African and international efforts are boosting the continent’s biotech industry—for now.
As H1N1 spread from continent to continent in 2009, there was growing concern over the severity of swine flu in Africa, due to its lack of accessible healthcare and affordable drugs. But without a homegrown H1N1 vaccine, African countries are forced to compete for limited stockpiles in the global market, going up against developed countries with millions of dollars to spend. As of yet, no African countries have been able to buy the vaccine for themselves, forcing them to rely on donations. Developed countries and international groups have offered to help, but as of December, no vaccines had yet reached the continent.
This dependency on the developed world could be...
The approach is novel. Instead of private investments and big pharmaceutical companies, Africa’s growing biotech business relies heavily on public and foundation money, small startups, and R&D collaborations between universities and private labs. The billions of dollars being pumped into the growing industry, which works on issues from infectious diseases to genetically modified crops, has resulted in a nearly 50 percent jump in the number of researchers in some African countries and hundreds of additional biotechnology products in R&D.
Still, “Africa isn’t the best place for Big Pharma right now,” says Dennis Liotta, a chemist at Emory University and founder of iThemba Pharmaceuticals in Gauteng, South Africa, which focuses on developing small molecule therapies for infectious diseases. To large corporations, the markets for diseases that only affect the developing world are too small—either in terms of the number of people affected with rare diseases or the percentage of African populations who can afford expensive treatments, he explains. “But there is a lot of potential and possibilities for small, innovative companies.”
While the boost in the number of biotech companies and jobs is promising, some question how long the small-scale, publicly funded industry can sustain itself. Because the industry is so young, very few companies are making significant profits from their products, and the current economic crisis has lowered the amount of money governments and foundations are able to pour into Africa. “There is a lot of enthusiasm around South Africa’s biotech business,” says Grant Napier, managing director of Elevation Biotech, a South African company working on peptide and peptidomimetic HIV attachment inhibitors for inclusion in HIV vaccines. “And we’re seeing progress in other [African] countries, too. But while the government and foundation money is great, the industry does need a jolt of private venture capital. But we’re considered still too risky to get it.”
Developments in politics, infrastructure, and economy have always tended to start in South Africa and spread north. So it is no surprise that the continent’s southernmost country is also the hub of biotech growth.
South Africa’s earliest biotech companies were established in the 1980s and achieved some success. Bioclones, one of the oldest biotech firms in the country, was founded in 1982; by 1995, it had developed a recombinant human erythropoietin, REPOTIN®, which helps treat anemia caused by chronic renal failure. Several others started in the 1990s. Vision Biotech, founded in 1999, generates approximately $5 million annually from sales of their immunochromatographic diagnostic tests for malaria, HIV, syphilis, and hepatitis. The company is currently developing tests for dengue and tuberculosis.
But the industry’s growth was relatively sporadic during its first 2 decades. So after a 3-day trip to Cuba in 2001, former South African President Thabo Mbeki returned home inspired by the resource-poor country’s massive science and technology program and drug manufacturing capacity. Just 3 months later, he announced South Africa’s first National Biotechnology Strategy.
The system created three Biotechnology Regional Innovation Centers and a national innovation center for plant biotech whose roles were to help establish new companies, recruit venture capitalists, and distribute a total of nearly $60 million in federal money to startups. The country has since invested an additional $26 million each year for a total of nearly $132 million.
The numbers may seem low—the US National Institutes of Health, for example, allocates nearly $650 million annually for 1500 startup companies—but once currency rates and the difference in operating costs are taken into consideration, South Africa’s financial contribution to its biotech industry is significant, explains Liotta. Drugs created in South Africa cost an estimated one-tenth of what they would in the developed world, says Heather Sherwin, the fund manager for Bioventures, South Africa’s only life sciences venture capital firm, likely due to reduced operating costs and researcher salaries, and the large number of drug-naïve patients available for clinical trials.
Since its inception, the country’s biotech strategy has doubled the number of biotech companies—there are now more than 80—and created more than 1000 research jobs. The number of biotech products in development jumped from 900 to more than 1500 between 2003 and 2007. The industry reported over $100 million in revenue in 2006.
Founded in 2003 using approximately $15 million of government funds, the Biovac Institute is the only manufacturer of vaccines in Sub-Saharan Africa. Thanks to the company’s production of a hepatitis B virus surface antigen in 2008, it generates nearly $25 million a year in revenue.
Other companies have experienced slower growth and limited revenues, but expect products still in R&D to start bringing in revenue in just a few years’ time. Elevation Biotech, for example, received a $1.45 million grant from one of the country’s innovation centers in 2006, which it used to look for and design novel HIV attachment inhibitors. They expect to have an immunogen suitable for use in preclinical vaccine development in 2 years. In its second round of funding, the company was awarded a $150,000 research grant from the International AIDS Vaccine Initiative and another $150,000 from South Africa’s HIV/AIDS Research and Innovation Platform (SHARP). SHARP also pledged an additional $500,000 if the company reaches certain milestones, says Napier.
Encouraged by the growth of South Africa’s biotech industry, several other African countries have also increased their support of biotech, particularly of genetically modified (GM) crop research. Kenya and Nigeria both passed biotechnology safety bills in 2009 and are charging ahead with GM crop development. Egypt’s Agricultural Genetic Engineering Research Institute has 13 laboratories working on topics from fungal-resistant potatoes to viral pathogen-resistant squash. Uganda also just jump-started a program to improve the cassava plant thanks to a $30 million loan from the World Bank.
South Africa is aiming to be one of the world’s top ten biotechnology economies by 2018, something they hope to achieve by increasing their R&D budget from 1 percent to 2 percent of their annual gross domestic product. While this is still lower, percentage-wise, than the United States’ 2.7 percent annual R&D budget, it is comparable to the United Kingdom’s 1.84 percent.
“Although the development of a sustainable and vibrant biotechnology industry remains a complex task, and although the global biotechnology environment is highly competitive, we are confident that South Africa will be successful,” says Nadeli Pandor, South Africa’s Minister of Science and Technology.
In the past 2 years, several large international agencies and foundations have donated millions of dollars to Africa’s science and technology sectors, particularly in support of its biotech.
The Wellcome Trust’s African Institutions initiative is aimed at training researchers, to increase Africa’s scientific output and lure more biotech companies to the continent. The $50 million initiative funds research in neglected tropical diseases and sponsors collaborations between 50 scientific institutions in 18 African countries and private-sector companies who can translate academic research into biotech products, such as vaccines.
The World Health Organization has also helped establish the African Network for Drugs and Diagnosis Innovation (ANDI), with a $30 million annual budget that will go directly toward funding research, facilitating networking between scientists, and bringing projects to market.
“There is no communication and collaboration between [African researchers],” says Uford Inyang, director of the National Institute for Pharmaceutical Research and Development in Nigeria and a member of ANDI’s task force. “If they were connected, it would allow Africa to be aligned with the international biotech community.”
The industry is off to a good start, says Paul O’Riodran, CEO of the South African biotech Synexa Group, but it needs a lot more money to become competitive in the global market. Synexa started with private money—$1.6 million in equity—from Bioventures and the Industrial Development Corporation in 2003. They then received a second round of funding—$1.8 million in loans—later that year from the government innovation center Cape Biotech Trust.
But the money hasn’t been enough to support the company’s growth. Synexa has to provide bioanalytical services to support its development of the Quorus bioreactor, a disposable bioreactor for microbial and cell culture applications.
Recently, some biotech managers have questioned how long the small-scale, publicly funded biotech industry can sustain itself, given how the economic crisis has hit governments and foundations. Since the industry is still so young, most biotechs are still in R&D phases, lacking products on the market to sustain their operating costs.
“Africa is a good place for biotech, especially South Africa,” says O’Riodran. “We have a [developed world] infrastructure, yet the cost of doing research is more like a developing country, much lower, two factors that give [the country] a competitive advantage in the global market. But there is a shallow venture capital pool, so when limited public funding runs out, it will be difficult to find additional money.”