Africa’s Way Forward

In my last contribution, I wrote that the gene revolution is finally arriving in Africa. Now I would like to explain what must be done to consolidate and progress this effort.

As a first initiative, Africa needs to focus on networking, which is necessary because the critical mass of scientists in developing countries is somewhat limited. When this is the case, networking can be viewed as partnering with equivalent institutions, which allows these projects to be done on a global basis.

 Even the best agricultural science has no effect if quality seeds do not reach the farmer. In the US, the non-profit Crop Improvement Association is responsible for monitoring seed production and for the process of seed certification for a limited number of generations. In Brazil, EMBRAPA has Foundation Seed, which sells to seed producers under strict rules, before being sold to farmers. In both countries seed laws have been in effect for decades. Brazil passed a simple law to regulate the commercialization of seeds: the seed inside of a container or bag should correspond to the label outside. This law, which went into effect in 1965, changed agriculture in Brazil and in effect stimulated the seed industry in the country.

In addition, Africa needs a law to protect its breeding achievements and varieties, something similar to the Cultivar Law, essentially based upon the UPOV System. For reference, examine the Law # 9456 sanctioned in Brazil in April of 1997.

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The Gene Revolution is in Africa

Those who went to the splendid seminar organized by Roberto Tuberosa in Bologna in  May of 2003 – titled In the Wake of the Double Helix, From the Double Helix to the Green Revolution – heard that the world’s poorest regions are the ones that could gain the most from the gene revolution, and also are the ones excluded from it.  During the seminar, the predominant voice was that the gene revolution had excluded the poor because no staple crops were on the agenda of the large corporations. In fact, most work by the large corporations is directed to soybean, cotton, canola and corn.

Plant genetic engineering in Europe today, for political reasons, is a shadow compared to what it was during the ’80s, when Marc van Montagu and the late Jeff Schell set the basis for genetic engineering in plants.  So it won’t be Europe that establishes a strategy to bring the benefits of the gene revolution to the poor. Still, the current state of agriculture in Brazil was built by just a dozen excellent geneticists, and I remember saying that all that Africa needed was 10 of their own to affect change.

The soybean revolution in Brazil was done by Romeu Kihl, and aluminum-resistant corn for the acid cerrado soil was done by Ricardo Magnavacca. The foundations of maize breeding had been previously done by the late Ernesto Paterniani. Eleuzio Curvello did cotton, Alcides Carvalho did coffee, during 52 years of his life. Dalmo Giacometti and Silvio Moreira tackled citrus. Marcilio Dias and Hiroshi Ikuta are the fathers of vegetable genetics. Raul Moreira, banana; Ady Raul da Silva, wheat; Frederico Menezes Veiga, sugarcane.

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Encouraging Pharma in Brazil

The pharmaceutical industry in Brazil grew 12% last year. Are there any indicators suggesting that growth is sustainable? What are the political policies behind this growth?

Brazil confronted hyperinflation from 1965 till 1994.The inflation climbed for three decades, comparable only to what happened in Germany during the 1920s. In June of 1994 alone inflation was 46.58 %. In 1994 the Plano Real (Real Plan) was launched when Itamar Franco was president of Brazil and Fernando Henrique Cardoso was ministry of finance (elected president of Brazil in October that year). Brazil adopted a new currency, the real, but it was recognized internationally only a couple of years later. Inflation dropped in later years but the cost of money to promote technological development in Brazil for many years and even today is the highest in the world.

For almost two decades one could buy public bonds and collect returns of 12% a year. Inflation was still very high, in the range of 6%, and when deducted from these bonds it would assure returns of 6% per year with zero risk. Who could possibly think to invest in technological development instead? In recent years, President Dilma Roussef decided to adopt a series of measures to reverse this trend. Public banks (Banco do Brasil and Caixa Economica Federal) decided to adopt lower tax rates for lending money. Of course private banks had to review their position, which for decades had resulted in the highest profits worldwide.

The common citizen and the small enterprises are now encouraged to obtain loans to promote their business. Interest rates (The Selic Index) are falling. For a long period this index was as high as nearly 20% yearly. Now it is down to 8.5%. That’s still very high, says Dilma Roussef. In the US this rate is close to zero. However when we compare inflation with the new interest rate the difference is gradually dropping, and those that benefited from easy money with zero risk might need to consider alternatives and eventually move in the direction of risk capital.

In truth, though, private risk capital is still scarce. So what is it that has promoted the growth in the pharmaceutical industry? Financing agencies (the Project Financing Agency, also called FINEP, and the National Bank for Social and Economic Development, BNDES) are lending money for technological development, including the pharmaceutical industry, to be paid back in 10 to 15 years, at subsidized interest rates coming in below inflation: 4-4.5 % per year. The loans also include three to five years during which only the interest needs to be paid. This is of course only available to enterprises that can demonstrate assets to back up these so-called reimbursable loans.

When we compare these policies to the series of crisis prevailing in Europe, the US and even countries like Japan, still struggling to recover from natural catastrophes, Brazil emerges as a new potential partner, as I predicted last year. It begs the question, though: where will the intelligence come from to support these pharmaceutical partnerships, should they take place in the coming years? As an answer, Brazil has adopted the most ambitious program in history to train young scientists abroad. Historically, Brazil extends 3000 to 5000 scholarships a year to train students in foreign countries. President Roussef now will fund more than 100,000 scholarships over a four-year period.

However, budgets are not elastic. This investment of billions of US$ dollars will come with sacrifice from other initiatives linked to the Ministry of Science and Technology. The general policy is a clear funding of the private sector and scholarships under government control.

Luiz Antonio Barreto de Castro

GM Plants and 7 billion people

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Beginning in the mid-’70s, Brazil prepared for a gene revolution. Patent, cultivar and biosafety laws were enacted in the ’90s before the commercial release of agricultural biotech products. Brazil has consistently invested in human resources training in science for the last 30 years. Science in Brazil is growing at a rate comparable to or higher than most developed countries.

Also, during the past 25 years, Brazil has trained excellent plant cell, molecular and developmental biologists at EMBRAPA research center CENARGEN (the National Research Center for Genetic Resources and Biotechnology), to team up with plant geneticists and breeders to develop the best programs for the tropics. Funds for molecular biology were applied to plant genetic engineering, but still, somehow plant breeding disappeared in Brazil during the last decade. Why is that?

Well, when the first genetically modified plant was commercially released in 1995, worldwide non-governmental organizations (NGOs) protested against it, a movement supported by the judiciary system in Brazil. We lost every legal action against the NGOs from 1997 on. One judge voting against the release of GMOs said he was judging a dispute between Greenpeace and Monsanto. The decision had nothing to do with science or what would be the best for Brazilian agriculture. It was a political and ideological decision.

The consequence was that from September of 1998 until 2005, Brazil could not commercially release genetically modified plants in Brazil. Those willing to do plant molecular biology and genetically modify plants even at scientific level were denied funds, as rules created by the Ministry of Environment in the country required years of endless justifications for scientists to release a field experiment. Beans engineered to be resistant to the Golden Mosaic Virus by applying RNA interference methods took almost 10 years to be released, with considerable opposition coming from NGOs, which garnered support by sectors of the Executive in Brazil.

What is really sad is that this is not isolated to Brazil. Plant genetic engineering in Europe is a shadow of what is was during the ‘80s, when Marc Montagu and Jeff Schell built the scientific basis for plant genetic engineering. Twenty years later, Ingo Potrykus is still struggling in Europe to bring his Golden Rice to market. This genetically modified rice has the potential to save the lives of millions of children in the developing world by fighting vitamin-A deficiency. Potrikus also has struck deals with dozens of biotech companies for patents on the technologies he used to create his rice. The world’s poorest regions of Central and West Africa would gain the most from the gene revolution. However most work in biotech by the large corporations are directed to soybean, cotton, cannola and corn — not much for staple crops. No wonder those representing developing countries feel excluded from the gene revolution.

Science and scientists are on the spot. Thousands die of hunger each day, mostly children. Ignoring this and not using the bioscience advances to attenuate this problem is morally unacceptable. Brazil surveyed recently its poverty. There are almost 20 million living at extreme poverty levels, close to 10% of the Brazilian population. They do not have enough money to eat two meals/day. In some rural areas of the Northeast the poverty average ranks twice the national average. It is imperative to have a global, science-based effort toward a less hungry world that builds jobs and focuses on major constraints for agriculture development in the tropics. This effort cannot be achieved if we demand never-ending biosafety analysis of products known to be safe. We must focus initially on plants resistant to drought, pests, and to soil aluminum toxicity, which affect more than half of tropical soils. Grasses capable of fixing nitrogen from the air are also needed (following up the work by Johanna Döbereiner, who died some years ago) to allow poor people to save the cost of oil-derived urea, which pollutes the soil and the water.

We can make the Gene Revolution work in the same direction as the Green Revolution did decades ago. We have a much more powerful science in our hands. We need an effective strategy to unite the world toward this goal. How do we explain to the developing world that almost a decade was required for the innocuous rice produced by Potrikus to be released, while a fast-track was found to commercially release a cosmetic that prevents wrinkles, purified from a neurotoxic protein from the Clostridium botullinum? Hunger is a world problem. Wrinkles are not. Poverty in Brazil is a small fraction of the world`s poverty, and Brazil will face it. What about the rest of the world? Can we ignore the advances of biosciences in this context? Think about it, please.

Luiz Antonio Barreto de Castro

Brazil as host

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Biotechnology is growing in Brazil but has not reached the level of other countries. The biotech industry in the country is about the size of biotech in Georgia /USA.

Part of the problem is that there is competition with other countries, particularly China. Part of the problem is the regulatory limitations in Brazil, particularly in the area of intellectual property rights (IPR). I see some signs, however, indicating that international companies, big and small, are interested in moving to Brazil. I got in touch with two of these companies — Amgen and Bio-Sourcing. Amgen is an old giant, and Bio-Sourcing is a small company that will be dealing in Brazil with genetically modified animals to express pharmaceuticals for the veterinary area.

Based upon the growth rates of about 12% per year of the pharmaceutical sector in Brazil, Amgen expects that the country will become the fifth largest pharmaceutical market in the world by 2015 (up from 8th today). Amgen hopes to make its medicines available to patients in major markets around the world, including Brazil and its quickly expanding middle class. A key element of Amgen’s strategy is to ensure that the medicines produced by the company will in time be recognized by the Brazilian government, medical professionals and patients as best-in-class. They believe that despite regulatory difficulties, Brazil provides a favorable environment for clinical trials.

Thus, Amgen will invest not only in clinical trials but also in scientific research to demonstrate the quality of their products in their main therapeutic areas: oncology, hematology, nephrology and bone health. Its development interests span areas as inflammation, neurology and metabolic disorders. Considering clinical trials, Amgen distinguished in Brazil an interesting multiethnic population with a balanced age profile, competitive costs and high quality of research standards and professionals. Laboratorio Bergamo, a local, traditional therapeutics company bought by Amgen last year, will produce products for clinical trials. One can see that Amgen took its decision after an in-depth analysis that might eventually be followed by other companies in the pharmaceutical sector.

Bio-Sourcing exploits a unique technological platform that they believe has become the world leader in animal transgenesis. Bio-Sourcing is thus able to provide the industry with a cheaper production process that is both flexible and environmentally safe, according to sustainable development standards. The company develops its own pipeline of innovative products. Its molecules are produced through genetic engineering, within the milk of big mammals such as cows or goats. To this day, milk remains one of nature’s primary products, and is recognized as safe by regulatory authorities. It also allows for direct delivery, thus avoiding heavy purification constraints. This technology is a new breakthrough in human and animal nutrition as well as in dermo-cosmetics. Moreover, it is highly suitable to the production of monoclonal antibodies at a very low cost. Lastly Bio-Sourcing aims to play a part on the animal selection market, by mastering cloning and animal transgenesis techniques.

Bio-Sourcing is the sole owner GTC world exclusive license, which includes its technology, its produced proteins, its means of production, and its technology transfer to Bio-Sourcing, as well as its patents on all sectors except human drugs. GTC has already registered a medicine produced through animal transgenesis, both to FDA and EMEA, which is currently administered to patients. GTC has also developed numerous molecules, the main part of which being monoclonal antibodies.

Bio-Sourcing’s managing team has entered into discussion, at the decision-making level, with a major group in Brazil focused on monoclonal antibodies. Those industrial discussions seek to validate bioproduction projects that would be of interest to industry leaders in the country and might work safely and with efficacy in Brazil, according to the regulation in place by the CTNBIO – Brazilian National Biosafety Commission.

On the one hand, BioSourcing will consider only products previously reviewed and approved by industrials. And Bio-Sourcing will allocate its production and development means to its Brazilian subsidiary.

Accustomed to Brazil’s language and culture, Bio- Sourcing’s CEO has already made contact with local players. Brazil is highly receptive to transgenesis techniques, but it also has attractive production costs, great know-how in milk industrialization and a dynamic internal market – all of which should help Bio-Sourcing succeed.

Bio-Sourcing already has its own patents, in particular regarding an innovative molecule that could become a blockbuster, thanks to multiple applications in different sectors. Its management team has experience as chairman, CEO, chief business officer and chief scientific officer in major international groups. Clearly, Brazil being a giant in animal husbandry has attracted Bio-Sourcing, but in this case the regulatory environment in Brazil might have played in its favor, too.

Luiz Antonio Barreto de Castro

The Patent System in Brazil

During the ’60s, biology was not patentable. Genetic engineering started during the ’70s, but it was called recombinant DNA technology back then. Investments made in this area demanded a solution for intellectual property (IP) rights being applied to biology.

Though living organisms were not patentable before, genetic engineering and particularly applications in the pharmaceutical area gave rise to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, which allows patent protection to be accorded to inventions in the area of Pharmaceuticals. (The TRIPS Agreement is Annex 1C of the Marrakesh Agreement under the World Trade Organization, signed in Marrakesh, Morocco on 15 April 1994.)

Brazil signed the agreement, with 13 other WTO members. When Brazil signed TRIPS, it automatically had to reorganize its patent regulatory system. Brazil then approved a patent law in 1996 (Law 9279) and the next year approved a plant variety protection law (Law 9456). These adjustments came a few years after TRIPS, and the Brazilian patent law incorporated what was minimally required in the TRIPS Agreement.

Our patent law offered the possibility to patent (recombinant) microorganisms that satisfied what was required for granting patents — a not-obvious invention. But it also provided the option to adopt a sui generis system (the UPOV system) to avoid patenting genetically engineered plants and animals – both not required by TRIPS. Patent law and the plant variety protection are hardly compatible (See Castro L.A.B. Revista da ABPI , March/April 2011). Those who have genes and protect the gene technology by the Patent Law also want to have the ownership of whole genomes of plants. The negotiation with agribusiness has progressed, however, since in Brazil farmers can measure the benefits and thus pay for the technology fees, mostly charged by large corporations. This has made Brazil second in the world to the USA in biotech crops.

The big disagreement came in pharmaceuticals. The Brazilian law incorporated TRIPS-endorsed principles that were never accepted by the international pharmaceutical sector, particularly compulsory license. The Brazilian law allows for patented products to be manufactured in Brazil if it’s deemed that prices established by pharmaceutical companies (mostly multinationals) are abusive.

Next the Brazilian government, under the stimulus of the health public sector, modified the Patent Law and established with ANVISA (equivalent to FDA in the USA and to EMEA in Europe) that those willing to patent in pharmaceuticals, and having applied for this purpose at the National Institute of Intellectual Property, needed an agreement from ANVISA. This rule makes the Brazilian process longer than any other in the world, and it is under judicial dispute.

The Brazilian Patent Law is very restrictive, as we can see in the Article 18 of the Law, which deals with biology matters. The Law 9279 prevents patenting parts of organisms, be it microorganism, plant or animal. Cells are not patentable .Genes are not patentable, unless essential for a patented process.

Biopharmaceuticals are not patentable. Molecules derived from the huge Brazilian biodiversity are not considered inventions even if these molecules are isolated and their function demonstrated. As a result Brazil has not one molecule patented from our biodiversity. In addition the general patent performance of Brazil, as compared to Korea, for instance, is extremely weak. The almost nonexistent number of patents from Brazil deriving from our biodiversity has been previously discussed on this blog.

Patenting is an essential instrument for partnerships, which is an absolute requirement for the pharmaceutical industrial sector in Brazil, that is funded with national money, to partner with large corporations (which have been in Brazil for decades, some for a century) to ascend to the large international market. This strategy is the only one that will allow these “native” pharmaceutical companies to become relevant actors in the international scene. Fortunately, the private sector is aware of the importance of patents as an instrument for partnerships. Thus partnerships are occurring in Brazil, despite of our patenting restrictions in biology. As result the Brazilian pharmaceutical industry is growing and is responsible today for 40% of the market in Latin America. The demand for pharmaceuticals is growing at 10% per year. In fact Brazil is leading an emerging biotech boom in Latin America. But it could do a lot better if our regulatory patents system was reviewed.

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Patents granted by the USPTO for selected countries – " pedidos" = deposits ; " concessões " = granted.**

Luiz Antonio Barreto de Castro

The Future of Startups in Brazil

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I’ve already written about Brazil as an emerging power in the area of science. A remaining challenge for the country is to move from science to industry in major areas, including biotech. I’ve also written about the laws surrounding biotech, but these laws mostly affect medium and large-size companies, because those can demonstrate incomes from which fiscal incentives can be applied and deducted from income tax.

But what happens to small, start-up biotech companies? Do they have a future? Brazil has launched a system called “subvenção economica,” which is inserted in the law previously mentioned.

Since 2006, there has been an annual call for proposals, inviting companies to apply for funds that don’t need to be paid back. Last year the “subvenção” offered about $300 million in reais (US$190 million) and the demand was four times that amount. Two hundred and fifty-two companies qualified for funds, and a majority will receive some. Biotechnology and health together totaled 25% (67 companies). Overall, small companies asked for 72% of the funds, which is remarkable.

Still, these small startups get an initial push but do not have a mechanism to scale up their business later. The two laws mentioned previously do not apply to small biotech companies because they do not have incomes from which to deduct incentives, and also they cannot offer guarantees to back up bank loans. One component of the Innovation Law provides tax deduction for entrepreneurs that invest in technological innovation and as such could give rise to funds from entrepreneurs to small business companies.

However, biotech does not stimulate the immediate economy because the projects are long term. So the only attractive factor coming from these small companies is IPR to be offered to larger companies as a means to assure that investments can be made under the protection of the Brazilian Patent Law – Law No 9726/96. The Patent Law in Brazil is restrictive to innovations related to biology, but I’ll talk about that later.

In order to establish an innovation center in the northeast of Brazil, we concluded that a non-profit association should be established, much like the Wisconsin Alumni Association, to deal with patents generated by the biotechnology network called RENORBIO.

RENORBIO in four short years accumulated more than 60 patents, deposited in Brazil and abroad. Funds are needed to assure that these patents will be of use for the industry, so we invited six entrepreneurs to be part of a management council in hopes of bringing together the private and the public sectors.

It’s too early to say if they will advance risk capital. If it doesn’t work, Brazil will attempt a tax deduction from Northern States and Counties. Nine Northern States in Brazil will collect an estimated US$25 billion in taxes in 2011. If that holds, 0.1% would be enough to establish an Innovation Pole in the Northeast of Brazil and small startup biotech companies would then have a future.

Luiz Antonio Barreto de Castro