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Going it alone

Facing opposition from big pharma, Contipro attempts to sell its patented drug to the West

By Markéta Hulpachová
Staff Writer, The Prague Post
August 15th, 2007 issue

COURTESY PHOTO
Contipro developed its wound-healing drug Hyiodin from a naturally occurring enzyme found in the human body.
COURTESY PHOTO
Contipro hopes to develop a line of hyaluronate products to find a niche within the U.S. and West European markets.
enlarge
Former Charles University molecular researcher Vladimír Velebný calls the success of his north Bohemian pharmaceutical company, Contipro, “a bit of a fairy tale.”
Founded in 1990 as a cooperative of seven scientists, Contipro’s initial capital was 1,400 Kč — just enough cash to buy the brooms and mops needed to clean up the company’s one-room laboratory, where the group developed nutritional supplements for the then-booming fitness-center market.
Today, Contipro employs 124 people and is one of the world’s leading producers of hyaluronate, a naturally occurring enzyme with regenerative properties. With the help of a worldwide patent, the company is breaking onto the international market with the wound-healing drug Hyiodin, its first brand-name product.
On Aug. 6, the company signed a deal for Hyiodin distribution in Turkey, following similar deals for the drug in Asia, South America and Eastern Europe.
However, Contipro has hit a dead end in the United States and Western Europe, where the market is dominated by multinational pharmaceutical companies. Such is the fate of Czech companies attempting to promote patented drugs in the West, the company says, where the efforts of midsize, independent companies like Contipro are often thwarted by multinationals, which block smaller distributors to maintain their dominant positions.
With years of experience and vast financial resources, the large pharmaceuticals are tough competition for independent upstarts, said Michal Kostka, chief consultant and biotech and life sciences sector manager at the South Moravian Innovation Center, a Brno-based organization that supports local innovation.
“The strong position of multinational companies is not surprising,” he said. “Each of these companies invests more than a third of its profits into research, development and, consequently, marketing. They also employ top field professionals and have years’ worth of connections. It’s not easy to fight that kind of army.”
Despite the imposing presence of multinationals, the Western market does leave enough space for smaller pharmaceuticals. But these companies are most often based in the United States. or Western Europe and produce drugs that cater to niche categories.
“There are dozens of successful little dwarfs whose innovative products succeed on the market. These products involve massive investment and substantial risk,” Kostka said. “To my knowledge, no company in Central or Eastern Europe has attained this level of resources.”
To join the ranks of smaller companies whose innovations are successful on the world market, Contipro plans to complement Hyiodin with a range of similar drugs.
“The way we hope to survive amid such tough competition is to offer a line of products,” Velebný said. “This requires substantial investment, but we would like to repeat what we’ve achieved in made-to-order ingredients with our finished products.”
Domestically, pharmaceutical companies typically fall into one of two groups. Large corporations — such as the pharmaceutical giant Zentiva — focus primarily on developing generic drugs for the East European market. Then there are small firms that, to gain funding for their research, often become the subsidiaries of multinationals or form partnerships with outside investors.
“The resources that pharmaceutical and biotech companies need shortly after their establishment almost always compel them to reach for venture capital,” Kostka said.
In this sense, Contipro is a unique presence on the Central and East European market.
“There’s no capital standing behind us,” Velebný said.
As a long-time researcher of hyaluronate, Velebný saw early on the potential of the enzyme’s marketability. Because hyaluronate is a substance commonly found in the human body, its development is shorter and less financially demanding than working with synthetics.
“We had the advantage of not having to develop our product in the chemical sense,” Velebný said.
Unique presence
In 2000, Contipro began developing Hyiodin and invested millions of crowns into an international patent for the drug four years later. After obtaining the license, Contipro began searching for strategic partners to distribute Hyiodin internationally.
While successful in finding smaller and midsized distributors in countries in Asia, South and Central America and Eastern Europe — including Bangladesh, Colombia, Mexico and the United Arab Emirates — the company encountered resistance in the United States and Western Europe.
“Western Europe is a tough nut,” Velebný said. “A majority of the market is occupied by larger companies and they do not want to distribute products that aren’t under their own brand.”
Initially, Contipro searched for distribution partners among the multinational pharmaceuticals, but met with adversity.
“When we approached one particular multinational company, we were basically told they would rather buy out our license than tolerate the presence of a superior product on the market,” Velebný said. “These companies have made substantial investments into research, so they don’t go by what’s new, but what’s lucrative for them.”
Aside from developing patented drugs, Contipro also uses hyaluronate to manufacture cosmetic and medicinal ingredients. In this capacity — as the world’s leading hyaluronate developer — the company sells made-to-order ingredients to pharmaceutical companies that have rejected its distribution appeals.
“The cosmetic quality of our [hyaluronate] ingredients reached a level that companies in the U.S. were no longer able to compete with,” Velebný said. Perhaps counter-intuitively for Contipro, these companies use the hyaluronate ingredients they buy to develop drugs that compete with Hyiodin.
While multinationals, with their concentration of resources, do not slow innovation, Velebný said the oligopoly cannot help but shape the direction of research and development.
“[Multinational] companies are at the helm of innovation,” he said. “But behind every development, there is capital, so it’s not a freely competitive market. The direction of development is modeled after the field in which there is investment.”

Markéta Hulpachová can be reached at mhulpachova@praguepost.com


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