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A market in expansion

Biominas finds that 51% of companies has no more than seven years

At the request of the Ministry of Science and Technology (MCT), the Biominas Foundation carried out a wide-ranging survey to identify and to describe the biotechnology companies in operation all over the company. It found that Brazil is home to 354 companies, in their majority less than seven years old, with sales estimated at something between R$ 5.4 billion and R$ 9 billion. All together, these companies create a total of 27,825 jobs. This X-ray of the sector will provide input for public policies and investment planning in the sector. Until then, the only survey had been the one carried out by the Brazilian Biotech Industry Association (Abrapi) and by the International Institute of Biotechnology Enterprises (IICA), in 1993.

Brazil’s biotechnology complex gained momentum from 1994 onwards. Half the companies that operate in Brazil today, as the survey found out, were created after that year. Biominas collected data from 304 of the companies in the sector, and classified them by region, market segment, degree of maturity, size, sales, R&D investments and patent requests, among other information. In a second stage of the research, the foundation heard 50 selected companies, drawing up a more detailed profile of the sector.

The findings were that São Paulo, Minas Gerais and Rio de Janeiro concentrate 81% of the country’s biotechnology companies. At least 57% of the enterprises in São Paulo are large in size and fall into the category of suppliers and multinational companies. In Minas, Brazilian companies predominate, the majority focused on the areas of human, animal and plant health. In Rio, the sector is balanced between multinational and domestic companies from the human health area.

Maturity Time
The survey noted that the Brazilian biotechnology complex is made up of extremely young companies: 28% are start-ups, with up to three years in operation, and 23% were classified as new, between four and seven years in age. At least 78% of them were classified as small enterprises. Mature companies, with over seven years in the market, account for 49% of the sector. Another significant figure is that one fifth of the companies from the sector are still being incubated.

It is worth highlighting that Minas Gerais is the state that has most invested in biotechnology incubators, or in incubators that cater to these companies: it is the state where 45% of the incubated companies are installed. In São Paulo and in Rio de Janeiro, this percentage is 8%. Biominas estimates that the group of biotechnology companies in Brazil generates a total of 27,825 jobs. Of these, 74% are with micro companies, 10% with small companies, 6% in medium ones and 10% in large companies.

Financial results
The Foundation calculates that the sector’s sales reach an amount between R$ 5.4 billion and R$ 9 billion, which corresponds to between 0.9% and 1.5% of Brazil’s Gross Domestic Product (GDP). It stresses, however, that these figures are approximate, and that the methodology for calculations may be revised. The major corporations – including multinational and public sector companies – account for 91% of the forecast total. Some of them gross as much as R$ 300 million. On the other hand, 56% of the companies were classified in the range of up to R$ 2 million revenue, and 8% of these were not effectively selling anything yet.

The time for the company to come to maturity is directly related to the financial results, the survey notes. In the case of the biotechnology sector, companies are slow to come to maturity. Even seven-year old companies were still to be found – at the time the survey was carried out – in the development stage, without yet having put any products in the market. This characteristic of the companies demands finance for investments and capitalization. Biominas registered a generalized need for funds, both in the large companies and in the little ones, in order to provide the necessary balance during the long maturity cycle, marked by heavy development and production costs. Of the 50 companies studied, 23 can draw on, or have already drawn on, foreign funds. But only three of them use venture capital, enjoying the support of eight private investors. Undercapitalization puts in jeopardy making the best use of technological and innovative capacities and potentialities.

In the assessment of the businesspersons heard by Biominas, finance and capitalization are the sector’s most sensitive points. Those linked to companies outside São Paulo recalled the good example set for technology companies by the Small Business Innovation Research (PIPE) and Partnership for Technological Innovation (PITE) programs, and suggested that these models should be adopted by national development agencies.

Another bottleneck for development, pointed out by the businesspersons consulted, was the high level of levies and taxes charged on the mini, small, medium and large companies that work with imported supplies and equipment. Also pointed out were problems like the need for regulating access to Brazil’s biodiversity, legislation on transgenics, and integration of the activities coordinated by the various ministries involved, among others.

The survey also assessed the technology absorption degree, taking for a yardstick R&D internalization and cooperation with universities and research institutes. It was found that 90% of the companies surveyed have carried out their own technological development, and 93% have formal or informal relations with the academic and research sectors. Small companies, with up to ten job positions, tend to have between 50% and 100% of their team in R&D activities. At the other extreme, large companies have between 5% and 6% of their team focused on these activities.

The companies in the sector invest heavily in innovation. The organizations surveyed put forward 47 patents, with 21 now granted and 26 applied for. The average is for one patent per company. But just one company, with just three years in existence, was responsible for requesting and obtaining 13 patents. This, indeed, is a well capitalized company, with investments from venture capital. At least 34 of the institutions surveyed have plans to export, with Mercosur, Latin America and the EuropeanUnion the main target markets. In fact, 28% of them have already started business with foreign countries.

With these results as a starting point, the Biominas Foundation is making a number of suggestions for the MCT. The first of them points out the need for expanding and diversifying financing instruments for biotechnology companies in the country. The second suggests ongoing organization and improvement of the regulatory activities on the part of the competent public spheres. The absence of regulation or sluggishness in its implementation are contributing towards the shrinking of investments back and also hamper exports. Finally, the foundation identifies the excess of taxation as a critical problem for the companies.

Classification criteria

The 354 Brazilian biotechnology companies mapped by the Biominas Foundation were analyzed, assessed and classified into nine categories: human health (diagnostics, drugs, plant medicines, vaccines, etc.); multinationals, public sector companies, drugs, generics and agro; suppliers (equipment, supplies and provisions); agribusiness (plant improvement, transgenics, forest products, ornamental and medicinal plants, bio-insecticides, biofertilizers, inoculations); industrial (fine chemistry and enzymes); biomaterials, biomedicine, consultancy in biotechnology (human, animal and plant health) – genetic identification and analysis of transgenics -; animal health (veterinary, animal reproduction, pets, vaccines, probiotics); environment (bio-recuperation, treatment of residues, analyses); supplementary instruments for biotechnology (software, bio-information technology and e-commerce) and in synergy (biomaterials, biomedicine consultancy in biotechnology).

24% of the companies were identified in the human health segment. 17% were to be found in the suppliers of equipment, supplies and provisions segment. 12% were in agribusiness, and 6% were companies from the fine chemicals and enzymes sector. Another 5% were classified under synergy, a sector that includes the area of biomaterials, biomedicine and consultancy in biotechnology, amongst other of less representative. Multinationals and public sector companies in drugs, generics and agro accounted for 22%.