north–south partnerships—a study of canadian firms

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978 VOLUME 25 NUMBER 9 SEPTEMBER 2007 NATURE BIOTECHNOLOGY North–South partnerships—a study of Canadian firms To the editor: Although developing countries are beginning to harness biotech for health and economic development 1,2 , there is also an opportunity for industrialized countries to leverage their biotech investments to both develop new commercial markets and address critical global health and environmental challenges. We report here a survey—to our knowledge the first of its kind—that examines the experiences, problems and needs of small- to medium-sized enterprises (SMEs) in the Canadian biotech sector, attempting to commercialize health and environmental biotechnologies in emerging and developing-country markets. Specifically, we sought to answer the following two questions: are there specific factors that inhibit Canadian firms from identifying and pursuing opportunities in emerging and developing-country markets? And, if so, how can these be overcome? We considered emerging (e.g., China, India and Brazil) and developing (e.g., sub-Saharan Africa) markets because of their growing importance as trading partners. Although the results are from Canadian firms, the findings and lessons from the study are likely applicable to companies in other industrialized countries. We conducted semi-structured, mainly face-to-face interviews with key decision makers (CEOs, CFOs or business development managers) of 32 Canadian SMEs in the areas of health (25 SMEs) and environmental (7 SMEs) biotech. We studied firms that have, or plan within a 5-year period, to market health and environmental biotechnologies in the developing world. Interviews were audio-taped and analyzed using qualitative content analysis. All 32 of the SME managers interviewed acknowledged the importance of developing and emerging markets in providing commercial opportunities for their firms. Such opportunities included access to growing consumer markets, emerging local biotech expertise, large clinical trial populations and even funding opportunities. Low-cost manufacturing and production facilities were also identified as opportunities; according to one interviewee, “distribution and scale-up [for big pharma and biotech] is not a problem—it is their business. In this regard, we are speaking with developing-country partners in the area of clinical development and maybe manufacturing. These are the two most costly things.” Aside from commercial opportunities, there appears to be a strong desire among SME decision- makers to address the health and environmental challenges of developing countries, although often the economic realities make this difficult to achieve. As one interviewee put it: “On a humanitarian front, we want to help, but the economic dealings must make sense.” In relation to barriers to commercialization, over three-quarters of the group interviewed highlighted a lack of funds as a hindrance to their ability to look beyond industrialized countries and consider opportunities in developing and emerging economies. Obtaining the relevant competitive intelligence, developing global R&D programs, initiating clinical trials, fostering partnerships and achieving upscaling of manufacture all require significant investment. Indeed, a lack of competitive ‘market’ intelligence was cited as a barrier to developing partnerships by three-quarters of those interviewed. Without timely and comprehensive intelligence, it was perceived to be extremely difficult to make effective decisions on whether to pursue opportunities abroad. One of the interviewees lamented, “we are a small company and we don’t have enough people to address the accumulation of market intelligence. We don’t know who our clients are. We are good with technology, we are good at selling, but there is a gap in obtaining the necessary intelligence.” The next most common barrier (mentioned by 23 of the 32 interviewees) was the inability to foster the personal relationships that underlie partnerships in emerging and developing-country markets. “We need to be more proactive and methodological in choosing local representatives as partners...but we don’t have the resources to take this to the next step and to get the partners on the ground to move this forward,” one interviewee noted. We also asked what services or ‘needs’ are required to overcome these problems. The answers fell into three broad categories: first, assistance/resources from government, non-profit or private firms in providing competitive intelligence to assess commercial opportunities in developing and emerging economies; new mechanisms of financial assistance to encourage international partnerships; and help on the ground to identify suitable partners. Twenty-three of the 32 interviewees suggested the need for high quality and timely competitive intelligence on the territory of interest (e.g., market research and an understanding of potential partners and local competitors), local regulatory information and a detailed overview of the local intellectual property regimes. With regard to financial assistance, 23 out of 32 of those interviewed felt the development of funds to aid commercialization of emerging markets would be beneficial. Interviewees at seven firms also mentioned the use of long-term loans to undertake clinical trials to support future product sales and/or the provision of public funds to undertake the final phase of clinical trials in return for access to that product at cost to developing-country markets that might not be able to otherwise afford the product. Interviewees at seven firms also suggested the development of an R&D fund for SME programs that focus on developing world challenges that would incorporate research collaborations with developing-country partners, including an emphasis on intellectual property protection. An additional idea, proposed by nine firms, was to establish a fund that provided support to SMEs involved in identifying, qualifying and facilitating collaborations and partnerships with commercial potential. Finally, 23 out of 32 decision makers highlighted the need for specific assistance in identifying suitable partners, pre- qualifying/screening potential partners and providing a mechanism to initiate partnerships. A case in point is that of Adaltis (Montreal), which is currently commercializing HIV/AIDS diagnostic technology in the Chinese market (among others). Their strategy to enter CORRESPONDENCE © 2007 Nature Publishing Group http://www.nature.com/naturebiotechnology

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Page 1: North–South partnerships—a study of Canadian firms

978 VOLUME 25 NUMBER 9 SEPTEMBER 2007 NATURE BIOTECHNOLOGY

North–South partnerships—a study of Canadian firmsTo the editor:Although developing countries are beginning to harness biotech for health and economic development1,2, there is also an opportunity for industrialized countries to leverage their biotech investments to both develop new commercial markets and address critical global health and environmental challenges. We report here a survey—to our knowledge the first of its kind—that examines the experiences, problems and needs of small- to medium-sized enterprises (SMEs) in the Canadian biotech sector, attempting to commercialize health and environmental biotechnologies in emerging and developing-country markets.

Specifically, we sought to answer the following two questions: are there specific factors that inhibit Canadian firms from identifying and pursuing opportunities in emerging and developing-country markets? And, if so, how can these be overcome? We considered emerging (e.g., China, India and Brazil) and developing (e.g., sub-Saharan Africa) markets because of their growing importance as trading partners. Although the results are from Canadian firms, the findings and lessons from the study are likely applicable to companies in other industrialized countries.

We conducted semi-structured, mainly face-to-face interviews with key decision makers (CEOs, CFOs or business development managers) of 32 Canadian SMEs in the areas of health (25 SMEs) and environmental (7 SMEs) biotech. We studied firms that have, or plan within a 5-year period, to market health and environmental biotechnologies in the developing world. Interviews were audio-taped and analyzed using qualitative content analysis.

All 32 of the SME managers interviewed acknowledged the importance of developing and emerging markets in providing commercial opportunities for their firms. Such opportunities included access to growing consumer markets, emerging local biotech expertise, large clinical trial populations and even funding opportunities. Low-cost manufacturing and

production facilities were also identified as opportunities; according to one interviewee, “distribution and scale-up [for big pharma and biotech] is not a problem—it is their business. In this regard, we are speaking with developing-country partners in the area of clinical development and maybe manufacturing. These are the two most costly things.”

Aside from commercial opportunities, there appears to be a strong desire among SME decision-makers to address the health and environmental challenges of developing countries, although often the economic realities make this difficult to achieve. As one interviewee put it: “On a humanitarian front, we want to help, but the economic dealings must make sense.”

In relation to barriers to commercialization, over three-quarters of the group interviewed highlighted a lack of funds as a hindrance to their ability to look beyond industrialized countries and consider opportunities in developing and emerging economies. Obtaining the relevant competitive intelligence, developing global R&D programs, initiating clinical trials, fostering partnerships and achieving upscaling of manufacture all require significant investment.

Indeed, a lack of competitive ‘market’ intelligence was cited as a barrier to developing partnerships by three-quarters of those interviewed. Without timely and comprehensive intelligence, it was perceived to be extremely difficult to make effective decisions on whether to pursue opportunities abroad. One of the interviewees lamented, “we are a small company and we don’t have enough people to address the accumulation of market intelligence. We don’t know who our clients are. We are good with technology, we are good at selling, but there is a gap in obtaining the necessary intelligence.”

The next most common barrier (mentioned by 23 of the 32 interviewees) was the inability to foster the personal relationships that underlie partnerships in emerging and developing-country

markets. “We need to be more proactive and methodological in choosing local representatives as partners...but we don’t have the resources to take this to the next step and to get the partners on the ground to move this forward,” one interviewee noted.

We also asked what services or ‘needs’ are required to overcome these problems. The answers fell into three broad categories: first, assistance/resources from government, non-profit or private firms in providing competitive intelligence to assess commercial opportunities in developing and emerging economies; new mechanisms of financial assistance to encourage international partnerships; and help on the ground to identify suitable partners.

Twenty-three of the 32 interviewees suggested the need for high quality and timely competitive intelligence on the territory of interest (e.g., market research and an understanding of potential partners and local competitors), local regulatory information and a detailed overview of the local intellectual property regimes.

With regard to financial assistance, 23 out of 32 of those interviewed felt the development of funds to aid commercialization of emerging markets would be beneficial. Interviewees at seven firms also mentioned the use of long-term loans to undertake clinical trials to support future product sales and/or the provision of public funds to undertake the final phase of clinical trials in return for access to that product at cost to developing-country markets that might not be able to otherwise afford the product. Interviewees at seven firms also suggested the development of an R&D fund for SME programs that focus on developing world challenges that would incorporate research collaborations with developing-country partners, including an emphasis on intellectual property protection. An additional idea, proposed by nine firms, was to establish a fund that provided support to SMEs involved in identifying, qualifying and facilitating collaborations and partnerships with commercial potential.

Finally, 23 out of 32 decision makers highlighted the need for specific assistance in identifying suitable partners, pre-qualifying/screening potential partners and providing a mechanism to initiate partnerships. A case in point is that of Adaltis (Montreal), which is currently commercializing HIV/AIDS diagnostic technology in the Chinese market (among others). Their strategy to enter

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Page 2: North–South partnerships—a study of Canadian firms

NATURE BIOTECHNOLOGY VOLUME 25 NUMBER 9 SEPTEMBER 2007 979

China emerged from a longstanding relationship with healthcare investment firm Picchio Pharma (Montreal) and one of Pichhio’s joint venture shareholders, Power Corporation of Canada (Montreal). Power Corporation connected Adaltis with CITIC Pacific, a Hong Kong–based firm with significant access to, and expertise in, the Chinese market; it was because of this relationship that Adaltis was able to start significantly investing in China.

In conclusion, our study highlights the financing, competitive intelligence and partnership challenges faced by biotech firms in industrialized countries when internationalizing their activities in emerging and developing-country markets. It also provides some intriguing ideas and suggestions for facilitating these

partnerships that could be perhaps taken up by governments, non-profit, or even private firms.

ACKNOWLEDGMENTSWe gratefully acknowledge the valuable comments of Sarah E. Frew and other members of the McLaughlin-Rotman Centre for Global Health, Program on Life Sciences, Ethics and Policy. The Program on Life Sciences, Ethics and Policy is primarily supported by Genome Canada through the Ontario Genomics Institute, Ontario Research Fund, Canadian Institutes of Health Research, and Bill & Melinda Gates Foundation, with other co-funders listed at http://www.mrcglobal.org. A.S.D. and P.A.S. are supported by the McLaughlin Centre for Molecular Medicine. P.A.S. is supported by the Canadian Institutes of Health Research Distinguished Investigator award.

COMPETING INTERESTS STATEMENTThe authors declare no competing financial interests.

Andrew D Taylor1, David Brook2, David Watters3, Elizabeth Dowdeswell1, Abdallah S Daar1 & Peter A Singer1

1McLaughlin-Rotman Centre for Global Health, Program on Life Sciences, Ethics and Policy, University Health Network; McLaughlin Centre for Molecular Medicine at University of Toronto, MaRS Centre, South Tower, 101 College Street, Suite 406 Toronto, ON Canada M5G 1L7. 2David Brook, DBk Consulting, 17 Academy Private, Ottawa, ON Canada K1R 1B6; 3David Watters, Global Advantage Consulting, 31 Goulding Crescent, Kanata, ON Canada K2K 2N9. e-mail: [email protected]

1. Thorsteinsdottir, H., Quach, U., Daar, A.S. & Singer, P.A. Nat. Biotechnol. 22, DC48–DC52 (2004).

2. High-Level African Panel on Modern Biotechnology (Calestous Juma and Ismail Serageldin, Co-Chairs). Freedom to Innovate: Biotechnology in Africa’s Development (African Union, Addis Ababa, Ethiopia, July 2006). <http://www.nepadst.org/doclibrary/pdfs/abp_july2006.pdf>. Accessed March 30, 2007.

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