Lack of private financing hobbles emerging biotech regions - Nature

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Lack of private financing hobbles emerging biotech regions Governments of the largest emerging economies, including China, India and Russia, continue to plough funding into biotech. Although these countries have specific priorities where medical, agricultural and industrial biotech play key roles, government funding and policies are likely insufficient to foster biotech venture creation. The availability of private funding remains an important but elusive factor for success. China keeps increasing the portion of its budget dedicated to biotech research year after year to support R&D in areas as diverse as genetically modified organisms, biofuels and new drug development as well as ancillary contract-based services such as biomanufacturing and clinical trials. Clearly, the objective of the government is to develop a self-sustained industry that will meet the needs of its home market first (see Table 1). Elsewhere, India’s new policy for 2006–2010 aims not only to foster the development of

new drugs but also to gear up the country to become the center for outsourcing services to the world’s biotech companies. To achieve this goal, the government has defined a set of prag-

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matic measures, including an effort to ramp up the training of Indian scientists, fiscal incentives for startup and simplifying the regulatory system. It also plans to have 10 biotech parks

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NEWS created by 2010, to open its borders to 100% ownership by foreign investors and a focus on contract research. Russia, the latest country to jump on the biotech bandwagon, also hopes to stimulate economic growth through biotech. President Vladimir Putin indicated last year that biotech is a priority for the country. The Biotechnology Society of Russia has drafted a proposal for using biotech to reduce drug imports, provide

high quality food, ensure adaquate biosafety regulations and enhance the country’s biotech competitiveness. But the proposal still needs to be discussed and ratified. Alexander Yanenko, deputy director of the State Research Institute of Genetics and Selection of Industrial Microorganisms, GosNII Genetika, welcomes the proposal. He notes, “This program is very significant for Russia because it’s the first example of two communities, science and business,

coordinating decisions.” The flurry of activity to develop policies encouraging the development of a biotech sector is a positive sign. However, the main hurdle for these emerging countries seems to be the lack of an appropriate level of funding. For example, Huaizheng Peng, portfolio manager of London-based venture capital firm Reabourne Technology Investment Management who has experience in Chinese biotech industry

Table 1 Shared problems? Biotech initiatives in three emerging economies Details

Priorities

Measures

China (2006-2010)

• Health. Screening for major genetic diseases, developing biotech drugs and vaccines focusing on major diseases in China.

• Fiscal incentives such as policy guidelines enabling biotech firms to get bank loans on a priority basis and schemes to provide government grants. Also, the tax policies will certainly be revised to allow more research facilities to remain tax free for longer than the current 3-years.

Estimate from previous program 2000–2005: RMb13 ($1.6) billion The next plan is expected to have a budget increased by several fold.

• Agriculture. Advancing commercialization of genetically modified rice, wheat and cotton as well as developing salt-resistant crops and sand-resistant plants. Developing biofertilizer. • Supporting biotech-based manufacturing, particularly when the products, such as one that replaces polyethylene, reduce China’s reliance on imported petroleum products. • Biofuels. Breeding and increasing acreage of crops spreading new plants for bio-alcohol and bio-diesel. • Environment. Supporting biotech antipollution measures. • Supporting biotech ancillary service, including contract research organizations.

India (2006–2010) $400 million

• Agriculture. Crop improvement with equal emphasis on genetically modified (GM) hybrids and new varieties and transgenic farm animal breeding. • Food biotechnology. Development of tools for evaluating food safety; diagnostic kits for detection of GM foods and food-borne pathogens. • Medical biotechnology. High priority to basic and applied research in molecular and cellular biology, genomics, proteomics, systems biology, stem cell biology, RNA interference; tissue engineering; biosensors. Regenerative and genomic medicine with emphasis on stem cell research. • Diagnostics for screening and early detection of infections and chronic diseases. • Bio-resources. Develop technologies to convert animal, plant and microbial and marine bio-resources into commercially useful products. • Environment. Eco-restoration of degraded habitats; conversion of toxic chemicals into harmless byproducts; bioremediation of wastes. • Industrial biotech. For the production of useful chemicals including bio-pesticides and bio-fuels. • Nanobiotech. Developing biomaterials for drug delivery and controlled release. • Bioinformatics and information technology–enabled biotechnology

Russia (2006–2015) Estimated budget needed to develop biotech in Russia RUB 150 ($5.2) billion; (including RBL 15 ($0.52) billion federal, RBL 45 ($1.6) billion regional and RBL 90 ($3.1) from extra-budgetary sources)

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• National priority projects for state safety centered around industrial and environmental biotech, including preservation of microorganism collections, biofuel production, production of raw materials for microbiology and chemical industry. • Federal projects centered around medical, food and agricultural biotech applications include post-genomic technologies development, bioinformatics, nanobiotech. A program “Biotechnology research—practical trends for 2009–2015” is in the works.

• Support the coordination of biotech research resources. • Increase financial support to biotech including venture capital. • Promote industrialization, support several major biotech parks. • Legislative efforts to write a biosafety law, which is especially important for the agbiotech applications. • Increase financial support to biotech including venture capital. • Promote industrialization, support several major biotech parks. • Legislative efforts to write a biosafety law, which is especially important for the agbiotech applications. • Massive manpower development program to ensure availability of scientists and technicians for the biotech industry. • Strengthening link between industry and academic institutions by enacting Indian version of the Bayh-Dole Act allowing companies to patent and commercially exploit innovations generated in academic institutions from government funding. A network of universities and industries facilitating pooling of resources, called “Bio-Edu-Grid,” is planned. • Fiscal incentives such as policy guidelines enabling biotech firms to get bank loans on a priority basis and schemes to provide government grants (up to Rs. 5 million ($100,000) to support early-stage innovative research of small biotech firms and low interest (2%) loans for product development. In addition, exemption of tax on revenue generated through contract research/R&D. • Simplifying regulatory and procedural formalities by replacing the multiple agencies at present by a single National Biotechnology Regulatory Authority. • Promoting and supporting new facilities including at least ten biotech parks by 2010 and depositories of biological materials and genetically modified organism test facilities in partnership with industry. • Attracting overseas companies by removing all hurdles in contract research and collaborations and allowing 100% foreign investment in biotech sector. • The Biotechnology Society of Russia drafted a proposal for a three-stage biotech program. • 2006–2008. The first phase involves evaluation of the biotech activity in Russia and determination of national biotech priorities. Providing a legal, economic and communication framework to support biotech. Training and education of biotech personnel. • 2009–2011. Action centered around newly defined priorities, which will involve biotech-based food provision and medicine production. • 2012–2015. Biofuel to constitute 5% of the country’s energy sources. Russian biotech products to replace 30% of imported goods (enzymes, biopesticides).

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NEWS explains, “if there is no mature investment framework, no such industry called biotech can exist. [The Chinese] government needs to create an investment-friendly regulatory and financial environment for knowledgeable global investors. Without money from knowledgeable investors, it is impossible to support an expensive industry like biotech.” China has money to invest in biotech. But Quanmin Hou, president of Beijing-based biopharmaceutical company Baiao Pharma

If there is no mature investment framework, no such industry called biotech can exist. points out that the government should invest some of the R&D money in enterprises instead of merely in public institutes. “Compared with the public institutes, China’s biotech enterprises have more acute market awareness, stronger capability of organizing all the necessary work that research on a new biotech drug calls for and a deep understanding of controlling costs.” In contrast, Russia is still at the stage where no specific funds have been allocated. Meanwhile, in India, Aluri Srinivasa Rao of ICICI Venture Funds in Mumbai feels the “small incremental loans and grants” that government policy makes available are unlikely to catalyze the anticipated growth. The government has

earmarked $400 million for the new biotech program. “It has to be big money,” he says. The government should create “very large funds” of several million dollars and allow deserving companies to apply for them. According to a study, ‘Health Biotechnology Innovation in Developing Countries’, by the Canadian Program on Genomic and Global Health at the University of Toronto Joint Center for Bioethics (Nat. Biotechnol. 22, DC48-52, 2004). China, India and Russia have some way to go before they can start to see tangible benefits from biotech investment. Although political will and the development of biotech parks to foster close linkages and enable innovation are important, there also needs to be more intellectual property protection and help for enterprise creation as well as the definition of niche areas to focus on. The final key criterion for success, the presence of individual leadership, remains something that no government incentive can promote. But that’s something that already exists in these emerging economies. Reporting by Hepeng Jia in Beijing, K.S. Jayarama in Hyderabad & Marina Astvatsaturyan in Moscow

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