The biotechnology industry develops, bacteria-like, in clusters. Hubs of entrepreneurial activity grow around regions, often university cities, with strong, well-established science and technology communities. For a biotech hub to thrive, however, there must be a favorable medium—an economic, regulatory, and social environment that can support an industry whose products exist, for the most part, in the future.
In Europe, where clusters develop nationally, Germany, Switzerland, France, and the U.K. have the most advanced biotech activity. The Scandinavian countries are close behind. The countries of the south, despite their strength in innovative academic science, are considerably less advanced because of barriers that are higher than elsewhere in Europe. Advocates are trying to change that.
The struggle to promote biotechnology in Southern Europe is well illustrated in Spain. Industry-wide sales increased last year by 16% to near $40 million, and the number of companies directly involved in biotechnology increased by 22% to 257, according to the Spanish Association of Bioenterprises (ASEBIO). Yet Spanish biopharma continues to struggle, burdened by a reluctant investment community and an academic tradition that virtually bars the transfer of know-how to commercial ventures.
Success stories at individual companies may be a better indicator of how things are advancing. Industry observers point to two Madrid-area firms that began making headway two years ago. That was when PharmaMar received European approval for its first drug, Yondelis, a cancer therapy derived from a marine animal called tunicate. The company recently won a second European approval.
Also in 2007, Genetrix, a private biotech incubator, landed its first North American licensing agreement for a product being developed by a company in its portfolio. Earlier this month, that company, Cellerix, brought in $40.5 million from international investors, including second funding rounds from the venture capital arms of Roche and Novartis.
These milestones matter in Spain, David Fernández says. The manager of international affairs at ASEBIO characterizes the country’s biotech industry as immature. “Traditionally, we haven’t had the best environment,” Fernández adds. The investment community has been hesitant, and academic researchers, under intense pressure to publish, are not motivated to patent know-how.
The government, however, has begun to invest more heavily in biotech, recognizing the sector as a high-tech industry that needs support. More important, Fernández says, university researchers are making key discoveries and a growing number of companies now have success stories. “The accomplishments of PharmaMar and Genetrix have shown the rest of the companies how to do things,” he says. “Their stories give hope to young companies.”
Yondelis is a “proof of concept” for biotech companies and potential investors in Spain, says Luis Mora, managing director of PharmaMar. “It proves that if you invest money for the long term—because biotech investments are long term—you get a return on your investment,” he says.
For PharmaMar, the European Commission’s approval of Yondelis as a treatment for soft tissue sarcoma in 2007 and for relapsed platinum-sensitive ovarian cancer this year proves something even more important: Marine animal life can yield innovative therapies. The company was formed in 1986 on the principle that the ocean, representing about 80% of the planet’s biodiversity, is a treasure trove of new therapeutic compounds that, if brought to market, will breathe new life into natural product research.
PharmaMar reached its commercial milestone after the typical decade-plus journey for a biotech company. In addition to its approved uses, Yondelis is in clinical trials for indications including breast and prostate cancer. The company has four other products in its pipeline: Aplidin for multiple myeloma, T-cell lymphoma, melanoma, and renal cancer; Zalypsis for endometrial and cervical cancer; Irvalec for lung and esophageal cancer; and PM01183 for solid tumors. The company has 74,000 samples in its library, Mora says. It annually sponsors about eight dives around the world to gather aquatic animal specimens.
A walk through PharmaMar begins in a laboratory that looks like the kitchen at a seafood restaurant, with researchers wielding hammers, knives, and saws and crustacean viscera lying hither and yon. It ends in pure chemistry. After expressing promising compounds via fermentation, or extracting them from macroorganisms, the company creates synthetic routes to the ones it wants to develop further.
According to Simon Munt, medicinal chemistry manager, PharmaMar’s commitment to developing drugs from aquatic animals runs counter to trends in big pharma, which largely abandoned natural products for combinatorial chemistry, a method that Munt says has fallen short in producing significant new medicines. He senses a vindication for natural product research.
Big pharmaceutical companies “went mad thinking robots would solve everything,” Munt says. Nature’s tremendous diversity is far from fully exploited, he argues, noting that aquatic animals in particular provide a large and mostly untapped source of medicinal compounds, especially for cancer. Natural chemistry is the key. “Marine life such as tunicate can’t run away,” he says. “Instead, these animals release toxic compounds that are highly potent when not diluted.”
PharmaMar initially extracted development quantities of Yondelis from actual tunicate. It then turned to a French contractor for production help while it worked on a synthetic process for manufacturing the drug. It spent $37 million on facilities at its headquarters and by 2004 had completed the new synthesis.
The plant, which runs to the U.S. Food & Drug Administration’s current Good Manufacturing Practice standards, passed its first FDA inspection in July, according to Mora. PharmaMar now sells the drug in Europe. It has a licensing deal with Taiho for marketing in Japan and one with Centocor, a division of Johnson & Johnson, for marketing in 14 countries in Latin America and Asia. The company achieved sales of $45 million in 2008, and Mora expects sales will hit $84 million this year.
Genetrix is also starting to make progress. A spin-off from Spain’s National Biotechnology Center that is funded by private Spanish investors, Genetrix forms and supports biotech start-ups through “death valley”—the funding range between $750,000 and $7 million that is most difficult to raise through venture capital, according to Neil Thomas, the firm’s business development manager.
It is particularly difficult to find financing in Spain, Thomas laments. “There is a lack of sophisticated investors,” he says. “But the other side of the coin is a lack of entrepreneurial spirit in academia.” While Spain ranks number four in Europe for publication in scientific journals, Thomas says, little of that science transfers to commercial venues. Part of the problem, he says, is that tenured academics have secure civil service jobs for life, and many scientists view becoming the chief science officer of a biotech as too risky.
There is also some naïveté on the part of academics, Thomas says. “They want treatments to be available to patients, but there is a misconception that patenting their know-how would prevent this,” he explains. “Without patents, pharmaceutical companies will not invest in the technology.” Backed by its investors, Genetrix is coaxing academic research into the private sector.
Genetrix has launched four biopharmaceutical companies and four technology companies, according to R&D Director Gabriel Márquez. Cellerix’ Ontaril, an adipose stem cell therapy for complex perianal fistula, is in Phase III trials. “Once this is approved, the technology can be turned to other indications that are more prevalent than perianal fistula,” Márquez says. “And there are other stem cell products moving to the clinic.”
Ontaril arose from work done by surgeons at La Paz University Hospital, in Madrid. The surgeons had isolated adipose tissue and carried out initial proof-of-concept trials of its efficacy. Genetrix teamed up with them, forming Cellerix, which went on to file patents. This led to the 2007 licensing deal with Axcam Pharm, a Quebec-based biopharmaceutical company, which is worth up to $40 million.
Other drug companies in Genetrix’ portfolio include Coretherapix, a specialist in cardiac cell regeneration; Biotherapix, which develops antibody therapies; and Fénix, a gene therapy company. Genetrix’ technology start-ups include Bioalma, a bioinformatics software firm; Sensia, specializing in biosensors; X-Pol, a developer of DNA repair technology; and Biobide, which developed a high-throughput-screening technology that uses zebra fish as a model to screen for side effects of cardiac drugs.
Most of these companies emerged from licensing agreements with research institutions, usually hospitals, universities, or organizations run by the Spanish National Research Council. Coretherapix, however, is based on in-house research.
The companies in Genetrix’ portfolio need support at nearly all levels of business, Márquez acknowledges. “They need to know about relevant technologies,” he says. “They need scientific advisers to manage the intellectual property. And they need some money.” The companies start in shared laboratory space operated by Genetrix in Madrid until they can establish themselves in their own facilities.
The Spanish biotech sector needs international investors, Thomas says, and Genetrix’ success with Cellerix demonstrates that academic research can lead to a world-class commercial venture. The Spanish government is taking notice. “Spain has realized it has to do something with its intellectual property,” says Thomas, whose background is in patent law. “It has to transform itself into a more knowledge-based economy.”
José María Fernández Sousa-Faro, founder and president of PharmaMar and current president of ASEBIO, agrees. “Right now, biotechnology is one of the best indicators of a modern society’s competitiveness,” he says. “The European Commission and numerous government and international bodies view biotechnology as an industry of strategic importance for promoting an economy driven primarily by knowledge and innovation.”
Despite the serious recession, the Spanish government has upped its commitment to funding new technologies, Sousa-Faro notes. “The Ministry of Science & Innovation announced a new anticrisis measure,” he says. “It will concentrate all R&D aid to businesses, over $1.8 billion in 2009, via a single channel, the Center for Technology & Industrial Development.”
Nearly 10% of these funds will go to biotech firms, Sousa-Faro adds, and 25% of aid from the center will be delivered in up-front grants of as much as $450,000. The amount of aid granted in the first quarter of this year was double the amount in the same period in 2008. And money for start-ups has tripled.
Spain’s neighbors recognize the increased efforts to promote the Spanish biotech sector, says Willy De Greef, secretary general of EuropaBio, the European biotech association. “Spain certainly has been a late starter, but they have had their success stories and they are catching up,” De Greef says. He believes policymakers and investors are taking notice as well. “Spain is a rich country, and there is no reason why venture capital should not get involved.”
Fernández of ASEBIO is thankful for the government commitment but emphasizes that converting Spain to a more knowledge-based economy will involve significant social change as well. “Is biotechnology viewed as a growth industry? That depends on whom you ask,” he says. “But there’s a new generation of workers and students in new fields—not only the sciences.” Biotechnology is one discipline that is attracting a lot of attention right now, he says.
Although PharmaMar and Genetrix are prominent success stories, Fernández emphasizes that “there are other companies getting products to market—diagnostics and medical devices, not all strictly biotech. The investments made over the last 15 years are starting to show some results.”