Biotech in the BRICyard (Jon Han) 

Biotech in the BRICyard

Brazil. Russia. India. China. Four countries that between them cover more than a quarter of the earth’s landmass, contain over 40 percent of its population, and have a combined gross domestic product surpassing $18 trillion. Four cultures with markedly different worldviews in terms of politics, philosophy and economics. And a grouping whose members see themselves as partners in an effort to gain global economic supremacy in the coming decades, particularly in the fields of biotechnology and biomedicine. As G. Steven Burrill, chief executive officer of Burrill & Company, a life sciences investment firm, tells Scientific American Worldview: “The 20th century may have been dominated by the United States, Europe and Japan, [but] the 21st century will be dominated by the BRICs.”

Today, a decade after Goldman Sachs Asset Management’s chairman James O’Neill coined the acronym “BRIC,” these four nations have exceeded the promise he foresaw. “They seem to have bounced back first from the global economic crisis. That has given them momentum while North America and Europe have been slow,” says Denis Simon, vice provost for international affairs at the University of Oregon. “And they’re looking at life science and clean energy—two technologies that will transform the world.”

The original stimulus for the BRIC acronym was O’Neill’s belief that the economies of these developing countries would grow at a rate that would make them the world’s most dominant by 2050. By then, he predicted, the four economies together would equal the size of the G7 nations’ economies, currently the world’s seven largest.

O’Neill based his concept on these nations’ economic potential. All four had incorporated global capitalism into their political structures—despite the fact that, as Dan Marshak, chief scientific officer of PerkinElmer and former head of that company’s China operations, points out, “Each one is different in terms of culture, political style and approach.”

As O’Neill saw it, China’s economy would become the world’s largest by 2041, while India’s would overtake Japan’s—second in the world in the early 2000s, behind only the U.S.—by 2032. He also saw the four currencies appreciating by 300 percent in the succeeding half-century and forecast that the combined BRIC economies would exceed those of the U.S. plus Europe’s developed countries within 40 years. Since then, Goldman Sachs Asset Management (GSAM) and other analysts have become even more optimistic about the four nations’ potential.

Trading Partners

The BRICs have confirmed O’Neill’s confidence in them through more than their individual economic growth. Increasingly, they trade with each other. China and India, for example, support their expanding industrialization by importing natural resources such as soy, iron ore, oil and natural gas from Brazil and Russia. According to GSAM, three of the nations have a BRIC counterpart as one of their two main trading partners.

One thing that O’Neill did not foresee was that the four countries would take the term he coined to heart. “When I created the acronym, I had not expected that a political club of the leaders of the BRIC countries would be formed as a result,” he wrote recently in his Viewpoints blog. But that’s what happened. The first BRIC summit took place in June 2009 in Yekaterinburg, Russia, followed by a second in April 2010 held in the Brazilian capital of Brasilia and a third, which convened this past April in Sanya, China.

In December 2010, the BRIC nations took political linkages a stage further—they invited South Africa to join them. When that country accepted, the club became “the BRICS.”

The selection of South Africa raised anew the question that has festered since the term BRIC originated: What made the four BRICs worthy of the acronym to the exclusion of other rapidly developing countries, such as Mexico and South Korea? At the time, those two nations were regarded as too developed. Since then, Goldman Sachs has included them in its N-11 (for “Next 11”) countries that have the potential to become powerful global economies in the 21st century.

Economists also question whether South Africa really belongs in the club. “There are a number of other economies from the so-called emerging world that are far bigger than South Africa,” including Indonesia, Mexico, Turkey and South Korea, O’Neill commented recently. “It is tough to see how South Africa matches up to these four countries, never mind the BRIC countries.” In addition, he noted, South Africa’s population is far smaller than that of any N-11 country. On the other hand, he continued, “perhaps [South Africa] might be justified as Africa’s representation alongside the BRICs, as the continent as a whole is about as large as India or Russia . . . and has similar potential to Brazil or Russia.” The inclusion of South Africa makes sense from a geopolitical point of view, as it extends the BRIC club into a fourth continent.

Economic Power

Even taking into account just the original four members, the economic power of the BRIC nations is immense. And they are resilient, having come back from the financial crisis faster than developed countries. “Money is no longer the issue,” Denis Simon says. “China has over $2 trillion in foreign exchange reserves.”

Those reserves have begun to finance improved educational opportunities for China’s citizens and the development of cutting-edge technology. “Just look at the number of Chinese students coming to the United States for education and paying the full bill,” Simon continues.

The BRIC nations also threaten to dominate aspects of biomedicine. A recent report by PricewaterhouseCoopers (PwC)—“Medical Technology Innovation Scorecard: The race for global leadership”—predicts that China, India and Brazil will have the strongest gains in developing next-generation lifesaving products in the coming decade. The reason: capital, jobs and research will drift toward those economies and their growing markets. Significantly, the report finds, China has become the world’s second largest source of venture capital for inventions involving medical technology behind the U.S., with Brazil in third place.

Mirroring the BRIC members’ growing expenditures to stimulate biomedical advances, their populations increasingly demand the results of those efforts. The countries are undergoing what BRIC Biotech, a growth fund, calls “voracious growth in healthcare spending, believed to top $500 billion in 2009.”

Such expenditure stems from the burgeoning wealth of these countries’ residents. “The first thing they want to do with increased affluence is healthcare,” Burrill explains. That desire bridges political and philosophical considerations. “All BRIC nations really value people a lot, and know that they need to provide better, safer food, water, and air quality as well as healthcare,” says Marshak. “Governments recognize that, whatever their political system, it’s important to have people who are healthy and highly trained and who know how to interact with the environment.”

Although the BRIC members differ in many respects, their pursuit of prosperity involves several common factors. “They have very coherent strategies for development. There’s a big government endorsement,” Simon explains. Equally important, he adds, the BRIC nations have increased their investment in education. “They have realized that if you can transform [many] people into talent, that may be the real gold of the 21st century,” he says. “Talent may be the thing that determines who wins and loses in global competition.”

BRIC countries also stand to gain an advantage from lessons learned in developed nations. For example, Burrill notes, “the BRICs are moving from healthcare to a ‘wellcare’ system.” As an illustration of this change, he forecasts that “healthcare delivery will live in a ‘spit in your Blackberry world’.” That is, today’s technology makes it seem possible that in the not-too-distant future a patient could spit on a diagnostic chip in a mobile phone, triggering multiple assays that would simultaneously assess the sample for biomarkers and generate results then sent to medical professionals—maybe even some form of artificial intelligence—who quickly provide a diagnosis and prescribe a treatment.

Unique Approaches to Biotech

Given the somewhat contrived nature of their linkage, it’s no surprise that individual BRIC members take unique approaches to biotechnology. Comparative population sizes account for a large part of the differences. “In China and India you have a billion plus people,” Burrill explains. “Brazil has 150 million and Russia 110 million. They have smaller population bases there but rapidly growing economic bases.”

Among the BRIC nations, China is the 800-pound gorilla in terms of economic power and leadership. “It has evolved to be the leader in guiding how other countries restructure and revitalize their economies,” says Simon. “The Chinese have been able to give a better life to a large number of people. The quality of life for most average Chinese has improved demonstrably.” Some of that improvement stems from investments in biotechnology. “China’s Minister of Technology told me that biotechnology will help to solve all the country’s top-10 problems,” Burrill recalls.

Simon notes a unique advantage that China possesses in its pursuit of biotechnology: the ability to connect the field with traditional Chinese medicine. However, China has also welcomed Western biomedical companies prepared to operate in the local environment. PerkinElmer, for example, operates the Chinese diagnostics company SYM-BIO Lifescience, which it acquired in 2009, in addition to running a new R&D facility. “Our goal has been to build a Chinese organization to serve the Chinese market, not to impose a Western-style company on China,” Marshak says. “We’ve had excellent relationships with the Chinese central government and with local governments.”

Despite some of China’s key biotechnology successes, such as sequencing a segment of the human chromosome 3 and the development of foodstuffs genetically modified to confer immunity against hepatitis B and battle various viruses, the government’s attitude toward intellectual property remains suspect in Western eyes. Moreover, the drastic reduction it imposed last year on exports of rare earths—the elements essential for production of electronics and alternative-energy technologies—cast doubts on its reliability as a trading partner.

India, like China, has a rapidly growing middle class that will demand the benefits of biotechnology. “It also has incredible burdens of high poverty rate and infrastructure that have broken down,” Burrill says.

Governmentally, India is “less of a top-down system than China,” Marshak says. “It requires much more attention at the local level. That’s been a challenge in that one can’t take direction of the central government and provide a solution for everyone.” Nevertheless, the country has a large foot in the biotechnology door through its historical participation in manufacturing generic pharmaceuticals. Indian companies produce 20 percent of the world’s supply of generic drugs and 30 percent of U.S. consumption of generics. And the country’s biotechnology industry grew by 17 percent from 2009 to 2010.

Brazil gained its start in serious biotechnology with an effort to sequence the genome of the Xylella fastidiosa pathogen. The success of that sequencing, reported in 2000, stimulated a biotechnology infrastructure of scientists and institutions that has grown rapidly ever since. A report by Global Health Progress in September 2010 indicated that Brazil has more than 820 biotechnology companies employing almost 100,000 people working to serve the world’s tenth largest biopharmaceutical market. Today, the Brazil National Development Bank spends $90 billion annually to develop the economy, financing biotechnology and other initiatives. “We’re convinced that Brazil is a very strong opportunity,” Marshak says.

Russia is often regarded as the weakest of the original BRICs because of its reliance on natural resources and its tendency to decide legal proceedings on political grounds. “Russia hasn’t got the investment that it wants,” says Simon. “It has a problem in building a class of technological entrepreneurs.” Nevertheless, Burrill says, “we see large healthcare investments in Russia with increasing affluence.” And the country’s 10-year plan to promote biotechnology includes bioparks for R&D in biotech and related fields as well as special economic zones to attract commercial biotechnology. Last year, leaders of Russian biotechnology started joint development efforts with Indian biotech companies.

Threat or Promise?

Do the current BRICS nations represent a threat or a promise to the developed economies of Europe and North America? “In terms of growth in the number of articles and citations, we in the U.S. are getting behind the innovation curve in stem cell research and alternate energy,” Burrill observes. “But they’re very much our partners in many ways.”

The following special report explores the depth of these growing partnerships through country close-ups highlighting the BRICS nations and commentaries from within and outside their borders.