Hungary Drug Research Targeted: Industry Spotlight
Bloomberg News
May 5, 1998, 8:29 a.m. PT
Budapest, May 5 (Bloomberg) -- U.S. companies are investing
in Hungarian drug research to tap skilled, low-paid chemists who
are developing new medicines at a fraction of American costs.
Paramount Capital Investments LLC., a New York-based
investor in biotechnology, has followed Illinois-based Abbott
Laboratories in targeting Hungarian drug research companies.
Paramount last month bought a majority stake in Gyogyszerkutato
Intezet Kft., while Abbott bought a minority stake in Biorex
Rt., Hungary's other main drug developer, in December.
''I'm betting my whole career on this,'' said Steve Kanzer,
34, a managing director at Paramount who traded his office on
Manhattan's upper East Side for a cruder one amid the chemical
odors of north Budapest. ''You could drive a locomotive through
this opportunity, it's so big.''
In Hungary, the initial stage of drug development, before
medical trials on humans, costs about a tenth of the average
U.S. cost of about $2 million, Kanzer said. Low salaried, well-
trained scientists, a strong domestic pharmaceuticals industry,
and a history of pioneering drug research, including a Nobel
Prize for extracting vitamin C, make Hungary ideal as a research
center.
''Hungary is unique because of the low cost of labor and
the necessary talent to do the work,'' said Kanzer.
Kanzer's move follows Abbott's purchase of a minority stake
in Biorex for $28 million, after earlier agreeing to jointly
develop bimoclomol, a compound discovered by Biorex to fight
some side-effects of diabetes, specifically microalbuminuria and
diabetic neuropathy.
Setting Standards
At the time, Abbott said the drug had the potential to
''set new standards in the treatment of diabetic
complications.''
''Abbott was driven by the potential of the drug itself,''
rather than cheaper development, said Genghis Lloyd-Harris, an
analyst at Credit Suisse First Boston in London. ''Hungary
certainly has the tradition of innovation in the pharmaceuticals
industry.''
At Gyogyszerkutato Intezet, which means Institute for Drugs
Research, or IDR, the lower-cost will allow the company to
research far more drugs, increasing the chance of finding a
winner, Kanzer said. In the U.S., it can cost up to $600
million to develop a new drug and take it onto the market,
including the costs of all the failures, analysts said.
Two drugs initially developed by IDR, cardiovascular drug
Efegatran and a drug for the central nervous system, GYKI
53,773, now are being further tested by Eli Lilly & Co. of the
U.S.
Research Center
Hungary was the home of much medical research for decades
before the former communist government cut funding and many of
the best scientists moved to the West. Those that remained
focused their efforts mainly on copying western drugs. IDR
employs about 250, only a quarter of the number who worked there
in the 1950s.
Hungarian pharmaceutical companies have been a target of
foreign investment for the past few years, with companies like
Sanofi SA and Servier SA of France, Novopharm Ltd. of Canada and
Bristol-Myers Squibb Co. of the U.S. buying stakes in Hungarian
drug companies. The main attraction thus far has been the
companies' cheap manufacturing and access to markets in Eastern
Europe and the former Soviet Union.
''The attraction has typically been the market reach and
cheap manufacturing rather than setting up,'' development
centers, said John Reeve, a pharmaceuticals analyst at Paribas
Capital in London.
It was Hungary's six biggest pharmaceutical companies that
jointly owned IDR. Five of the companies sold out to Paramount
for an undisclosed sum. The sixth, Gedeon Richter Rt., Hungary's
only independent drug maker, and the largest by sales, retained
its stake of 12.5 percent in IDR.
Richter said it expects the researcher to rekindle
Hungary's tradition of pioneering drug research.
Considering Listing
''We have extensive links with the universities and we feel
that over the longer term there'll be continuing benefits from
research in Hungary,'' said Michael Stevens, Richter's director
of investor relations.
Kanzer said he is considering listing the company on New
York's NASDAQ market. Biorex also said it plans to list its
shares on that market in the future, giving more investors a
chance to invest in Hungarian medical research.
''A lot of money is looking for a better place for a bet
with more up-side,'' said Kanzer.
He's betting on the success of three new drugs developed by
the institute, two of which caught the eye of Eli Lilly. Kanzer
also plans to hook up Hungarian chemists to the internet and to
pore over reams of archived research that
never made it beyond the idea stage in search of potential world-
beating medicines.
The drug Kanzer and IDR Chief Executive Officer Vilmos
Galamb are ''most excited'' about is GYKI 16084, a potential new
treatment for enlargement of the prostate, which affects 50
percent of men over the age of 50, said Kanzer.
''This is a company that's ahead of a lot of trends in this
industry,'' said Kanzer.
--Rodney Jefferson in the Budapest bureau (36-1) 327-4241/ru |
