Overcoming Hurdles In Hungary

For years, this country shied away from biotech, but that is changing

by Emily Waltz

Hungarian university scientist György Kéri begrudgingly founded one of his country's first biotech companies. "I didn't have a choice," he says. It was 1991, and Kéri was a biochemist at Semmelweis University in Budapest. In those days, Hungary was still transitioning from socialism to a free-market economy, and most Hungarian universities didn't have the money to protect their scientists' intellectual property. Even if Kéri's university could pay the international patent fees, it didn't have the capacity to license those technologies to the private sector. Financiers outside the university weren't much help. When Kéri sought funding from Hungary's Innovation Bank to patent and sell a hormone technology that he had developed, the bank handled it badly, Kéri says. As a result, he lost his patents.

So when Kéri developed a series of promising anti-cancer compounds, there was only one way to protect them: He had to set up a private entity to commercialize his own work. He mortgaged his home and borrowed money from his best friend to cover the patent fees and start-up costs.

Kéri's company, Biosignal, is a typical Hungarian biotech story—born out of dramatic political changes and homegrown money. "At the end of the socialistic era and beginning of the new system, lots of researchers had similar problems regarding patent financing and technology transfer," says Kéri. "But actually the system helped these scientists to establish biotech companies." The path for these forced entrepreneurs wasn't easy. They had little biotech experience and no venture capital. Most young businesses survived on service work, not innovation.

Making matters worse, many scientists considered the move to the private sector as a conflict of interest. University scientists weren't supposed to be involved with companies. That sentiment still lingers, says Erno Duda, head of the Hungarian Biotechnology Association. Until recently, the Hungarian Academy of Sciences curbed its researchers' private-sector work. Recent economic changes in Hungary, however, have encouraged the birth of new biotech companies. Hungary's Research and Technological Innovation Act of 2004 required public research institutes to develop and protect intellectual property. The law also encouraged university employees to spin-off companies. "Six biotech companies started up right after that," Duda says.

In addition, Hungary's 2004 accession to the European Union put its biotech companies on improved international footing. For instance Budapest-based ThalesNano Nanotechnology immediately lured three high-level employees from abroad, says Laszlo Urge, the company's chief executive officer. Industry wide, contracts with international clients increased.

Through all of Hungary's changes and funding barriers, Kéri continued working at Semmelweiss University. In 1999 he started Vichem Chemie, a new company where he developed Biosignal's kinase-inhibitor library and drug-discovery technologies. The profits from Vichem support 41 employees and much of the company's innovative drug-development projects in HIV, tuberculosis and cancer—not bad for a guy who didn't want to be in the business. "Maybe he didn't want to be an entrepreneur at first," Duda says, "but I think he would have eventually."