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Feature Articles : May 1, 2010 (Vol. 30, No. 9)

Hungary Bids for Prime Spot in EU Biotech

Country Ranks First in Development Capacity Index for Central and Eastern Europe
  • Susan Aldridge, Ph.D.

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.

AMRI focuses on drug discovery, development, and manufacturing of active ingredients and pharmaceutical intermediates for healthcare companies. Headquartered in Albany, NY, with facilities in India, Singapore, and the U.K., AMRI became established in Hungary through its purchase of ComGenex. The company recently opened a new 32,300 sq. ft. chemistry R&D facility in Budapest, with a scale-up lab for non-GMP synthesis up to 25 L capacity.

The development meets the company’s planned expansion in synthetic chemistry services and underpins its presence in the European marketplace. It will now offer more parallel synthesis and specialized medicinal chemistry, including fragment-based discovery services. “Increasingly, we are becoming  a collaborative partner to our customers,” observes Gergely Makara, Ph.D., managing director of AMRI’s Hungarian operations.

Part of the income from the ComGenex sale went to set up ThalesNano, which specializes in development of microreactors, lab-on-a-chip, and flow chemistry. The company has built a market in flow chemistry and continuous processing. By 2008, the top 20 big pharmas, the top three fine chemical companies, and the top three agrochemical companies had adopted ThalesNano’s technology, the firm reports.

Its first product was the H-Cube™ continuous-flow hydrogenation reactor. H-Cube is used in hundreds of labs and generated U.S./Europe revenues of $3.3 million in 2008, says CEO László Ürge, Ph.D. Customers include AstraZeneca, GSK, Takeda, Roche, BASF, Novartis, Boston University, Cambridge University, and Imperial College, London.

“We have the most comprehensive benchtop continuous process technology and instrument portfolio with 70% market share,” says Dr. Ürge. “This technology solves R&D bottlenecks because transfer of a method to large scale is very fast.” He believes that these systems increase the productivity of researchers 50-fold and represent a good alternative to outsourcing chemistry to India or China. Continuous processing is also carbon neutral, he says, and it is safer than conventional approaches, and fulfills FDA PAT requirements.

ThalesNano works closely with NanGenex, which specializes in nanoformulation. The company’s NanoActive™ technology reportedly enhances the solubility and bioavailability of active ingredients through creation of nanoparticles. With 90% of NMEs being poorly soluble, NanoActive can turn them into effective nanodrugs, and therefore, decrease dosage and side effects, the firm claims. The technology is also applicable in agriculture, and the company has deals with two major agrochemical companies.

“If we are successful, we could rewrite the way we use these poisons in the environment,” says CEO Gábor Heltovics. He also envisions the technology being used in fragrances and foods. “It increases the opportunity space by increasing solubility without inventing a new active.” In one case, the solubility of a marketed drug could be increased from 0.0035 mg/mL to 27.6 mg/mL. NanGenex is exploiting the technology through a number of programs, including NanoLead™, NanoRescue™, and NanoReform™, which can help to extend expired patents with new formulations or rescue failed compounds by improving their properties.

Also in Budapest is N-Gene, a New York-headquartered drug discovery and development company formed by Hungarians in 1997. N-Gene’s lead compound, BGP-15, a small molecule to treat insulin resistance, is in Phase IIb for type 2 diabetes and in Phase I for schizophrenia-induced metabolic disorder.

Vichem has a kinase platform which provides discovery services, including a unique library of more than 12,000 kinase inhibitors (the Nested Chemical Library™). Partners select a kinase target, and Vichem delivers a lead compound. The firm is involved in lead/preclinical programs in TB, influenza, AIDS, and cancer. KinaTor™ is another Vichem platform, which is a chemoproteomic technology for selectivity profiling of kinase inhibitors.

Meanwhile, ChemAxon offers chemical software development for drug discovery. “Pharmaceutical companies have millions of compounds in their databases. We provide all the tool kits you would need to manage them,” explains CEO Alex Drijver. “We also provide tools for drug design itself—that is, building virtual libraries and screening virtually.”

ChemAxon’s market share has been rising rapidly, with revenue doubling in the last year, according to Drijver. Several big pharmas, including Pfizer, are customers. “The platform integrates well into customers’ architecture,” Drijver observes. “It also enables a search of the patent literature from the desktop, which saves time and money.”

Hungary is a good location for clinical trials, so HungaroTrial, a CRO for Phases I to IV, is doing well. It has been profitable from the start and has carried out 63 clinical trials in CEE countries, CEO Lajos Sarosi, M.D., says. It is also developing business in the U.S. and counts Roche, GSK, Wyeth, and Sanofi-Aventis among its customers. It will soon start work in Ukraine, Kazakhstan, and Russia. “These countries are to play a significant role in clinical research,” predicts Dr. Sarosi.

Finally, Solvo Biotechnology is one of Hungary’s most established biotechs. Berend Oosterhuis, business development director, explained that Solvo is focused on the phenomena behind drug absorption and excretion that often cause drug-drug interactions. “We deal with transporter proteins, which are a hot topic now,” he notes.

Hungarian biotech companies largely generate revenues by offering services. “This financing model is better than having government throw money at drug discovery,” says Duda. “Local VCs do not have sufficient experience and want a lead investor. They see that, apart from ComGenex, there is a lack of successful exits in the region. But the first VC to set up a $100 million fund here will make a lot of money.”