Hungarian scientist Károly Ereky coined the term “biotechnology” in 1917, describing it as “all lines of work by which products are produced from raw materials with the aid of living things.” Today Hungary leads the biotechnology sector in Central and Eastern Europe (CEE), according to a study called “Biotech in the new EU Member States: An emerging sector” by Venture Valuation and EuropaBio.
Patrik Frei, Ph.D., CEO of Venture Valuation, notes that “there are not many countries here which have a critical mass of biotech companies.” He used the Development Capacity Index (DCI) to compare the biotech sectors in each state. DCI combines quantitative factors like the number of companies to assess the existing state of affairs, and qualitative factors such as government support that indicate development potential. The higher the DCI the more advanced the biotech sector is, and the more favorable the environment for future growth. Hungary is ranked first with a DCI of 52, followed by Poland with 35.
“Hungary is the most developed biotech country of all those we studied,” adds Ludovic Lacaine, healthcare council director of EuropaBio. “International companies have a strong presence here. There is also a very positive view of biotech in political circles. It is seen as a priority and this has been translated into legal and tax incentives for biotech innovation.”
The Hungarian Biotechnology Association (HBA) currently has 100 members—a significant increase from 2003, when it was hard to find the ten members required for its establishment. “There has been very dramatic growth in biotechnology,” says Erno Duda, head of the HBA and CEO of Solvo Biotechnology.
There are around 170 companies undertaking biotech-related activity, of which around 50 are core biotechs. One third of the 37 “red” biotech companies have been formed in the last two years. Many are owned by their founders, and 75% sell services or technologies to pharma, while 25% are developing therapies.
Duda noted that Hungary has a long tradition in pharmaceuticals, and there are now many well-known pharma companies here including Teva, Sanofi-Aventis, GSK, and Servier. Hungary also has a strong clinical trials focus with most global CMOs and CROs having a Hungarian presence. A 2009 survey by Buck Consultants International rated Hungary top out of six countries including Germany and U.K. on factors including cost and speed.
Meanwhile, Hungary’s Innovation Act of 2004 (based on the Bayh-Dole Act) has been a major advance. “This is our biggest achievement,” comments Duda. Those who conduct research now retain IP to discoveries made with public funds, bringing Hungary’s legislation into line with Western Europe.
On the downside, Hungarian biotech lacks VC funding and start-up capital. Moreover, the Venture Valuation report found that finding and applying for government funding was still uncoordinated. There is also a lack of management ability among biotech execs (a problem not confined to Hungary), which the HBA is tackling through a number of training schemes similar to the bioentrepreneurship scheme at Budapest’s prestigious Semmelweis University.
Hungary joined the EU in 2004, and the government has been implementing an EU-supported convergency program to address its finances with the aim of eventually joining the Euro. It is hoped that the biotech sector can help Hungary move toward prosperity in the future.
Accordingly, biotechnology features strongly in The New Hungary Development Plan, the main objective of which is to expand employment and create conditions for long-term growth. A key element of the plan is to create an innovative knowledge-based economy through supporting market-oriented R&D and creating the necessary infrastructure, establishment of high-tech spin offs, and promotion of tech transfer/incubator activities. In 2010, the government will introduce a 20% tax allowance for companies doing R&D, and this will be increased to 100% in 2011.
“The pharmaceutical and biotechnology industries are seen as key sectors to boost our future economy,” says István Varga, minister for National Development and Economy. “We had identified biotechnology earlier as a sector where Hungary has a competitive advantage. We now have an action plan to implement to deliver upon our ideas and goals.”
The Hungarian Investment and Trade Development Agency (ITD Hungary) supports biotechnology with incentive packages including government cash subsidies, development tax allowances, and training and job creation subsidies. Projects eligible for these benefits include the establishment of manufacturing and new R&D facilities. For example, ITD Hungary has supported the building of a new €8.5 million bacterial-vaccine facility for veterinary company Ceva Phylaxia.
There is a cluster of biotech and IT companies at Budapest’s Graphisoft Park, the location of Servier’s only R&D facility outside France. The Park’s co-founder, Gábor Bojár, notes that, “many things have been invented in Hungary but there have not been many business successes.” Bojár, whose software engineering firm Graphisoft forms the nucleus of the Park, is determined to change the latter.