SA: Next hunt­ing ground for biotech

BioSpectrum (Asia) - - Bio Contents - Nitin Konde

even as the coun­try faces acute skilled labour short­age, en­demic poverty and preva­lent dis­eases, gov­ern­ment’s ef­forts to grow the bio-econ­omy through strength­ened part­ner­ships with in­dus­try is bear­ing fruit

South Africa is emerg­ing as one of the prom­i­nent play­ers in the biotech sec­tor. Cur­rently, the biotech sec­tor of the coun­try is hov­er­ing around US $3.9 bil­lion mar­ket (as per the Deloitte re­port) and it is ex­pected to grow with the rate of six per cent year on year, so it is likely to touch US $5.1 bil­lion by 2018. South Africa has a two-tier phar­ma­ceu­ti­cal mar­ket. The pub­lic sec­tor tier is char­ac­terised by high de­mand and low prices caused by low lev­els of fund­ing. The pri­vate sec­tor tier has drug prices sim­i­lar to those in the de­vel­oped world. The gov­ern­ment sets a sin­gle exit price (at ex-fac­tory level) for all pre­scrip­tion medicines, re­gard­less of the chan­nel through which they are pur­chased.

Re­cently, the an­nual in­crease on the sin­gle exit price has not been in line with the rec­om­mended/pub­lished equa­tion to cal­cu­late this in­crease. This has had a neg­a­tive im­pact on the sec­tor, which is still heav­ily re­liant on im­ports and as such has been neg­a­tively af­fected by the de­val­u­a­tion of the ZAR against the US dol­lar and Euro.

In par­al­lel, how­ever, South Africa faces a con­sid­er­able set of so­cial prob­lems: one of the most un­equal dis­tri­bu­tions of in­come in the world, mass un­em­ploy­ment, a short­age of skilled labour and en­demic poverty. In the health field, South Africa’s bur­den of dis­ease is sub­stan­tial and, for some in­di­ca­tions, worse than other coun­tries in sub Sa­ha­ran Africa. It has the most peo­ple liv­ing with HIV of any coun­try in the world (5.54 mil­lion peo­ple ac­cord­ing to es­ti­mates from 2005) and the sev­enth-high­est in­ci­dence of tu­ber­cu­lo­sis, with an alarm­ing re­cent in­crease in cases of ex­ten­sively drug-re­sis­tant tu­ber­cu­lo­sis. Other lead­ing causes of death are cere­brovas­cu­lar dis­ease, is­chemic heart dis­eases and lower res­pi­ra­tory in­fec­tions.

All these pre­vail­ing hur­dles have cre­ated a per­fect plat­form for the growth of South African biotech in­dus­try. The coun­try has a great po­ten­tial to cater mas­sive health­care needs through its R&D base, ex­per­tise in first-gen­er­a­tion biotech (the use of wild-type or nat­u­ral or­gan­isms to pro­duce a prod­uct) and great bio­di­ver­sity. These and other fac­tors lie be­hind the rel­a­tively re­cent drive to build a lo­cal biotech in­dus­try to ad­dress not only hu­man health, but also food se­cu­rity and en­vi­ron­men­tal sus­tain­abil­ity and to act as an en­gine of job and wealth cre­ation. The huge de­vel­op­ment in coun­try’s biotech sec­tor came in 2001 when Depart­ment of Sci­ence and Tech­nol­ogy’s Na­tional Biotech­nol­ogy Strat­egy al­lo­cated 450 mil­lion Rands in pub­lic spend­ing for the year 2004-2007. Fur­ther en­hanc­ing the sec­tor, Gov­ern­ment of South Africa also cre­ated Biotech­nol­ogy Re­gional In­no­va­tion Cen­tres, or BRICs which was par­tic­u­larly carved to iden­tify and de­velop op­por­tu­ni­ties in biotech.

The BRICs, along with two life sciences in­cu­ba­tors— EGOLI Bio (Jo­han­nes­burg) and Acorn Tech­nolo­gies (Cape Town), which were estab­lished through an ear­lier gov­ern­ment ini­tia­tive called the Godisa Trust (now SEDA, the Small En­ter­prise De­vel­op­ment Agency) rep­re­sent the main ded­i­cated pub­lic sec­tor in­stru­ments to stim­u­late

and grow pri­vate sec­tor biotech ac­tiv­ity, par­tic­u­larly through re­al­is­ing the com­mer­cial po­ten­tial of South Africa’s con­sid­er­able R&D as­sets.

How­ever, avail­abil­ity of skilled labour has al­ways re­mained a big prob­lem for the biotech sec­tor in South Africa. As per the re­cent sur­vey by Man­power Group, the com­pany that con­ducts an­nual sur­vey by gath­er­ing sam­ples from around 750 busi­nesses in South Africa, skilled trades and en­gi­neers re­main the most dif­fi­cult po­si­tions for com­pa­nies to fill.

The sur­vey re­port fur­ther stated, “With un­em­ploy­ment in the coun­try re­main­ing high, it is sur­pris­ing that em­ploy­ers con­tinue to have dif­fi­culty filling po­si­tions. South Africa’s con­tin­ued skills deficit is be­ing com­pounded by lack of tech­ni­cal skills, which is hav­ing a neg­a­tive im­pact on em­ploy­ment across many sec­tors of the coun­try’s econ­omy.”

“Fur­ther­more, there is a high in­stance of poverty among South African youth, leav­ing mil­lions un­able to pur­sue sec­ondary and ter­tiary ed­u­ca­tion or train­ing, which presents a chal­lenge in terms of their skills de­vel­op­ment and em­ploy­ment prospects,” the sur­vey states.

Re­port also added that this year the coun­try man­aged to gain 30th po­si­tion with 33 per cent of em­ploy­ers re­port­ing dif­fi­culty in filling jobs. The sur­vey was con­ducted around 41 coun­tries. Fur­ther, 30 per cent of South African em­ploy­ers cited the lack of in­dus­try-spe­cific qual­i­fi­ca­tions or cer­ti­fi­ca­tions in terms of skilled trades as a chal­lenge,

while 26 per cent cited lack of can­di­date ex­pe­ri­ence.

The gov­ern­ment’s na­tional health plans are ex­pected to boost de­mand for lower cost drugs es­pe­cially gener­ics in the com­ing years, as its com­mit­ment to pro­vide greater ac­cess to anti-retro­vi­ral (ARV) med­i­ca­tion within the pub­lic health sys­tem to com­bat the HIV/AIDS pan­demic. Gener­ics cur­rently ac­count for around 60 per cent of the over­all mar­ket in terms of vol­ume, but be­cause of their low cost, around one-third in terms of value. The gov­ern­ment pro­cures mass vol­umes of generic prod­ucts via ten­der. How­ever, the pri­vate mar­ket for generic drugs is grow­ing; the higher prices paid by the pri­vate sec­tor help to sub­sidise the low-cost gener­ics made avail­able to the pub­lic sec­tor.

The South African med­i­cal en­vi­ron­ment is the most reg­u­lated on the African con­ti­nent. There is pend­ing dis­cus­sion on fur­ther reg­u­lat­ing the sec­tor, which some ar­gue will sti­fle com­pe­ti­tion and in­crease prices, while oth­ers jus­tify ad­di­tional reg­u­la­tion as nec­es­sary to limit price in­fla­tion. Among the re­cent ini­tia­tives, the gov­ern­ment has drafted new IP reg­u­la­tions in recog­ni­tion that South Africa lacks a uni­fied, well-co­or­di­nated IP pol­icy. The gov­ern­ment is also im­ple­ment­ing leg­is­la­tion to speed up the drug reg­is­tra­tion process, make South Africa more at­trac­tive as a des­ti­na­tion for clin­i­cal tri­als, and in­crease the over­all com­pet­i­tive­ness of the coun­try’s life sciences mar­ket as a whole.

Cur­rently, the Medicines Con­trol Coun­cil (MCC) is South

Africa’s pri­mary reg­u­la­tory agency for the man­u­fac­ture, dis­tri­bu­tion, and mar­ket­ing of medicines in the coun­try. One of the key chal­lenges it faces is long de­lays in the reg­u­la­tory ap­proval process. (MCC em­ploy­ees are qual­i­fied pro­fes­sion­als who work on a part-time ba­sis, some­times re­sult­ing in sig­nif­i­cant de­lays when it comes to ap­proval of medicines.) To ad­dress this and other reg­u­la­tory is­sues, MCC is set to be re­placed by the South African Health Prod­ucts Reg­u­la­tory Agency (SAHPRA), which will be tasked with reg­u­la­tory re­spon­si­bil­ity across the life sciences sec­tor—phar­ma­ceu­ti­cals, bi­o­log­ics, med­i­cal de­vices and in-vitro di­ag­nos­tics, com­ple­men­tary medic­i­nal prod­ucts, foods, and cos­met­ics. It is, how­ever, un­clear when the tran­si­tion to SAHPRA will be com­pleted.

Iden­ti­fy­ing the po­ten­tial of South Africa’s biotech mar­ket, Ci­pla, In­dian multi­na­tional phar­ma­ceu­ti­cal and biotech­nol­ogy com­pany, has de­cided to ex­plore the SA land by in­vest­ing 1.3 bil­lion South African Rand (about Rs 600 crore) in a biotech­nol­ogy plant. As per the in­for­ma­tion pro­vided by the firm, this plant will tar­get to pro­duce af­ford­able can­cer drugs and will be also re­spon­si­ble in spread­ing it across the global mar­ket. The an­nounce­ment was made af­ter the re­cent visit of Prime Min­is­ter Naren­dra Modi to South Africa. Ci­pla Biotech, a sub­sidiary of the com­pany, will con­struct the plant at a spe­cial eco­nomic zone in Dur­ban which will com­mence pro­duc­tion in 2018. In its first ini­tial move to grip the South African biotech mar­ket, Ci­pla had ac­quired South African drug firm MEDPRO in 2013, this is marked as the first large for­eign ac­qui­si­tion of Ci­pla.

To fur­ther back the sec­tor, the Gov­ern­ment of South Africa in 2014 launched an up­dated bio-econ­omy strat­egy to har­ness part­ner­ships with in­dus­try and academia. The gov­ern­ment played this card so that it can ramp up the de­vel­op­ment of biobased ser­vices, prod­ucts and in­no­va­tions in South Africa. While un­veil­ing the up­dated strate­gies, Derek Hanekom, Sci­ence and Tech­nol­ogy Min­is­ter, Gov­ern­ment of South Africa while in­ter­act­ing to Busi­ness Day (na­tional daily of South Africa) stated, “The strat­egy calls for in­dus­try, sci­ence coun­cils, gov­ern­ment de­part­ments and academia to co­op­er­ate closely to en­sure that biotech­nol­ogy and bio-in­no­va­tions are mar­ke­trel­e­vant and find eas­ier ap­pli­ca­tion in South Africa.”

“The gov­ern­ment’s aim is to grow the bio-econ­omy through strength­ened part­ner­ships with in­dus­try, and to ex­tract the full po­ten­tial of the coun­try’s liv­ing sys­tems through the ap­pli­ca­tion of our col­lec­tive com­pe­ten­cies and ca­pa­bil­i­ties,” he said. Ac­cord­ing to the South Africa’s Depart­ment of Sci­ence and Tech­nol­ogy, the bio-econ­omy strat­egy is closely aligned with the coun­try’s Na­tional De­vel­op­ment Plan (NDP), which holds that ad­vances in sci­ence, tech­nol­ogy and in­no­va­tion will un­der­pin ad­vances in South African econ­omy and so­ci­ety.


Though the South African land is look­ing like a high­yield­ing ground for biotech­nol­ogy sec­tor, but there are a few hur­dles that might pull the horses down. The Gov­ern­ment of South Africa has been proac­tively in­volved in churn­ing out wheels for the biotech sec­tor and its hard work is re­flect­ing through rapid trans­for­ma­tion tak­ing place within few years. Avail­abil­ity of skilled labour will al­ways be go­ing to be a big ques­tion mark on South Africa’s biotech­nol­ogy sec­tor but that can be over­looked as gov­ern­ment is plan­ning to roll out few ini­tia­tives in the com­ing years to over­come this hur­dle. Over­all, the sit­u­a­tion is look­ing very lu­cra­tive for the biotech­nol­ogy sec­tor in South Africa and if all goes ac­cord­ing to the plan, this na­tion might com­pete with other coun­tries dom­i­nat­ing this sec­tor.

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