rooms:

Animal rooms are where the animals are kept. This may comprise of either caging facility or

housing system depending upon the type of animal that is kept. For smaller animals like rats,

mice, rabbits, etc, cages are maintained, while for large animals like Horses, goats, cattle, etc.

are kept in sheds and outdoor facilities with a proper fencing done. The animal housing system

taken overall, should be designed carefully to facilitate animal well being, meet research

requirements, and minimize experimental variables. The housing system should:

- Provide space that is adequate, permit freedom of movement and normal

� postural adjustments, and have a resting place appropriate to the species;

- Provide a comfortable environment

- Provide an escape proof enclosure that confines animal safety

- Provide easy access to food and water

- Provide adequate ventilation

- Meet the biological needs of the animals, e.g., maintenance of body temperature,

urination, defecation, and reproduction

- Keep the animals dry and clean, consistent with species requirements

- Facilitate research while maintaining good health of the animals

Small Animal Requirements

Basic requirements for keeping rodents (small animals):

- Standard cage sizes depending upon the weight/ size of the animal

- Standard floor space/ animal

- Controlled temperature and humidity

KIPDC


- To simplify servicing and sanitation, cages should have smooth, impervious surfaces that

neither attract nor retain dirt and a minimum number of ledges, angles, and corners in

which dirt or water can accumulate

- Feeding and watering devices should be easily accessible for filling, changing, cleaning

and servicing

- Particular attention must be given to eliminate sharp edges and broken wires, keeping

cage floors in good condition

Area requirements for keeping mice:

Floor area

per mice

(cm2)

38.7 51.6 77.4 96.7

Weight of

animals

(grams)

<10 Up to 15 Up to 25 >25

Small cage

(24 cm x

14 cm)

8 7 4 3

Large cage

(32.5 cm x

21 cm)

17 14 9 7

Table explanation: eg., with a floor area of 96.7cm2, mice with cumulative weight more than 25gm can be

kept. However, such mice should not exceed 3 in number for a small cage, and 7 in number for a large

cage.

Large Animal Requirements

Basic requirements for keeping large animals (cattle, monkey, dogs, sheep etc.):

- Standard area (floor space)/animal as prescribed

- Breeding facility

- Proper supply of food and water to the animals

KIPDC


- Humidity and temperature control in case the animal is caged, for example, in case of

monkeys

- Fenced grounds/areas so that the animal can not escape from the surrounding, as well as

some outside animal should not enter into the reserved area, eg. In the case of cows and

horses

Area requirements for keeping monkeys:

Weight (kgs) Floor Area (ft2) by

kilo wt as defined

Height (cm)

Up to 1 1.6 50

Up to 3 3.0 72

Up to 10-12 4.3 72

Up to 12-15 6.0 72

Up to 15-25 8.0 90

* A single monkey can weigh up to 25 kgs, hence cage floor area is determined by weight

Area requirements for keeping farm animals:

Weight (kgs) Floor Area /Animal (ft2) Height (ft)

Sheep and Goats

<25 10

Up to 50 15

>50 20

8

Swine

Up to 25 12

Up to 50 15

Up to 100 24

Up to 200 48

>8

KIPDC


Service area:

This area is reserved for the cleaning of animals and animal cages, as well as is concerned for all

the routine sanitation activities.

Sanitation is essential in an animal facility. Animal rooms, corridors, storage spaces, and other

areas should be cleaned with appropriate detergents and disinfectants as often as necessary to

keep them free of dirt, debris, and harmful contamination. Cleaning utensils, such as mops, pails,

and brooms, should not be transported between animal rooms. These activities need to be done

in service areas.

Animal Runs:

Large animals like horses, goats, etc. should have proper and spacious open-air animal runs

(open areas) with a proper fencing and wired mesh, where these animals can be let open, play

and run. This will help in keeping the physical and mental health of the animal in a stable

condition.

The animal runs may be separate for separate group of animals. This type of provision should

always be made for animals with specialized locomotor pattern to express these patterns,

especially when the animals are held for long periods. For e.g. ropes, bars, and perches are

appropriate for branching non-human primates. Cages are often used for short-term (up to 3

months) housing of dogs and may be necessary for postsurgical care, isolation of sick dogs, and

metabolic studies. Pens, runs, or other out-of-cage space provide more opportunity for exercise,

and their use is encouraged when holding dogs for long periods.

Storage area

This area is used for maintaining the feed storage as well as spare cage storage and also for

other necessary machineries or equipments related to animal house.

Animals should be fed palatable, non-contaminated and nutritionally adequate food daily unless

the experimental protocol requires otherwise. Feeders should allow easy access to food, while

avoiding contamination by urine and feces. Food should be available in amounts sufficient to

KIPDC


ensure normal growth in immature animals and maintenance of normal body weight,

reproduction, and lactation in adults. The animal feed should contain moisture, crude fiber, crude

protein, essential vitamins, minerals crude fat and carbohydrate for providing appropriate

nutrition.

Health labs

Animals need to be monitored for their health on a routine basis to ensure healthy animals

available for studies to be conducted. Health labs enable checking of the vital statistics of animals

and ensuring that the population is disease free and healthy.

All animals should be observed for signs of illness, injury, or abnormal behavior by animal house

staff. As a rule, this should occur daily, but more-frequent observations might be warranted, such

as during postoperative recovery or when animals are ill or have a physical deficit. It is

imperative that appropriate methods be in place for disease surveillance and diagnosis.

Unexpected deaths and signs of illness, distress, or other deviations from normal health condition

in animals should be reported promptly to ensure appropriate and timely delivery of veterinary

medical care. Animals that show signs of a contagious disease should be isolated from healthy

animals in the colony. If an entire room of animals is known or believed to be exposed to an

infectious agent (e.g. Mycobacterium tuberculosis in non-human primates), the group should be

kept intact and isolated during the process of diagnosis, treatment, and control. Diagnostic

clinical laboratory may be made available.

Health lab may be a part of the animal house, or located in another facility near the animal

house, so as to ensure speedy checks if required. A typical health lab should include:

- Blood pressure monitoring

- Blood testing facilities

- Stool testing

- Ecto-parasite testing

- Height/ weight monitoring

- X-ray Facility

- Diagnostic analytical tools

KIPDC


- Microbiology section

- Pathology section – clinical and surgical (optional)

- And other routine health check facilities

Personnel Area

This area is meant for the staff and is used by them for their work. This also includes the

administration section of the building.

It is essential that the animal care staff maintain a high standard of personal cleanliness.

Facilities and supplies for meeting this obligation should be provided e.g. showers, change of

uniforms, footwear etc. Clothing suitable for use in the animal facility should be supplied and

laundered by the institution. A commercial laundering service is acceptable in many situations;

however, institutional facilities should be used to decontaminate clothing exposed to potentially

hazardous microbial agents or toxic substances. In some circumstances, it is acceptable to use

disposable gear such as gloves, masks, head covers, coats, coveralls and shoe covers. Personal

should change clothing as often as is necessary to maintain personal hygiene. Outer garments

worn in the animal rooms should not be worn outside the animal facility. Washing and showering

facilities appropriate to the program should be available.

Autopsy/ Test room

This area is meant for conducting autopsies on animals post experiment if necessary or for

performing surgeries or tests on animals during the studies. This area may also support storage

units maintained at low temperatures for storing animal organs needed for toxicological studies.

Incineration Facilities

Sacrificed animals should be properly disposed and immediately removed from the facility so as

to reduce the chances of contaminations or any kind of infections. Incineration facilities may be

part of the facility or may be conducted at a separate incinerator facility. Guidelines for

incineration facilities are independent of those for animal houses.

In case of large animals, burial may also be conducted for sacrificed animals. Local municipal

corporations are also helpful in arrangement of disposal of sacrificed animals. Small animals are

wrapped in specific bags designed for the purpose and immediately transferred to the cold

KIPDC


storage rooms wherein they are kept at -20oC temperatures until the time they are sent for

incineration to the corporations involved in such kind of activities. (See Case Study for Mumbai)

Research Labs (Not Mandatory)

Generally animal houses maintained by any Pharmaceutical company or a CRO may have one

more additional lab for research purposes where the liquid preparations, molecule suspensions

can be made and other research issues are taken. However, this is not mandatory for individual

animal houses.

KIPDC


Fig 10: Flowchart for Animal disposal

Case Study: Sacrificed Animal Disposal in Mumbai

Small animals

(rodents)

Big animals

(cattle/horses)

Stored to -20oC Bombay Municipal

Corporation has

incineration facility

where they are

either buried or

burnt Biomedical waste

management unit maintained

by Bombay Municipal

Corporation have biomedical

waste collection Vehicles.

Similar facilities in Mumbai are

maintained by Taluja group.

Also there is SMS Enviroclean

group who look after these

issues

Disposal of dead animals

KIPDC


Regulatory Compliance

Every animal house supplying animals of any kind to the companies for test/ research purpose

must be setup and supervised in accordance to Committee for the Purpose of Control and

Supervision of Experiment on Animals (CPCSEA) which is duty bound to take all such measures

as may be necessary to ensure that animals are not subjected to unnecessary pain or suffering

before, during or after the experiments on them. CPCSEA guidelines are in accordance with

Prevention of Cruelty to Animals Act (PCA). For this, government has made “Breeding and

Experimentation on Animals (Control and Supervision rules), 1988” which was amended

thereafter in 2001 and in 2006, to regulate the experimentation on animals.

Every such animal house or any institution having animal house with animals being sourced for

research purposes should have an Institutional Animal Ethics Committee (IAEC) so that to

maintain the quality and consistent ethical review mechanism.

For experiments and studies involving some bacterial infections or fungal studies and other

concerns similar to that like toxicology studies, there needs to be an Institutional Bio Safety

Committee (IBSC) to regulate and supervise the experimentation and disposal of waste matter

and animal dead bodies

All the animal house are supposed to function in all respects in accordance with CPCSEA

guidelines and routine inspection and survey needs to be get done by the owner to renew his

certification.

Other certifications which a particular animal house can go for but which are not mandatory are:

• DSTGLP (Department of Science and Technology Good Lab Practices)

• NABL (National Accreditation Board for Testing and Calibration Laboratories)

accreditation for labs

There are a few international accreditations:

• Accreditations from Jackson Laboratory, Maine, USA

• AAALAC (Association for Assessment and Accreditation of Laboratory Animal Care)

accreditation. AAALAC International is a private, nonprofit organization that

KIPDC


promotes the humane treatment of animals in science through voluntary

accreditation and assessment programs. This is the only major organization that is

only for animals

• FELASA (Federation of Laboratory Animal Science Associations) accreditation. The

Federation of European Laboratory Animal Science Associations (FELASA) is

composed, at present, of 12 independent European national and regional

laboratory animal science associations. It can speak for laboratory animal

scientists and technologists in at least 20 countries: Austria, Belgium, Czech

Republic, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Ireland,

Italy, Latvia, Lithuania, the Netherlands, Norway, Spain, Sweden, Switzerland and

the United Kingdom

However, very few Animal houses in India are having these international Accreditations like

AAALAC and FELASA. The reason being:

• Non-competitive attitude of the animal houses in India to struggle and look forward

for improving their facility standards

• Lack of proper planning and vision

• Lower revenues which restrict them from getting their facility maintained and

functional according to the standards

• Improper business models which are not renewed routinely

• Dependency on repeat clients

• Lack of proper trained professional in India

KIPDC


Infrastructural Requirements for an Animal House – A Summary

Type of facility Small Animals Large Animals

Animal rooms Y (Cages) Y (large areas)

Service area Y Y

Animal Run N Y

Storage Area Y Y

Health Labs Y Y

Personnel Area Y Y

Autopsy/Test room Y Y

Incineration Facility May be present in own

campus / Outsourced

May be present in own

campus / Outsourced

KIPDC


Regulatory Requirements for an Animal House

For any animal house to function in India, it needs to be compliant with the regulatory

requirements. The following flowchart outlines the regulatory procedure to set up an animal

house

Figure 11: Regulatory Approval Process

Basic Infrastructure in

accordance to CPCSEA

Registration of breeding

Formation of Institutional

Animal Ethics Committee

Animal House ready; Projects designed

Inform authorities / CPCSEA

about the details of every

project; IAEC approval

KIPDC


- All animal houses should function in accordance with Committee for the Purpose of Control

and Supervision on Experiments on Animals (CPCSEA)

- Facilities must be accredited with NABL (National Accreditation Board for Testing and

Calibration Laboratories) and DSTGLP (Department of Science and Technology Good Lab

Practices) to assure quality maintenance and safety of animals used in laboratory studies

- All animals must be acquired lawfully as per the CPCSEA guidelines

- A health surveillance program for screening incoming animals should be carried out to

assess animal quality

- Animal care programs require technical and husbandry support. Institutions should

employ people trained in laboratory animal science or provide for both formal and on-the-

job training to ensure effective implementation of the program

- For animal experiments involving bio-hazardous agents, the use of animals in such

experiments require special attentions. The procedures and the facilities to be used must

be reviewed by both the Institutional Bio-safety committee and Institutional Animal

Ethics Committee (IBSC)

- Transgenic animals are those animals, into whose germ line foreign gene(s) have been

engineered, whereas knockout animals are those whose specific gene(s) have been

disrupted leading to loss of function. These animals can be bred to establish transgenic

animal strains. Transgenic animals are used to study the biological functions of specific

genes, to develop animal models for diseases of humans or animals, to produce

therapeutic products, vaccines and for biological screening, etc. These can be either

developed in the laboratory or produced for R&D purpose from registered

scientific/academic institutions or commercial firms, and generally from abroad with

approval from appropriate authorities

Apart from DST/GLP and NABL accreditations, animal houses can also get international

accreditations. These can help them while performing studies for international organizations, or

for study results to be submitted to international drug authorities. While breeding imported

strains of animals, the animal house may also be accredited by the international company from

where the imports are done, to ensure quality of animals. Some of the well known accreditations

are:

KIPDC


- Accreditations from Jackson Laboratory, Maine, USA

- AAALAC (Association for Assessment and Accreditation of Laboratory Animal Care)

accreditation. AAALAC International is a private, nonprofit organization that promotes the

humane treatment of animals in science through voluntary accreditation and assessment

programs. This is the only major organization that is only for animals

- FELASA (Federation of Laboratory Animal Science Associations) accreditation. The

Federation of European Laboratory Animal Science Associations (FELASA) is composed, at

present, of 12 independent European national and regional laboratory animal science

associations. It can speak for laboratory animal scientists and technologists in at least 20

countries: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany,

Greece, Iceland, Ireland, Italy, Latvia, Lithuania, the Netherlands, Norway, Spain,

Sweden, Switzerland and the United Kingdom.

Environmental Impact of an Animal House

The animal houses may at times, have an impact on the nearby environment if not maintained

properly. However, all the Animal houses are supposed to function according to CPCSEA

guidelines. Deviations may happen at times which may have negative impacts on the

surroundings. Few of the impacts:

- There are chances of grazing animals or rodents who may slip out of the animal house and

may enter the nearby farms/fields destroying the standing crops or other properties

- If proper drainage and waste removal system is not functioning in order, that may again

harm the environment

- Animals used in toxicology studies should be under proper surveillance and should not be

allowed to go out of the farm

- Sacrificed animals should be properly taken care of as per norms, otherwise the improper

disposal may create foul smell and spread of infection to the nearby water bodies.

- Noise pollution is again a problem with large animal houses housing large animals like

horse and cattle

Since incineration and burial of sacrificed animals is as per state protocol and can be outsourced,

they do not have a direct role in the environmental impact of a stand-alone animal house.

KIPDC


Gaps in Facilities as Perceived by Sponsors

Most of the Pharma companies as well as CROs consider using their own Animal house facility

animals for conducting tests and studies. However if the requirement is large, then they may opt

for buying animals from outside. However, the animals are generally bought from the vendors

who have good quality animals and have supplied to the sponsor earlier also. Following are the

key points which are mentioned as gaps by the sponsors for any general Animal house facility

functioning independently:

• Lack of proper accreditations at national level, which include bare minimum like ISO or

DST accreditations.

• The study results, if needed to publish at an international level, need to have animals that

are from a certified facility following GLP, which gives an extra edge towards the

acceptance of the results

• Sometimes necessary Animal certificates are also needed like Certificate of Birth or

Genetic Monitoring Certificate for a particular stock, which may not be available in proper

form with an animal house

• Animal health is again a major concern. Animal may be supplied to the sponsor in a poor

health condition, or may be a significant percentage of animals in a stock may not be at a

good physical level top conduct experiments or studies.

• Maintenance of typical animal models like Diabetes mouse or Cancer models all the time is

again not possible for all kinds of animal houses, since extra care has to be taken for

these models

• Breed mixing and maintenance is again an issue which is encountered some of the times.

Like, there is a possibility of strain mixing in the animal house which may then

contaminate the stock and the same is unknowingly transferred to the sponsor. This may

again foul the results of the experiment

• Supply of animals is also a problem to some extent because if a large sample is required

for some test, the animal houses ask for a time of atleast one to two month so as to raise

the animals. That is, they act only on getting the orders from sponsors and very few

animal houses in India have necessary stock ready all the time

KIPDC


KIPDC


Importance of Bangalore as a Suitable Location for Animal House

Karnataka Life Sciences Industry Overview and Feasibility of Setting up Animal House in Bangalore

Karnataka Life Sciences Overview

o Karnataka state’s capital city Bangalore is ranked as the fourth best technological

hub in the world by United Nation's Human Development Report

o This State is a home for the more than 187 biotech companies, which forms 50% of

the Life Sciences Companies in the country

o The Government of Karnataka was the first state government to bring out a Biotech

policy. It is one of the most pro active state governments in promoting Biotechnology

in the country.

o The annual Flag ship event of Bangalore Bio is the largest and the most important

Biotech event in India.

o The State houses leading life science research institutes of the country like Indian

Institute of Science (IISc) – ranked as the eighteenth best institute in the world by

the World Education Report and has produced several Noble Laureates, National

Centre for Biological Sciences (NCBS) – one of the 10 institute in the world that is

recognized by NIH, USA for stem cell research, Jawaharlal Nehru Centre for

Advanced Scientific Research (JNCASR). National Institute of Mental Health and

Neuro Sciences is India’s leading Neurology research center.

o Karnataka is home to the second largest number of Medical Colleges in India at close

to 40.

KIPDC


Fig 12: Number of life sciences companies in Karnataka

Fig 13: Karnataka Industry segment

KIPDC


Karnataka- Requirement for Animal House

• Bangalore is home to the largest Biocluster of the 6 Bioclusters in India.

• The Bangalore Biocluster comprises close to 40% of all the companies in India that are

undertaking research in the field of Biopharmaceuticals, Enzymes, Contract R&D services,

Bioprocessing and Genomic/Proteomic research.

• The cluster is a well balanced interdependent web of companies, research institutes,

government agencies and stake holder groups

• 60% of the market is controlled by the Research Services and Human Health based

products.

• The Research Services are for Drug Discovery Research, Preclinical Research and

Toxicology services.

• The leading national biological research institutes of IISc, NCBS, JNCASR, NIMHAS, etc are

engaged in basic and applied biology research.

• The company’s and research institute present a significant market for Lab Animal and

Animal testing services.

• On an average a Pharma Companies and Contract Research Organization engaged in Drug

Discovery and Development research spends close 25 Lakhs to 1 Crore annually on Lab

Animal.

• High concentration of Medical Colleges will drive demand for Lab Animals

• Most institutes and companies import animals as there are very few local players with the

capability and infrastructure to meet the demand.

KIPDC


Companies

• Close to 200 Life Science Companies in the state • Biotech exports in 2009 are close to INR 3000 Crores • Many leading Indian and MNC companies comprise this

cluster e.g. Biocon, Avesthagen, Stempeutics, Astra Zeneca, Novo Nordisk.

• Bangalore has one of the highest number of Biosuppliers. E.g Invitrogen, Sigma Aldrich, Millipore, Waters, Sartorius, Pall

• Significant number of Drug Discovery and Genomics/ Proteomics companies

Government Support

• Karnataka was first in the country to announce Biotech Policy in the year 2001.

• This policy was revised in 2009 with a number of additional benefits.

• Single Window Clearance agency has been created to fast track project clearance.

• Projects with value over USD 10 Million to receive special package.

• All research labs to come under the Green category.

• State-of-the-Art Animal Quarantine and Bio-Security Facility to be set up at Bangalore International Airport

Stake holder groups

• The Bangalore Cluster is unique in having Institutions for Collaboration (IFCs), which focus on cluster communication and collaboration.

• Examples include the Association of Biotechnology Led Enterprises (ABLE), the Vision Group on Biotechnology, which has organized the nation’s flagship annual biotechnology exhibition, Bangalore-Bio International Fair (“Bangalore-Bio”), since 2001.

• Bio-Venture Fund of US$

Research Institutes

• Karnataka is home to many world class universities such as IISc, NCBS, JNCASR, NIMHANS.

• 15 out of the 30 universities offering degrees in biotech in India are based in Bangalore.

• Karnataka has the second highest number of medical colleges in India at close to 40.

• Proposed National Center of Excellence in Stem Cell Research is expected to come up in Bangalore

Bangalore Biocluster

• Bangalore is considered India’s main Biotech Hub.

• The Competitive Strengths of Bangalore are suited for supporting Biotech Cluster. This Biocluster is also ably supported by allied industries such as the Large IT sector and BPO sector.

• Due to the relatively high R&D and capital demands of the Life Sciences sector

Karnataka’s relative strength in R&D, Proactive government policies, world class Institutes and Active Public Private Partnership makes Bangalore and natural Hub for Life Sciences research in India.

Source: Frost & Sullivan

Drivers for Bangalore as an Ideal Location

KIPDC


SWOT Analysis of Bangalore as a location for Animal Houses

Strengths Opportunity

- Strong Scientific resource base with

presence of a large number of

Scientific Institutes focused on Life

Science Research

- Large Concentration of Research

Oriented Life Science Companies

- Second Largest number of Medical

College in India

- Availability of manpower due to

presence of Veterinary Research

Institute

- Acknowledged R&D capital of India

- Proactive Government Policies

- Large Market Demand for Lab Animals

and Services (Initial estimate of

50,000 animals annually)

- Minimal Competition- There is just one

major independent lab animal provider

in Bangalore.

- Increased Drug Discovery Outsourcing

activity with emphasis on Biology

based research for which Bangalore is

hub.

- Setting up of National Center of

Excellence in Stem Cell Research will

boost demand.

Weakness Threats

- Infrastructure Bottlenecks

- Lack of quality manpower due to

lack of specific courses which

specialize students in working in an

animal house, leading to on-the-job

training of veterinarians

- Highly regulated environment for

Animal Experimentation

- Competition from Hyderabad

- Requirement for High standard

facility can increase initial

infrastructure costs

- Mind set of local companies to

import Animals due perceived lack

of credibility of Indian suppliers

KIPDC


Benefits of setting up facility in Special Economic Zones (SEZ’s)

Special Economic Zone (hereinafter referred as “as “SEZ”) is a geographical region that has

economic laws that are more liberal than a country's typical economic laws. An SEZ is a trade

capacity development tool, with the goal to promote rapid economic growth by using tax and

business incentives to attract foreign investment and technology. Today, there are approximately

3,000 SEZs operating in 120 countries, which account for over US$ 600 billion in exports and

about 50 million jobs. By offering privileged terms, SEZs attract investment and foreign

exchange, spur employment and boost the development of improved technologies and

infrastructure.

There are 13 functional SEZs and about 61 SEZs, which have been approved and are under the

process of establishment in India.

As observed in various interactions with stakeholders of animal houses, an SEZ for an animal

house may not be of immediate value to the system. Advantages of having an Animal House

located in an SEZ:

- Availability of an animal house in a Pharma/ biotech SEZ will be of immense value to the

Pharma/ biotech companies who will not need to have to maintain their own animal

houses or outsource to animal houses far from their location, thereby making monitoring

activities simpler

- The animal house will be assured of a captive client base from the companies in the

vicinity

- Presence of other animal houses in the same SEZ can facilitate sharing of resources like

health labs and incineration facilities. This can help in reduce the running cost of the

facility

- Being inside an SEZ can help the animal house in the cost of sourcing international strains

of animals. However, this has to be explored in further details.

KIPDC


The advantages listed above for presence in an SEZ however, are not unique. While companies

within the SEZ may choose to conduct their studies in an animal house in the same SEZ, they will

also consider other factors such as capability of the animal house and pricing of study before

awarding a project to an animal house.

If presence in an SEZ constraints the animal house with respect to availability to other companies

outside the SEZ or other similar constraints with respect to facilities, the animal house may not

benefit from being present in the SEZ.

(A) The Units set up in an SEZ which have begun to manufacture / provide services during the

financial year beginning April 1, 2005 will get the following exemptions:

- 100% exemption of profits and gains from business for the first 5 years.

- 50% exemption on profits and gains from business for the next 5 years.

- 50% exemption to the extent that such amounts is re-invested in the SEZ Special Reserve

Account.

If the SEZ Unit has already availed of benefits for 10 years under Section 10A of the ITA, the

above exemptions are not available. Further, when a Free Trade Zone (“FTZ”) or an Export

Processing Zone (“EPZ”) is converted into an SEZ, the Units, which have already availed of

the 10-year tax exemption in an FTZ or EPZ, cannot avail of the Section 10AA exemptions.

(B) Losses falling under the heads “Profits and Gains from Business or Profession” and “Income

from Capital Gains” can be carried forward / set off as long as such loss is related to the business

of the SEZ Unit.

(C) Capital Gains on transfer of assets in case of shifting of an industrial undertaking from an

urban area to an SEZ shall be exempt, provided that 1 year before, or 3 years after the transfer

KIPDC


(i) machinery / plant was purchased for the business of the industrial undertaking in the SEZ, (ii)

building or land was acquired or building was constructed in the SEZ, (iii) the original asset was

shifted and the establishment was transferred to the SEZ and (iv) the assessee incurred such

other expenses as are notified by the Central Government

(D) Interest income received by a non-resident or a person who is not ordinarily resident in India,

on a deposit made in an OBU situated in an SEZ, shall be exempt from total income

(E) No tax deduction shall be made by the OBU from interest paid:

(i) On deposits made on or after April 1, 2005 by a non-resident or a person not ordinarily

resident in India; or

(ii) On borrowings on or after April 1, 2005 from a non-resident or a person not ordinarily

resident in India

(F) The gross total income of an assessee having an OBU or an assessee being a Unit of an IFSC

shall be deductible to the extent of 100% for 5 consecutive years from the year of grant of

permission under the Banking Regulation Act / SEBI / other relevant law and 50% for the next 5

years12. It further defines the exempted “income”, which is:

- Income from an OBU in an SEZ ;

- Income from business referred to in the Banking Regulation Act, 1949, or any other Unit

which develops, develops and operates, or develops, operates and maintains an SEZ ;

- Income from an approved unit of an IFSC.

KIPDC


(G) Exemption from Securities Transaction Tax available to taxable securities transaction entered

into by a non-resident through the IFSC.

Other Benefits

Customs and Excise

- Exemption from Customs Duty: SEZ Units may import or procure from the domestic

sources, duty free, all their requirements of capital goods, raw materials, consumables,

spares, packing materials, office equipment, DG sets etc. for implementation of their

projects in the SEZ without requiring any license or specific approval

- Goods imported/procured locally which are duty-free could or should be utilized within the

approval period of 5 years

- Domestic sales by SEZ Units will be exempt from Special Additional Duty

- Domestic sale of finished products, by-products is permitted on payment of applicable

Customs duty

- Domestic sale of rejects, waste and scrap is permitted on payment of applicable customs

duty on the transaction value

- Exemption from applicable excise duty on goods brought in from the DTA to an SEZ

Foreign Direct Investment

- 100% FDI under the automatic route is allowed in the manufacturing sector in SEZ Units,

except for arms and ammunition, explosives, atomic substances, narcotics and hazardous

chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and

manufactured tobacco substitutes

KIPDC


- Exemption from the applicability of Press Note 2 (2005) that prescribes certain conditions

that a foreign investor proposing to make foreign direct investment in real estate sector in

India has to satisfy.

Banking / Insurance / External Commercial Borrowings

Setting up OBUs has been allowed in SEZs. External Commercial Borrowings by SEZ Units up to

US$ 500 million a year is allowed without any maturity restrictions

- Freedom to bring in export proceeds without any time limit

- Flexibility to keep 100% of export proceeds in an EEFC account and freedom to make

overseas investments with it

- Commodity hedging permitted

- SEZ units allowed to 'write-off' unrealized export bills

Central Sales Tax

- Exemption from Central sales tax on inter-state sale or purchase of goods

Other Central Enactments

State Taxes

- The respective State Governments may for the purpose of giving effect to the provisions

of the SEZ Act, notify policies for Developers and SEZ Units and take suitable steps for the

enactment of any law for granting exemption from state taxes, levies and duties to a

Developer or an entrepreneur

Service Tax

- Exemption from Service Tax to the Developer and the SEZ Units to carry on authorized

operations in the SEZ. Service tax exemption granted only to Units in the DTA providing

services to a Developer or to a Unit.

KIPDC


Labour laws

- All labour laws as applicable within the country apply in an SEZ.

Stamp duty

- No stamp duty is chargeable in respect of any instrument executed, by, or, on behalf of,

or, in favor of, the Developer, or Unit or in connection with the carrying out of the

purposes of the SEZ

Sub-Contracting

- SEZ Units may sub-contract part of their production or production process through Units

in the DTA or through other EOU / SEZ Units

- SEZ Units may also sub-contract work from the DTA exporters, and export from the SEZ

- Units can be set up to provide manufacturing services to overseas entities subject to

certain conditions

Transaction incentives with DTA

Any supplies from a DTA to an SEZ are to be treated as physical export. A DTA supplier would be

entitled to:

- Drawback / DEPB

- Exemption from Central Sales Tax

- Exemption from State Levies

Income-tax benefit as applicable to physical export under Section 80 HHC of the Income Tax Act

KIPDC


Analysis

Strategic Recommendations• We feel that the benefits of setting up in an SEZ are not that significant.• Instead focus on setting up in a Biotech Park which may not offer as much benefits as an SEZ but will be able to sustain the business better. Biotech Parks are more focussed towards R&D and some companies house their R&D sets with them. Bioparks are also know to nurture small and medium companies that do not have the capital to set up a full fledged Animal House and Toxicology division and could provide a captive client base.• Most Bioparks generally have common instrumentation facility and air conditioning and other utilities which can reduce the capital expenditure.

Benefits of SEZ• Setting up in an SEZ offers the a lot of tax benefits and incentives as highlighted.• Customs exemption import of equipment and sale in the domestic market.• By setting up in a Pharma SEZ an assured clientele is accessed• Single Window clearance mechanism are in place in most SEZ’s and some of them have Pre approved Pollution Control Clearance.• Common utilities such as Electricity, Water Supply and Incinerator services.• Good connectivity and infrastructure.

Limitations of SEZ• 95% SEZ’s are focussedtoward manufacturing set ups which have very little of no requirements for Animal House.• Most Pharma/Biotech SEZ’sare developed by single party’s e.g. Serum Institute SEZ in Pune, Biocon SEZ Bangalore etc. These company’s possess their in house Animal House facilities and also do not source from local vendors.• No access to common equipment facilities as most of the companies are manufacturing facilities and not R&D facilities

Financial Benefit of an Animal House in a SEZ

The financial benefits from setting up an animal house in an SEZ is only derived on the taxation

front, which does not directly impact the cash flow of the animal house.

Revenue generation may be easier if the animal house is located within a Pharma R&D SEZ,

however, that is rare in practical scenario and difficult to implement.

Frost & Sullivan surmises that the financial benefit of setting up an animal house in an SEZ is not

significant.

KIPDC


Case Study of captive business potential of Biotech Park

Biotech Park- S P Biotech Park

Introduction: The Shapoorji Pallonji Biotech Park (SPBP) is spread over 300 acres near

Hyderabad, India and was the first of its kind in the country. It is the hub of Genome Valley,

India’s first state of the art biotech cluster for life science research, training and manufacturing

activities. This is one of the most successful Biotech Parks in the country working on a Public

Private Partnership model between the Shapoorji Pallonji group and the Andhra Pradesh

Government.

Facilities Overview:

The park offers common effluent treatment facilities, power back up, compressed air and other

facilities. It also has a biotechnology incubation center to support start up companies in

translating their research ideas into commercially viable technologies without making large R&D

investments up front.

Modular laboratory units with standard facilities and services

- Telecom network

- Power and water supply and sewerage treatment

- Common effluent treatment facility

- Security, housekeeping, roads, fire detection and protection and landscaping

Assistance in getting started

- Technology Incubation Centre – Facilitates validation of science and technology without

making large scale investment up front

- Pilot Plant

- Support in meeting statutory requirements

KIPDC


Figure14: Client Profiles

All the companies that are housed in this park are focused on R&D activities. 87% of the

companies are focused on human health related applications. Out of these 57% are

Biopharmaceutical companies such as Avesthagen, Biological E etc. 22% are Contract Research

Organizations such as Vimta Labs, Albany Molecular Research Inc. etc. 9% are Pharma

companies who have housed their R&D set in this park, companies such as Uni Sankyo, Sandor

etc.

This 87% of companies provide a potential captive customer base for an animal house as

majority of the companies have housed their discovery, development or pre clinical activities in

this park.

Business Potential:

A typical Biopharmaceutical R&D facility consumes roughly 500 rats/month, 500mice/month and

30-50 Guinea Pigs and Hamsters. The price of the animals can vary from INR 200 for ordinary

animals to INR 4000-10000 for highly specialized animal. This is dependant on the kind of R&D

programs of the companies. Some small and medium companies might have molecules is an

advanced stage of development where in they would require mammalian studies such as dog and

KIPDC


primate toxicology. Primate toxicology studies are yet to take off in a big way in India and

majority of the companies are forced to look at companies in China mainly due to stringent

regulatory restrictions in India. Dog toxicology studies too are in a nascent stage but are slowly

picking up. Indian companies can charge a premium and margins in this business can vary from

50-75% In order to understand fully the potential of setting up an Animal House facility in a

Biotech Park a detailed analysis on the tenants and their R&D program is required.

KIPDC


Company Profile: Raj Biotech

Case Study- Animal House: Raj Biotech Pvt. Ltd.

Raj Biotech Pvt. Ltd.

Services

- Since 2000 Raj Biotech has successfully

completed over 200 studies for more than 60

satisfied customers.

- The animal facility is distributed in an area of

nearly 4200 sq ft.(500 sq meters). and is

supported with qualified veterinarians and

skilled animal care staff

- The facility meets the requirements as per the

guidelines of Committee for the Purpose of

Control & Supervision of Experiments on

Animals (CPCSEA) and is registered with the

CPCSEA.

- (Registration number is –

449/01/bc/CPCSEA)

- An Institutional Animal Ethics Committee

(IAEC) has been constituted as per CPCSEA

guidelines and reviews the scientific projects of

the institute quarterly.

- The facility undertakes animal breeding,

management, care and husbandry practices.

The facility houses small laboratory animals

viz. mice, rats, rabbits. The facility is engaged

in the production of quality animals by

undertaking various quality control programs

and preventive measures.

- Preclinical Pharmacology (Efficacy

studies / Acute & Chronic Models)

- Pre-clinical safety Pharmacology

- Pharmacokinetic Studies

- In vivo Toxicology

- In vitro Toxicology (Microarray

based predictive toxicology)

- Biological Testing

- Animal Tissue Culture based

studies

- Custom-made Polyclonal Antibody

Services

KIPDC


Animal Strains Available at the facility

Figure15: Clientele

Mice Rabbits

Rat Guinea Pigs

• Swiss albino • BALB/c • C57BL/6 • NUDE mice • B6D2f1 • DBA2 • C3Hej • SCID mice

• New Zealand White • Sandy Half Lop

• Sprague Dawley • Wistar

• Hartley

KIPDC


Figure16: Business procedure of getting orders and supplying animals

KIPDC


Actual sales: nearly 2000 mice per month.

Monthly sales: nearly 15 to 20 lakhs per month

YoY growth observed for animal sales: 10-12%

• Contacts maintained with CPCSEA registered clients (mostly Indian clients)

• Pre-Orders are taken from clients • 2-3 months in advance • Prefer the orders which will continue for more than 6 months

• Breeding is started by using standard breeding pairs which are already maintained by us at any point of time

• Order is supplied as and when needed once the breeding is started

• Strains of mice, rats, rabbits and guinea pigs are maintained

• Transportation facilities available throughout India

KIPDC


Area requirements:

Facility has nearly 26 animal rooms. Each animal room is roughly 350 ft2

Total animal room area : 26*350ft2 = 9100 ft2

Central labs: Three. Each Cental lab is nearly 500 ft2

Total lab area: 3*500ft2 = 1500 ft2

In the facility, the labs are shared for animal studies as well as routine monitoring and other procedures.

Labs are for multipurpose use.

Other type of requirements present in the facility:

- Storage rooms (Cage & Feed)

Registrations, Recognitions and Accreditations with Raj Biotech

- IAEC Institutional Animal Care and Use Ethics Committee is recognized by CPCSEA

(Committee for the Purpose of Control and Supervision of Experiments on Animals, Govt. of

India) for conducting any study involving lab animals and for sales of lab animals

- Recognition by Department of Scientific and Industrial Research, Govt. of India

- Recognition by Department of Biotechnology for Institutional Biosafety Committee for

conducting studies involving r-DNA

Under process

- NABL (ISO 17025) main assessment due

- GLP implementation underway

KIPDC


- Washing room (Cage washing and Autoclaving equipments)

- Personnel area (1 room)

- Temperature Control vehicles and facility for vehicle disinfection

- Fumigation facility

Therapeutic areas in which studies are performed:

- Toxicology

- Cancer

- Diabetes (Diabetes model nSTZ costs nearly 10,000 INR)

- Obesity

- Glaucoma studies

- Antibody production

- Pharmacology studies

- Histopathological experiments

- Pancreatis models

Future plans:

Adding four more animal rooms to the existing facility: Cost will be around 25 lakhs INR

Overall perception of the respondent towards Animal house market:

Low High

1 5 2 3 4

Untapped potential

KIPDC


Key reasons for growth:

- Not much quality concern shown by Indian companies towards acquiring animals for

studies

- Big companies prefer having their own animal houses rather than getting animal from

outside. They come to private animal houses only when needed.

- Being in SEZ, doesn’t seem to improve the situation, since too many local small farms also

giving tough cost competition

- Maintenance costs are pretty high

KIPDC


Type of projects that can be sourced in India but are not there presently

Presently, the animal house preclinical trending is at a growing/Sprouting stage in India. With

India, nowadays been seen as a preferred site for doing clinical trials studies which include

preclinical and Phase I-IV studies, there resides a lot of potential in the usage of a broad

spectrum of animal models for different types of studies.

Figure17: Clinical trials in India, 2008-2015 (e)

Total number of Trials

350466

583

728

874

10051106

420

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

2008 2009 2010 2011 2012 2013 2014 2015

The number of clinical trials in India are expected to grow at a CAGR of about 18% till 2015. This

increase will be fuelled by the fact that India is a preferred destination for companies due to low

cost and large patient pool for broad spectrum of diseases. This is turn is going to fuel the usage

of animal models for the preclinical testing and evaluation studies. The demand that is going to

be there for animals will be pretty high in years to come, and that will increase the dependency

of organizations on private animal house setups.

KIPDC


Figure18: Clinical trials by phases in India, 2008-2015 (e)

Clinical Trials by Phase in India

39 59 61 82 102 122 141 15581 84 89

146175

201221

189223 252

315

393

472

543

597

42

5565

76

87

105

121

133

111

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

2008 2009 2010 2011 2012 2013 2014 2015

Nu

mb

er

of

Tri

als

Phase I Phase II Phase III Phrase IV

Its clearly visible that the number of phase-I activities are on wave in coming few years and

hence the preclinical activities will take a giant leap. The more number of clinical trials again will

need the CROs and the big Pharma companies to look into the available options for sourcing the

animals from outside their facility depending upon the type of study being done and the quality of

outcome that is expected by the sponsor

KIPDC


Figure19: Therapeutic split (Phase-wise) for the clinical trials in India

Opportunity Areas

Projects in oncology and CNS areas are witnessing a growing trend and are presently occupying a

significant proportion of revenues at an overall level in Clinical trials market.

- 62% of the Phase I revenue is generated from oncology trials in India, with only 3%

contribution to Phase I from Diabetes due to the fact that most of the diabetes drugs are in

phase II/III/IV

- Phase 2 revenues are dominated by CNS segment with 19% share, diabetes segment with

18% share, Immunology/Vaccines with 16% share , Bone disorders and pain management

with 16% share followed by Cardiovascular segment with 15% share

- Diabetes remains as a predominant revenue contributor in Phase III with 23% revenue

contribution followed by Cardiovascular with 17%

• Revenue contribution in Phase IV is again dominated by diabetes and cardiovascular with

KIPDC


PART II – Financial Viability Assessment comprising of CAPEX

requirements and revenue estimation

KIPDC


The cost of an animal house is dependant upon a number of factors. The most important of them

being the land/ area apportioned for the setup, followed closely by the type of facility planned. A

facility which is planned for international approvals requires higher quality infrastructural

requirements as compared to a GLP approvable facility.

Since animal houses are service models, the accreditations of the facility also impact the clients

which are serviced by the facility, as well as the pricing commanded by the organisation.

Type of Animal House Targeted

The typical animal house in India caters to small animal requirements, consisting of mice, rats,

guinea pigs and also rabbits. However, the demand is seen to be highest for mice and rats.

Facilities for large animals like stud farms require a captive client base for which the facility is

created – eg. A serum manufacturing company. Thus, such facilities are few in number. Also, for

such facilities the regulatory requirements and animal rights requirements are stricter, leading to

higher supervision costs.

Animal houses with canines or primates like monkeys are gaining acceptance in India, but still

are under the strict supervision of animal rights as well as regulatory requirements. Such

facilities also have a higher margin, but a lower demand since India is still not cost competitive or

experienced on this front. Frost & Sullivan estimates this market to grow as companies continue

research on their molecules and need tests to be performed on canines. However, primate

facilities are extremely rare in India and also have a low demand. Canine facilities are

comparatively easier to maintain and comply with regulations and hence are seeing an increasing

preference in India as compared to other large animals. However, dog breeding for animal testing

is still now allowed in India restricting the cost benefit for any such animal house.

For this report, Frost & Sullivan has concentrated on small animal houses and animal

houses with canines.

Built-up Infrastructure Requirements

From our analysis of independent animal houses in the country which perform tests either for

their internal study requirements or breed animals for supply to other animal houses for tests,

the typical profitable animal house contains 5,000+ small animals.

KIPDC


To keep an animal house of 5000 animals, the animal house needs to have sufficient rooms, with

adequate service corridors, ventilation, as well as supply of fresh air, water and feed.

It has been found from our study, that a typical animal house which can accommodate 5000+

animals, including breeding rooms as well as separate rooms for animals, needs an investment

ranging from INR 1 crore to INR 10 crores.

This cost includes the cost of the facility building, complying with the regulatory requirements,

the air-conditioning, water flow mechanism, paintwork and specialized doors as per the animal

house requirements.

The facilities are typically 2 storied, with rooms distributed equally between the two floors.

AAALAC certifiable facility

For a GLP certified facility which is also looking for an AAALAC certification, the basic

requirements of an animal house infrastructure increase, since it then has to comply with the

requirements of the US administration and animal rights. Also, the area required by such a

facility is higher, since AAALAC also specifies the room sizes, corridor and empty space area

requirements. An animal house for rodents, with ~5,000 rats and mice, including a breeding

room apart from storage and study rooms, complying to AAALAC requirements will need 35,000

square feet area. The infrastructural cost for such a facility will be approximately INR 10 Cr.

A canine facility which houses 40 beagle dogs will require 500 sq ft area for housing the dogs. In

addition to this, there should be a run area as well as lab area. The total area for an independent

canine facility should be 30,000 sq ft. the infrastructural cost for such a facility will be

approximately INR 3 Cr in addition to common areas like lab area, storeroom etc.

GLP certifiable facility

For a facility which is GLP certifiable, the requirements are much more relaxed with infrastructure

meeting the needs of the CPCSEA guidelines. The minimum floor area for a GLP certifiable facility

containing 5,000 rodents like mice and rats will be 15,000 square feet, thus bringing down the

cost of built-up area significantly. Such a facility typically may need an investment of INR 1 cr.

A canine facility housing 40 beagle dogs will require 500 sq ft housing area, plus run area for the

dogs. The total area for a GLP certifiable independent canine facility will be 15,000 square feet.

The infrastructural cost for such a facility will be INR 80 lacks.

KIPDC


Lab Area

Animal houses also contain a lab area within their premises. This area is usually considered

within the total floor space required in an animal house. However, when the focus of the animal

house shifts from only breeding and supplying of animals to also conducting toxicology and

pharmacology studies, there is a definite infrastructural requirement for the labs.

The cost of setting up a serviceable lab infrastructure within an animal house to conduct the basis

tests can range from INR 10-25 lacks depending upon the size of lab and the types of animals

kept in the facility.

However, it the lab is meant for complex toxicology tests, which can be NABL certified, the facility

cost can range from INR 50 lacks.

Frost & Sullivan Suggestion

If an organization is planning to develop an animal house considering a long term business

potential, Frost & Sullivan would suggest building a facility catering to AAALAC requirements.

Most research and development of Pharma companies is based out of the USA, with primary

research material being submitted to the USFDA or the equally stringent EMEA.

Also, a typical infrastructural development when made well can be sustained for 10 years with

minimal modifications.

In such a scenario, if the animal house intends to have a sustained business model, with

increased returns year on year, it is advisable to create infrastructure which satisfies the

stringent AAALAC requirements. This also ensures that the company can look at increased

profitability and higher revenue studies for the AAALAC certifiable facility.

An animal house which wants to expand its business over the next few years should also look at

the option of an expandable lab area where complex toxicology tests can be performed in the

future, to increase the sales revenue from the operations of the facility. However, the animal

house can also construct a facility where the lab is pre-equipped infrastructural to contain a lab

with sufficient area to hold equipment for such studies in the future.

Equipments Requirement

A typical animal house has requirements of cages and service equipments for keeping the

animals. These requirements also vary according to the certification of the animal house, as well

KIPDC


as number of animals kept in the same. However, the costs of such equipment is not very high

and does not exceed INR 35-40 lacks for a 5,000 rodent facility.

Typically an animal house also has a lab area where the animals are dozed, or tested upon. This

area requires equipment certified internationally, which can conduct tests on various types of

animals. A typical lab facility adjoint to an animal house will require an investment of INR 25-30

lacks.

Land Area Requirement

Apart from the basic infrastructure, an animal house should have adjoining land, free of any

development. This land can be used for the following purposes:

1. Future expansion of the animal house

2. Fresh feed production for the rodents (e.g. carrots for rabbits)

3. Waste water management

4. Garden area for reduction of noise pollution to adjoining areas

5. Shed area for generator

6. Air purification area if the facility recycles air

7. Safe area to ensure escaped animals remain within premises in case of accident

Considering the above, it is advisable that the animal house is surrounded by gardens and has

open area around it.

Typically, after functioning of 5 years it is expected that the business of the animal house sees in

increase, which may result in the animal house increasing its facility size.

Also, if the new facility is to conform to the new requirements, it typically is built ground up

instead of expansion on the existing premises.

Thus, for a small animal facility, the total land requirement of an animal house is 15,000 sq ft

built up area, plus 20,000 sq ft vacant land. The minimum advisable area for an animal house

thus becomes 35,000 sq ft.

KIPDC


Operational Costs of an Animal House

The costs of an animal house can broadly be classified into:

1. Recurring Variable Monthly Costs

2. Fixed Upkeep Costs (annual recurring costs)

3. Cost of acquiring Animals

4. Other Variable Costs

Recurring Variable Monthly Costs

These costs include outflows that remain more or less constant on a yearly basis and are the

basic requirements for running of an animal house. The most important monthly costs are as

mentioned below:

1. Material Costs

2. Personnel Costs

3. Transportation Costs

Material costs include the cost of feed and bedding of the animals. This is the most crucial cost

and depends directly on the number and type of animals kept in the facility. This also includes

medication and other lab requirements for maintaining healthy animal. For a small animal facility

the cost of feed, bedding and other animal upkeep expenses can range from 20-25% of the total

monthly costs.

Personnel costs are the human resource costs. Typically this can vary from upwards of INR 45

lacks. A small animal facility with 5,000 rodents requires at least 2 veterinarians, 5-10 animal

attendants who can work on a rotational basis, and 8-10 caretaking staff who handle the daily

requirements of the facility. The renumeration of the staff varies widely as per location of the

animal house (and hence accessibility of labour) and prior experience of the staff. Since animal

houses do not have specified training schedules in India at education level, veterinarians who

have worked in animal houses are considered the most equipped to work in such a facility.

KIPDC


Transportation costs are operational expenses incurred by the animal house for transport of

animal supply or of the materials related to animal health and welfare. This cost remains upto

6% of the net revenue.

Fixed Upkeep Costs

These are the costs that can occur monthly or yearly, but remain constant on a year to year

basis. These costs do not depend upon the number of animals of the facility, but rather the

infrastructure of the facility. This includes the cost of air-conditioning, the water treatment,

electricity, etc. This cost is again locational dependant since the electricity and water costs are

dependant on the state infrastructure. However, for a typical animal house it varies between 20-

30% of the total operational costs.

Cost of Acquiring Animals

An animal house has to continually renew its breeding pair. This can be done either from its

existing supply or externally from another animal house.

Also, new strains of animals need to be typically acquired from other animal houses which

develop those strains.

Acquired animals are either sourced from within the country or from international reputed labs

like Charles River Labs or Jackson Labs, etc.

Acquisition of canines needs to be done on a periodic basis since canine breeding is not allowed

in India. The cost of a beagle dog (the most common dog variety for studies) is usually INR 1 lac/

dog.

The cost of small animals varies according to the strain of the animal. A ‘BalbC’ white mice can

be acquired from within India for as low as INR500 per pair, while the same can be acquired from

Jackson Labs for INR 1500 per breeding pair. However, for a running animal house the initial

investment on animal acquisition remains high, but reduces over the next years as it supplies its

own breeding pairs.

Other Variable Costs

This includes heads like diagnostic testing, autoclaving expenses, and typical unprecedented

expenses. For a small animal facility this is expected to range from INR 2lacks to higher,

depending on the type of expense. Changes in the air filtration system, for e.g. can be upto INR

30 lacks.

KIPDC


Capital Requirement and Cash Flow Estimation for an Animal House

Based upon the interaction of Frost & Sullivan with a number of independent animal houses

across India, Frost & Sullivan have developed two cash flow statements for animal houses – one

for a GLP accredited AAALAC approvable facility and another for a GLP approvable facility.

While the AAALAC approvable facility due to its infrastructure and higher customer confidence

gains revenues to higher value-add services like performing toxicology tests and not only supply

of animals, the GLP approvable facility due to lack of accreditations is used by most customers as

a source of animals which can be used for further tests in the client’s own animal houses.

Case Study 1: AAALAC Approvable Small Animal House

This section uses an example of a GLP certified facility which houses 5,000 small animals

(rodents). The facility is AAALAC approvable, or else has a AAALAC approval.

Example 1: AAALAC Approvable Animal House, with 5,000 small animals

All values in INR lacs2009 2010 2011 2011

Net Sales 360 420 491 574

Animal Supply (Breeding business) 120.0 132.0 145.2 159.7

Toxicology Tests 240.0 288.0 345.6 414.7

Operational Cost 259 253 266 281

Fixed Upkeep Costs 70.0 70.0 70.0 70.0

Cost of acquiring animals 37.5 41.3 45.4 49.9

Recurring Variable Costs 131 140 149 159

Personnel Cost 90.0 94.5 99.2 104.2

Transportation cost 7.2 7.9 8.7 9.6

Material cost (feed, bedding, etc.) 33.9 37.3 41.0 45.1

Other Variable Cost 20.0 2.0 2.0 2.0

Profit (EBIT) 101 167 224 294

Depreciation 133.5 133.5 133.5 133.5

Operating Cash Flow (incl Tax) 235 301 358 427

NPV# 1,023

# estimated considering a growth rate of 10% for the capital

KIPDC


Typically, such a facility will source its animals regularly from an international reputed lab and

hence have a higher animal acquisition cost. Also, the personnel will have to be trained better,

thereby ensuring adherence to the norms as required by AAALAC.

As seen in the cash flow statement above, the facility has high revenue from toxicology studies

than from sale of animals. This is because the animals are typically sourced from international

labs and bred for a short period in the lab. A lab animal is typically bred for 5 generations to

preserve its strain. Therefore, Pharma companies and CROs who source the animals for

conducting tests prefer to source the animals from the international labs, and would approach a

AAALAC approvable facility when in need of animals on a short notice.

The animal house thus earns a revenue of INR1.2 cr from animal breeding and supplying

business.

However, the animal house has forward integrated and also performs toxicology tests for

specified strains, as per client requirements. Since AAALAC approvable animal houses are few in

number, and their facilities are at par with the facilities in Pharma companies; also since Pharma

companies can use the results form these facilities for international submissions, they outsource

some of their studies to such animal houses. This is a higher valued business with lesser

competition, and though the animal house may perform lower number of studies, it will have a

better topline from this business. In this case the animal house earns twice the revenue from

toxicology studies than from animal supplies.

The business for animal supplies is increasing on a 10% basis YoY, however, the toxicology

studies business is increasing on a 20% yoy growth rate. This is mainly because of the increasing

number of pre-clinical molecules, as well as increased trust of Pharma companies in the animal

houses.

The infrastructural investment made by the animal house for the facility are as follows:

One-Time Investments

Infrastructure cost 1,335

Building cost 1,050

Animal House GLP 1,000.0

Animal House non-GLP

Lab facility GLP 50.0

Lab facility non-GLP

Equipment Cost 285

Animal House equipment 35.0

Lab equipment (for studies) 250.0

KIPDC


Excluding the land cost, which will be dependant upon the location of the facility, the one-time

investment made on the infrastructure of the facility is INR 13 Cr.

For this exercise we have considered a straight line depreciation for the infrastructural costs, at

10% depreciation. It is expected that with ageing of the facility as well as changes in the

regulations, there will be a renovation/ change in facility at the end of 10 years.

The net operating cash flow value for this animal house which is AAALAC approvable,

over a period of 4 years is estimate to be INR 10.2 Cr.

Case Study 2: GLP Approvable Small Animal House

This section uses an example of an animal house which houses 5,000 small animals (rodents).

The facility is GLP approvable, or else has a GLP approval.

Example 2: GLP Approvable Animal House, with 5,000 small animals

All values in INR lacs2009 2010 2011 2011

Net Sales 236 261 290 321

Animal Supply (Breeding business) 200.0 220.0 242.0 266.2

Toxicology Tests 36.0 41.4 47.6 54.8

Operational Cost 150 124 128 132

Cost of Upkeep (recurring) 46.0 46.0 46.0 46.0

Cost of acquiring animals 10.0 5.0 5.0 5.0

Other Costs 74 71 75 79

People cost 45.0 47.3 49.6 52.1

Transportation cost 12.0 13.2 14.5 16.0

Material cost (feed, bedding, etc.) 17.0 10.6 10.6 10.6

Other Variable Cost 20.0 2.0 2.0 2.0

Profit (EBIT) 86 137 162 189

Depreciation 16.2 16.2 16.2 16.2

Operating Cash Flow (incl Tax) 102 154 178 205

NPV# 513

# estimated considering a growth rate of 10% for the capital

Typically, such a facility will source its animals regularly from an Indian lab like NIN (National

Institute of Nutrition) which have their own strains, or do a one time purchase from an

international reputed lab and use those strains for a longer period. Thus cost of animal

KIPDC


acquisition is comparatively lower here. Also, the personnel can have lower experience and thus

can be sourced at a lower cost.

As seen in the cash flow statement above, the facility has high revenue from sale of animals than

from toxicology studies. This is because the animals are typically sourced from international labs

and bred for a long period in the lab. While a lab animal is typically bred for 5 generations to

preserve its strain, here the animals can be bred multiple times, and its strain tested every few

generations. Thus, the animals are cheaper to source from such an animal house than from

international labs. However, since the labs are not accredited, Pharma companies and CROs

typically do not want to outsource their toxicology tests which they would like to submit with NCE

papers to these labs.

The animal house thus earns a revenue of INR 2 Cr from animal breeding and supplying

business.

However, the toxicology test business in this case is much lower, with revenue of INR 36 lacks

only. This business is an adjacent revenue earner due to the sale of animals, where some clients

may prefer the animal house to conduct the toxicology tests in some cases.

The business for animal supplies is increasing on a 10% basis yoy, however, the toxicology

studies business is increasing on a 15% yoy growth rate. This is mainly because of the increasing

number of pre-clinical molecules, but a limited trust of Pharma companies.

The infrastructural investment made by the animal house for the facility are as follows:

One-Time Investments

Infrastructure cost 162

Building cost 97

Animal House GLP

Animal House non-GLP 72.0

Lab facility GLP

Lab facility non-GLP 25.0

Equipment Cost 65

Animal House equipment 10lks 40.0

Lab equipment (for studies) 25.0

Excluding the land cost, which will be dependant upon the location of the facility, the one-time

investment made on the infrastructure of the facility is INR 1.6 Cr.

KIPDC


For this exercise we have considered straight line depreciation for the infrastructural costs, at

10% depreciation. It is expected that with ageing of the facility as well as changes in the

regulations, there will be a renovation/ change in facility at the end of 10 years.

The net operating cash flow value for this animal house which is GLP approvable, over

a period of 4 years is estimate to be INR 5.13 Cr.

Conclusion

Though a GLP approvable animal requires lower investments, its revenue earning potential is

limited. The profitability of a GLP approvable animal house may also be higher in the short term

due to the lesser cost of animal acquisition and animal care, however, considering the values

earned, an AAALAC approvable facility has a higher net present value.

KIPDC


PART III – Land Requirement and Site Suitability Assessment for Setting up of

an Animal House

KIPDC


Estimation of Land Estimation for setting up of Envisaged Project

On the basis of the existing models for animal houses, Frost & Sullivan recommends a small

animal house housing 5,000 animals. The animal house is also recommended to be AAALAC

approvable so as to ensure long term revenues and potential for growth.

Over the course of years, the animal house can also expand its scope of operations and contain a

canine facility.

Thus, the minimum land requirement for the animal house should be as follows:

Table 1: Land requirements for Animal House

Land Requirement Criteria Land (sq ft)

Land for small animal facility 35,000 Additional land for expansion of small animal facility 15,000

Additional land for canine facility 2,000 Gardening and surrounding land 20,000

Total Land Requirement 72,000

Thus, for a facility which plans to expand in the future over the next 5 years, the land

requirement is 1.65 acres (72,000 sq ft).

The land required for an AAALAC approvable small animal facility is 35,000 sq ft. However, this

can also be built over two levels than flat on the ground. We have still considered this area as a

net land requirement since an animal house building will also need a surrounding area for various

administration and regulatory purposes. The given land area also gives the facility the flexibility

to plan the animal house as per the best suitable option during construction. Also, since this area

includes the lab area for the facility, it gives the animal house to have a large lab area which can

be state-of-art and also cater to canine requirements over the next few years.

Though the animal house may initially have 5,000 small animals, the demand may increase over

a period of years, as the market reputation of the facility increases and demand for studies

increases, the facility may need to increase the number and strains of animals kept within. For

the same purpose, an additional housing area may be needed, which can then be constructed

adjacent to the existing facility. The land requirement for such a facility will be lower since this

KIPDC


new facility can share the common lab areas, storage, washing areas, etc. with the original

premises.

As demand and reputation of the animal house increases, and also as studies on large animals

within India increase, the animal house may expand to have a small canine facility. The facility

can initially house 40 canines. The minimum requirement for the same would be 2,000 sq ft. This

is also low since this facility can share the common areas like storage and labs with the original

animal house facility.

To ensure compliance to pollution requirements as well as any plans for waste water

management, it is suggested to keep a minimum gardening area of 20,000 sq ft.

Thus, the minimum land requirement of an animal house which plans to grow and increase its

service offerings over the next 5-10 years is estimated to be 1.65 acres.

However, Frost & Sullivan recommends the total land area allocated for an animal

house to be 2 acres. This additional land may initially be the gardening area, however, it can be

utilized as per the demand and market dynamics. If the canine facility needs further expansion,

or if the requirements of the storage and lab areas of the canine facility are not fulfilled by the

main animal house due to high inflow of projects, the facility can then create additional labs and

storage areas in the free land.

If required, the animal house can also create its own power generation and waste management

shed area in the free land.

Key Parameters for selection of a site for project

To select a site for an animal house it is necessary to identify the key parameters that determine

the

The parameters can be classified into three aspects:

1. Cost based

2. Non-cost based

3. Miscellaneous

KIPDC


Cost Based Factors

These include factors which directly influence the cost of the project. This is apart from the actual

operational cost of the facility. Some of the cost based factors identified by Frost & Sullivan are:

a) Land Cost – this is the cost incurred by the company to set up the facility. Since this can

vary widely between states as well as within states, this is an important consideration for

setting up a facility

b) Raw Material Cost – this does not only include cost of acquiring the animals, but also the

cost of feed and bedding for the animals as well as associated costs

c) Site Certification Investments – cost of GLP / NABL/ AAALAC certifications

d) Labour Costs – cost of human resources in the location

e) Basic Utilities – cost of electricity, water supply, waste disposal, etc.

f) Transportation Cost – includes the cost of transportation of sacrificed animals, as well as

cost of transport of animals for a study supply, transport cost of feed or bedding acquired

from a distance, etc.

Non-cost based Factors

This section includes softer factors which influence the decision of setting up a facility. However

these factors are not directly tangible and do not contribute to the cost of establishing or running

a facility directly.

The factors considered within this section are:

a) Availability of land – Land for a new facility can only be bought if the land is freely

available

b) Availability of skilled professionals – human resources like veterinarians should be

available and wiling to work with the animal house, at its location

c) Availability of transportation – the facility should be well connected by road/ rail or air to

the main client locations as well as to locations from where raw materials are to be

sourced. Transportation to incineration facilities should also be available.

KIPDC


d) Availability of raw materials – the facility should be located close to a source to ensure

availability of feed and bedding for the facility through the year

e) Demand from companies – an animal house cannot be profitable unless there is a demand

for its services. The facility should be set up close to its clients, where their requirements

can be met. This may be close to biotech or Pharma company clusters, or parks

f) Competition – the animal house should not be in a location with very high competition

and other successful established animal houses in the vicinity. This can impact the

business from future clients

Miscellaneous Factors

Apart from the above mentioned factors, some other factors also determine the selection of a site

for an animal house. These are listed below:

a) Regulatory requirements for site approvals – the animal house should be able to satisfy the

requirements of the regulatory authorities for setting up of an animal house

b) Pollution norms – the animal house should comply to the pollution norms, and the

location should enable it to comply with the norms satisfactorily. This can include waste

water management facility availability, waste matter management, etc.

c) Animal Rights Compliance – the facility should be located in an area which will ensure that

the animals are comfortable

d) Miscellaneous local reasons – there can be many other miscellaneous factors which can

impact the decision of setting up an animal house in a location

Each of the above mentioned parameters have been prioritized and rated by Frost & Sullivan as

per their importance on a scale of 0-10. The most important factors have been rated 10.

KIPDC


Parameters Rating

Land cost 10

Raw material cost 3

Site certification Investments (for GLP/ NABL etc.) 5

Labour Costs - Compensation of Vets, Animal Caretakers etc. 8

Basic utilities (Electricity, water supply) cost 7

Transportation cost 2

Availability of land 10

Availability of skilled professionals 5

Availability of transportation 2

Availability of Raw materials 3

Demand to Biotech/Pharma companies/CROs 8

Competition in nearby surroundings 7

Regulatory Requirements for Site approvals, etc. 10

Pollution norms 5

Animal right activities 8

Miscellaneous local reasons 3

Cost-based

Non-cost based

Others

As seen in figure above, among the cost based factors, Land cost is the most important factor

while setting up of a facility. This is the highest investment. However, it is also a long term one-

time investment. Labour cost is a recurring cost and is the next important factor, with a rating of

7/10.

Amongst non-cost based factors, land still remains a factor, since availability of the desired land

is crucial for setting up of a facility. Also important is the demand from biotech/ Pharma

companies to ensure revenue flows into the company.

Regulatory requirements are the most important feature when an Animal house starts business,

since this determines the type of clients and the business potential from the animal house.

KIPDC


Broad Sensitivities for selection of Land

The choice of land for an animal house is, as seen from locational analysis, the most important

factor while setting up an animal house. Some of the factors to be considered while selecting land

for an animal house are:

a) Land cost – the cost of land is one of the crucial factors while deciding on the land to be

bought for setting up an animal house

b) Availability of Land – the selected, suitable land should be available for purchase

c) Stamp duty etc. costs – the cost of stamp duty and other legal costs associated with acquiring

the land should be competitive

d) Legal requirements – the land should be usable for setting up an animal house, and should not

have legal hinderances for the same

e) Approval from neighbours – the neighbouring dwellers or facilities should not have objections

to an animal house. The location of the land should be

f) Land attractiveness for the project – the land should be suitable for setting up of an animal

house and the location should also fulfill the key parameters as listed in the section above

On the basis of our interactions with various animal houses within India, Frost & Sullivan have

rated each of these key features from 0-10, where 10 is the highest score for the most important

factor.

Land Parameters Rating

Land Cost 8

Availability of Land 7

Stamp Duties etc 2

Legal Requirements (before setting up Animal House on Land) 5

Approval from neighbouring dwellers/ companies 3

Land Attractiveness for the project 10

KIPDC


As can be seen in the figure, Land Cost remains an important factor; however, the suitability of

the land for the project, on the basis of the predetermined parameters becomes the most

important factor.

Availability of land and the legal requirements to use that land for an animal house the next

factors which need to be kept in mind while selecting land for an animal house.

Assessment of classification of project by pollution control board and bye

laws / pre-requisites for setting up animal houses

The management of animal and experimental waste is a subject of considerable concern to public

health and infection-control specialists, as well as the general public. It is a well known fact that

in several types of health care activities, various types of hazardous and contagious materials are

generated. Even though the consequences of discarding such waste carelessly are well known, it

is only recently that adequate initiatives to manage this waste in a scientific manner are being

taken in India.

Unscientific disposal of such waste may lead to the transmission of communicable diseases such

as gastro-enteric infections, respiratory infections, spreading through air water and direct human

contact with the blood and infectious body fluids. These could be responsible for transmission of

Hepatitis B, C, E and AIDS within the community. Health care professionals and the general

public are at risk due to this. Diseases are spread by improper treatment and disposal of waste.

Rag pickers expose themselves to diseases like Hepatitis B, Tetanus, Staphylococci, etc. while

handling items like needles, surgical gloves, blood bags etc.

The Bio-Medical Waste (Management and Handling) Rules; 1998 are conferred by

section 6,8, 25 of the Environment (Protection) Act, 1986 (29 of 1986).

Application: These rules apply to all persons who generate, collect, receive, store, transport,

treat, dispose or handle bio-medical waste in any form. Biomedical waste means any waste,

which is generated during the diagnosis, treatment or immunization of human beings or animals

or in research activities pertaining thereto or in the production or testing of biologicals, means

KIPDC


any preparation made from organisms or micro-organisms or product of metabolism and

biochemical reactions intended for use in the diagnosis, immunization or the

treatment of human beings or animals or in research activities pertaining thereto These Rules will

apply to all institutions generating biomedical waste which includes hospitals, nursing homes,

clinics, dispensaries, veterinary hospital, animal house, research and pathological lab, and Blood

Bank etc., generating biomedical waste.

The Biomedical Waste (Management and Handling) Rules 1998, explicitly state that waste

handling and treatment facilities shall have to be established within stipulated deadlines or

earlier, for all waste generating establishments.

KIPDC


KIPDC


KIPDC


Frost & Sullivan Recommendations

Go/ No-Go Decision

Through the course of the study it has been found that an animal house is a profitable venture in

India, with scope of expansion and increased revenue opportunities in the future. As research

activities increase within the country, and as India emerges as a preferred destination for

outsourced research from international companies, the market for animal houses is expected to

increase.

On the basis of the findings in the study, Frost & Sullivan recommends the setting up of an

animal house in Bangalore, Karnataka.

Proposed Animal House Model

Frost & Sullivan recommends a three phase approach to the set-up of the animal house:

Phase I: Small Animal Facility of 5,000 animals

Phase II: Expansion of small animal facility to 6,000 or 7,000 animals, as per demand

Phase III: Set-up of Canine facility, as per demand

Animal

house

setup

Rats/Mice

5000

Guinea Pigs

(80);

Rabbits (30)

Canines

40

Future

KIPDC


Phase I

The highest demand in the present Indian market for studies is for rats and mice. We

recommend the animal house to concentrate on a rats and mice facility housing 5,000

animals.

The facility can also house rabbits and guinea pigs, which are higher revenue earning, though

lower in demand. Thus a facility housing 60 guinea pics and 30 rabbits can also be

considered.

Phase II

The facility can be expanded to accommodate additional animals and strains, as per the

demand from existing customers.

Phase III

Typically, as molecules are proven effective, their safety needs to be tested on large animals.

Indian companies who are conducting tests on small animals will need to do so on large

animals as well. Since outsouring such studies to international market may not always be

feasible, a trusted Indian organization will be the next choice. Thus, as per demand the

facility can expand to contain canines.

Note: Primate Facilities are still rare in India, and need a higher regulatory compliance, as

well as suffer from low demand. Hence, it is not suggested to set up a primate facility within

5 years from initiation of the animal house.

Facility Infrastructure

To ensure a continual revenue stream over a period of 10 years or more, we recommend the

animal house to be AAALAC approvable. The facility may not immediately undergo a AAALAC

accreditation, which is expensive and has stringent requirements. However, after a few years and

a stable revenue source, the animal house can undertake a AAALAC accreditation, which will then

enable it to source projects for US FDA or EMEA submissions. This will impact the revenues of the

animal house.

KIPDC


Business Model

The suggested business model for the animal house will be to:

a. supply animals to other animal houses across the country

b. act as a center for toxicology studies on animals

Most Pharma companies have their own animal houses which are used for studies and in which

they breed animals for their own requirements. However, they do not always have enough

animals to service their requirements. Also, many companies prefer to buy animals for studies

from independent animal houses, as this reduced their operational costs.

As the number of preclinical molecules increase, the number of toxicology tests to be performed

also increase. The private animal houses of Pharma companies may not be able to handle the

increased load, and it will be unfeasible for them to expand their facilities to cater to this

requirement. In this phase it is expected by Frost & Sullivan that they will outsource their studies

to CROs and animal houses who they feel are competent.

Frost & Sullivan strongly feels that over time it will be more feasible for companies to outsource

their study requirements to animal houses than CROs because of the following factors:

a. availability of animals within the same premises

b. business focus on animal supply and studies, thus ensuring competence in the field

c. cost competitiveness as compared to a CRO, where overheads for managing an animal

house will be higher

Secondary Business Model (optional)

Apart from the other factors, since the animal house will be set up by the government of

Karnataka, it is also suggested that the Government can study the option of setting up the

animal house with a research center in the adjoining premises. This will help the business model

in the following factors:

a) Increased Captive requirement

KIPDC


b) Development of own strains which can then be sold to animal houses across the country

and also outside the country

c) Increased shared area, and hence reduced land wastage (common areas like gardening

can be shared)

d) Forward integration of an animal house into research and development

The research center should act independently from the animal house, and not b e involved in the

day to day activities of the animal house. This will ensure that Pharma companies and CROs

continue to use the animal house for their studies without fear of their material being shared with

another research center.

The research center will act only as a leverage to develop new strains of animals as well as a

regular (captive) client for the animals from the animal house.

In case of high demand, the labs of the research centre can be used by the animal house for

conducting some of its studies, on a prior notice and confidential basis.

Thus, Frost & Sullivan recommends an animal house in Bangalore, Karnataka with the

following business model:

1. Animal Supply Animal House

2. Animal House which conducts toxicology studies for Pharma companies and CROs

3. Animal House which has an independent research facility in the adjoining premises,

ensuring a captive requirement and a source for new strain development (Optional)

Frost & Sullivan suggests a further study to test a business model which also has an adjoining

research center, and also analyse its effect on the business from Pharma company and CROs

towards conducting of studies.

Suggested Ownership Model

KIPDC


The animal house should be operated by personnel experienced in the animal house business.

Since the animal house is recommended to be AAALAC complaint, the administration should also

be well versed in the requirements of international regulations for Pharma and Biotech.

It is suggested that the animal house be managed by a private entity, with associations in the

Pharma and Biotech industry. This will ensure a regular flow of revenues from the initial year of

setting up of the animal house.

Since the land is owned by the Government of Karnataka, this will assist in compliance with the

factors outlined for site selection. However, the government is not expected to have the prior

experience and dedicated capability to ensure revenues from the animal house.

It is therefore recommended that the government set up the animal house and hand

over its operational activity to a bottom line generating private enterprise. Thus, a

public-private-partnership (PPP) model is suggested.

Land Requirement

The suggested facility should be allocated 2 acres of land, keeping in mind scope of

further expansion.

If the option of research centre is also considered, land estimations will have to be re-considered.

Expenditure

The setting up of a AAALAC compliant animal house which houses 5,000 small animals is

expected to cost at least INR 14cr apart from the cost of land.

Apart from the above, a yearly running cost of INR 2.5 cr will be needed. This cost may

be recovered within the second year of operations and thereafter be funded by the animal

house itself.

KIPDC


Annexure 1: Animal Types for an Animal House

Different strains of animals need to be kept in the animal house. Apart from the commonly used

strains, some of the particular strains that might have use in a new animal house concentrating

on diabetes, glaucoma and cancer are mentioned below

Based on the upcoming waves in various therapeutic domains, animal houses are recommended

to keep below mentioned animals in their animal houses:

Diabetes models nSTZ

Glaucoma models DBA/2

Cancer models

• Hepsin overexpression: this transgenic model may be employed to investigate the

function of hepsin in prostate cancer progression and serve as a system for testing novel

antagonists or inhibitors.

• Delta-N-ERG: This prostate cancer model may be used to further delineate the roles that

Delta-N-ERG plays in cancer progression and test the efficacy of anti-cancer therapies.

• Smo/Smo: Sonic Hedge Hog (Shh) and notch signaling is implicated in early

hyperproliferation in medulloblastoma. This genetically faithful system may be employed

for brain tumor therapy and/or drug screening for brain cancer prgression from early to

late stages.

• P27S10A: This knock-in models may be used to examine the mechanisms underlying

tumorgenesis for the development of novel therapies. This model provides a system with

a S10A substutition mutation introduced into p27 is a useful tool for studying the

mechanisms and signaling pathways involved in tumor resistance of various types of

human cancers.

• P27CK-: The p27 CK- knock-in model has imparied p27, cyclin binding. This model may

be used to examine the mechanisms underlying tumorgenesis for the development of

novel therapies. These models provide a system to study the mechanisms and signaling

pathways involved in tumor resistance of various types of human cancers.

KIPDC


• ErbB2: In addition to ErbB2 role in breast cancer and cardiomyopathy, these mice also

provide a model for the study of treatments for the loss of motor and sensory neurons.

• VgEcR-RXR: A modified ecdysone receptor (VgEcR) and the retinoid X receptor (RXR)

transgenic mouse serves as a system for examiing ecdysone-regulated gene expression in

mammalian cells with implications for neuronal function, lipid metabolism, signaling, cell

cycle regulation, embryonic development, cancer and apoptosis.

• GIST: This gastro-intestinal stromal tumor knock-in model with a mutation in the kit gene

initially identified in sporadic gastrointestinal stromal tumors. This model may be used to

examine the functional significance of Kit and for pre-clinical validation of novel

gastrointestinal stromal tumor therapies.

• PMS-2: Mutations in the Pms2 DNA repair gene are responsible for many hereditary non-

polyposis colorectal cancers. Mice deficient in Pms-2 may be used for drug screening of

tumorcidal drugs, in particular for lymphoma and colorectal cancers. Model system for

effect of diet in a cancer predisposing background.

• SK3 transgenic: The SK3 overexpression model may be used to investigate mechanisms

that influence cardiomyopathy that may result from current cancer terapies. Sk3 is

involved in the regulation of vaascular tone and blood pressue; thus modulation of its

activity may help prevent cardiac dysfunction.

KIPDC


Annexure 2: Products Offered by Animal Houses

Small Animals

Mice

Breed Strain Type Animal Products

Swiss (I.B) Weaning Post-

Weaning

Retired Blood

Plasma/Se

ra

Monoclonal

antibody

Inbred &

recombinant

inbred strains

129P2 Blood

Plasma/Se

ra

A/J

BiozziABH

C3H

FVB/N(I.B) Weaning Post-

Weaning

Retired

Blood

Plasma/Se

ra

SJL

Outbred Mice ICR

NDA Swiss

KIPDC


Webstar

NSA

OF1

NMRI

Hybrid Strains B6129S2F1

/OlaHsd

Blood

Plasma/Se

ra

B6C3F1/Ola

Hsd

Blood

Plasma/Se

ra

B6F1/OlaHs

d

Blood

Plasma/Se

ra

NZBNZWF1

/OlaHsd

Mutant Strains Albino

C57BL/6

Weaning Post-

Weaning

Retired

Blood

Plasma/Se

ra

Beige Nude

XID

Fox Chase

SCID

Lyst^bg

KIPDC


Wallerian

Degenerati

on

Tnfrsf6^Lpr

Congenic mouse B10.A-H-

2^h4

C.B10-H-

2^b

BALB/C

An.N (I.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Se

ra

Lactating Mouse

with litter

KIPDC


Rat

Breed Strain Type Animal Products

CFY/NIN

(I.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

Fischer 344

N (I.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

Inbred Rats ACI

BDIX

Lewis

LUDW

PVG

Winstar

Furth

Wistar

Kyoto (I.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

Wistar/NIN

(I.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

Monoclonal

antibody

KIPDC


Outbred Rats Lister

Hooded

ORGA

Sprague

Dawley

(O.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

Holtzman

(O.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

SABRA-R

Hybrid Rats FBNF1/Hsd

LBNF1/Hsd

B612SF2/J Blood

Plasma/Sera

B6SJLF1/J Blood

Plasma/Sera

NZBWF1/J Blood

Plasma/Sera

Mutant and

Trangenic rats

Athymic

Nude

Blood

Plasma/Sera

KIPDC


DPP4

HIV-1

Zucker

Congenic rats

Lactating rat with

litter

Rabbits and Guinea Pigs

Species Breed Type Animal Products

Guinea Pig NIH: Hartly

(O.B)

Weaning Post-

Weaning

Retired

Blood Plasma/Sera Antibody

NIH: Coloured

(O.B)

Weaning Post-

Weaning

Retired

Blood

Plasma/Sera

IAF Hairless

Guinea Pig

KIPDC


Large Animals


Horse Kathiawari

Horses

whole

blood

serum,

plasma


Rabbit

New

Zeeland

(O.B)

Weanin

g

Post-

Weanin

g

Retire

d

Bloo

d

Plasma/Se

ra

Antibody

Dutch

Flemish

Giant

Watanabe

Hamster

Golden

(Syrian)(I.B)

Weanin

g

Post-

Weanin

g

Retire

d

Bloo

d

Plasma/Se

ra

Lactating Hamster

With litter

KIPDC


Marwari

Horses

Monkey

Rhesus

Macaques

chimpanzee

s

Macaca

fascicularis

Cat

Dog Beagles CPB whole

blood

serum,

plasma

tissue

samples

HFR

RCC

Gerbils Mongolian

Gerbil

Mixed breed

mongrels and

hounds

whole

blood

serum,

plasma

tissue

samples

Ferret Dark Stable whole

blood

serum,

plasma

tissue

samples

Albino whole

blood

serum,

plasma

tissue

samples

KIPDC


Sable mitt whole

blood

serum,

plasma

tissue

samples

Black eyed

white

whole

blood

serum,

plasma

tissue

samples

KIPDC


Annexure 3: India – Pharmaceutical & Biotechnology Industry Overview

India – Pharmaceutical Industry Overview

The Indian Pharmaceutical Industry (formulations and bulk) grew at a CAGR of around 20% to around US$

17 bn in 2007-2008

Current

- In the last 6 years period, exports which account for 47% of the total industry, grew at a CAGR of

27%; while the domestic market grew at a CAGR of 14%

- The formulation segment, which constitutes 17% of the total industry reported a CAGR of 17% while

bulk drugs aided by exports grew at a CAGR of 28%

- Contract research a nascent industry in India 5 years ago grew at a significant rate

- Bulk drug production: $2.10 billion, with over 400 bulk drugs produced. Over 60,000 Formulations

produced, in 60 therapeutic categories

- Capital investment: up 14.8% to $1.16 billion

- Employment: 5 million direct, 24 million indirect

Future

- The upward growth trend is expected to continue

- Expected CAGR for the Indian Pharmaceutical Industry (formulations and bulk) is expected to be 14-

15% and the industry is anticipated to reach US$ 50 bn by 2015-2016

- Exports driven by contract research are expected to grow at a CAGR of 16.2% while the domestic

market is expected to grow at 12.5%

KIPDC


India – Biotechnology Industry Overview

INDIA – BIOTECHNOLOGY INDUSTRY OVERVIEW

- 2003 - Total industry size US$ 442 million, ~ 1% of global market

- 2006 - Total industry size US$ 1.45 billion, 50% of which was exports

- India was #11 in the world and # 3 in APAC in terms of number of biotech companies

- The CAGR for the period of 2002-2006 was 49% for the industry as a whole, 50.5% for domestic

sales and ~46% for exports

- While Bio-Pharma is the biggest segment in terms of value and volume, the Bio-Agri and Bio-

Services are the fastest growing segments

- In Bio-Pharma the growth primarily stems from the manufacturing of biogenerics and vaccines

KIPDC


India BioClusters

KIPDC


Glossary of Terms Used

CAGR Compound annual growth rate FDA Food and Drug Administration (U.S.) GLP Good Laboratory Practices GoI Government of India MNC Multi National Company NABL National Accreditation Board for Testing and Calibration Laboratories NIMHANS National Institute of Mental Health and Neuro Sciences, Bangalore R&D Research and Development WHO World Health Organization SEZ Special Economic Zone ACTREC Advanced Centre for Treatment, Research and Education in Cancer PPP Public Private partnership CRO Clinical Research Organisation NCE New Chemical Entity PK Pharmacokinetics CMC Christian Medical College, Vellore AIIMS All India Institute of Medical Sciences NTC National toxicology Centre IISc Indian Institute of Science, Bangalore BWM Biomedical Waste management CPCSEA Committee for the Purpose of Control and Supervision of Experiment on

Animals PCA Prevention of Cruelty to Animals Act IBSC Institutional Bio Safety Committee DSTGLP Department of Science and Technology Good Lab Practices AAALAC Association for Assessment and Accreditation of Laboratory Animal Care FELASA Federation of Laboratory Animal Science Associations IAEC Institutional Animal Ethics committee NCBS National Centre for Biological Sciences, Bangalore NIH National Institute of Health JNCASR Jawaharlal Nehru Centre for Advanced Scientific Research, Bangalore ABLE Association of Biotechnology Led Enterprises FTZ Free Trade Zone EPZ Export Processing Zone SPBP Shapoorji Pallonji Biotech Park INR Indian Rupee USD United States Dollar YoY Year on Year

Animal House Final Findings 18may10

Documents

types of animal houses

number of animal houses

business models

analysis of business

information available

incorrect information

prefeasibility study

volume of study