November 1, 2008 (Vol. 28, No. 19)
Bruce F. Mackler Ph.D., J.D.
Lack of Funding, Infrastructure, and IP Protection Are Some of the Hurdles Being Disassembled
The excitement generated by “Biolatina” held last month in Sao Paulo, Brazil, confirmed that biotechnology is emerging in Latin America as a major economic sector, building momentum with new technologies and partnering opportunities. Fundação Biominas, the prime organizer of Biolatina, believes that the meeting contributes to a more favorable business environment in Latin America, facilitating the creation and development of biotechnology companies.
Brazil is the preeminent Latin American country in terms of the number of biotech companies—there are 71 established biotechnology companies in Brazil. Approximately 10 Brazilian biotech companies have fully emerged from academic and research programs, and they are perceived to have excellent chances of success through partnering and providing products for the local market. The remaining 60+ Brazilian biotech companies are still academically based and success is less certain.
To drive the development of these nascent firms, the Brazilian Innovation Agency recently announced a three-tiered funding program. Although there was broad approval of the program at the meeting, many local biotech executives wondered whether this funding will drive academic expectations of company valuations too high and whether there will be sufficient local venture capital community to fund these companies once the federal funds are exhausted.
Several speakers provided insights into the realities of corporate relationships, private and public funding, governmental policies, regulations, and clinical studies. Steven Burrill, president of Burrill & Company, provided his perspective on the biotech industry over the last year, and his analysis and predictions through 2020. He believes that Latin American biotech companies can compete globally with their health-, agriculture-, and biofuels-related technologies.
Mark Edwards, founder and managing director of Recombinant Capital (now part of Deloitte), subsequently examined the realities of alliances between academic and corporate entities. This topic was especially important to the Brazilians that see partnering as central to the development of biotech in Latin America. Christian Suojanen, secretary general of the European Federation of Biotechnology, further counseled the nascent industry to focus on its strengths and comply with international standards.
The regional nature of the Biolatina meeting was exemplified by the diversity of groups participating from all over Latin America. Neos is a private technology transfer office located in Santiago, Chile. It was formed in 2003 to facilitate the spread of Chilean and Latin American innovations across developed countries. Its goal is to serve “as a connecting channel between universities and state companies, so as to detect and seize the synergies that provide value to local technological innovation.”
Octantis, another Chilean initiative that counsels developing companies, has invested over $20 million into firms operating out of its incubator in Santiago, Chile. Ocantis also advises clients to visit the U.S. to obtain partnering exposure and raise funds.
These Chilean efforts, like those of Fundacao Biominas in Brazil, are examples of private-sector entrepreneurial efforts to create and foster commercialization of local technological innovations. In the U.S., Europe, and Japan such efforts are coordinated by trade association.
Established Biotech Firms
Pele Nova Biotecnologia is one of Brazil’s most promising firms. It was launched in 2003 by academic researchers and currently markets a biomembrane product, BioCure, for the treatment of acute wounds. The firm sees its future growth in partnering with large pharma, not in bringing new products to market. It has invested two years, making the rounds in Europe, to build interest in its technology with potential European partners. According to Marcos Garcia da Silveira, president of Pele, this is the preferred business model for Brazilian technology-based companies.
Recepta biopharma is another emerging biotech company from Brazil. It was founded by Jose Fernando Perez in partnership with the Ludwig Institute, which has built partnerships with various Brazilian governmental institutions rather than build and fund its own infrastructure. Using technology licensed from Ludwig, Recepta is focused on the development of monoclonal antibodies to treat cancer. The firm’s first clinical trial, which commenced earlier this year, is focused on ovarian tumors.
One of the greatest challenges for Brazilian biotech companies, according to Dr. Perez, is that it is difficult to generate cGMP-compliant products locally and perform GLP preclinical studies in order to enter clinical studies locally. Brazil actually taxes money used to pay foreign cGMP and GLP vendors, adding an extra cost to clinical programs dependent on foreign resources, even though there are no comparable domestic resources.
This surtax on payments to foreign vendors continues to be a tremendous impediment to the development of products in Brazil, and makes the biotech industry dependent on out-licensing and partnerships with foreign entities. Dr. Perez believes that Brazilian biotech companies will always be forced to partner with foreign companies, in the absence of domestic cGMP and GLP vendors and adequate funds for clinical studies.
Another successful Brazilian business is FK Biotec, founded by Fernando T. Kreutz. Based on his Canadian postdoctoral and commercial experiences, Kreutz was able to raise $15 million in 2007 from Canadian angel investors to fund an autologous whole cell prostate cancer vaccine. FK Biotec is now moving its clinical operations to Canada and setting up a 120 liter bioprocessing facility.
Gentros, a recent start-up, has in-licensed U.S. technology for recombinant animal health vaccines directed against ectoparasite. The company’s founder, Tailia Lemos, Ph.D., was trained at Eli Lilly She plans to grow the company through government grants and access to government laboratories, which will perform clinical trials compliant with GLPs and GCPs.
Beyond angel investors, a local venture community is emerging that could support Latin American biotech companies after they have exhausted their initial government funding, reported Guilherme Emrich, partner at Fir Capital, and Francisco Jardim, regional fund manager of criatec fundo de capital sementre. Of particular interest is the announced formation of a fund by criatec fundo to provide two rounds of financing to build valuation. Dr. Jardim reported that the firm’s intention is to develop an investment model that integrates early-stage government funding with private financing. The firm also hopes to provide guidance to firms on partnering.
The importance of local venture support was emphasized by Cate Ambrose, executive director of the Latin America Venture Capital Association. Turns out that North American VCs are more likely to invest in Latin American companies when there is a knowledgeable local venture group as the lead investor.
Conspicuous in their absence from the meeting were the Brazilian pharmaceutical companies that have focused on generic drug formulations, and are now a growing force in terms of their having begun internal biotechnology-based product development. Down the road, these firms may become partners for the emerging companies. Such partnerships may actually enable small biotechnology companies to overcome the major growth challenge in Brazil posed by the lack of GLP compliant space for animal studies and for cGMP manufacturing of Phase I and II products.
The vast majority of clinical studies now being performed in Brazil are those of foreign multinationals looking for local approval and to supplement clinical studies performed in other countries. According to Brazilian biotech executives, it is quite difficult to get authorization of a Phase I through ANVISA (the Brazilian regulatory agency), until there is adequate safety data from other countries.
Another lingering concern, since the growth of the biotechnology industry in Latin America is focused on academic-generated research and technology, are the uncertainties of several key aspects of academic ownership and licensing. Although Brazil has enacted a Bayh-Dole like Act, it has yet to be legally interpreted by any court. Academic institutions tend to take a conservative approach to out-licensing. If the biotech industry in Brazil and many other Latin American countries is to develop, many issues will have to be clarified.