By Fred Olds
Time. Money. Two crucial resources that control the destiny of promising biopharmaceutical entities from discovery to market. Acquiring and managing these two resources can consume an entrepreneur during start-up. Venture capital is difficult to procure, and the regulatory processes in developed nations are backlogged, slowing down time to market. However, Barbados is proposing an alternative for biopharmaceutical R&D which it believes can help save both time and money.
Perhaps not the first name to come to mind in biotech, Barbados estimates it might be able to shave a year or more off the time needed to complete basic research, and help reduce overhead by subsidizing costs for facilities and equipment. Wayne Kirton, CEO of Invest Barbados, says the project consists of two parallel and concurrent initiatives. First is the formation of an oversight agency to establish and regulate research. The second is construction of the Research and Development Center, a 20,000-square-foot lab and office complex.
Regulatory delays and backlogs are recognized by the FDA itself. Announcing new initiatives to improve and expedite regulatory procedures, Margaret Hamburg M.D., U.S. commissioner of food and drugs, said that regulatory science has lagged behind basic research and discovery. She compares it to a rower with one strong powerful arm and one weak and underdeveloped. Hamburg said, “We cannot allow this imbalance to persist….for if we do, we will row in circles.”
Consultants estimate that a company could reduce development time lines by a year or more simply because Barbados does not have backlogs that exist in Europe or the United States. Shortened times will not be due to low standards. Kirton emphasizes that, “Barbados is not a nameplate jurisdiction.” He says that to meet the regulatory agency time reduction goal, it is imperative that the product meet international standards and acceptance or there is no reduction at all. While there have been no contacts with international bodies, Kirton says, “Research has to meet a standard that an agency like the FDA or any other international agency might recognize as its own.”
The biotech project will be run by a private-public joint venture (JV) formed with land provided by Barbados and capital provided by private industry. If a company chooses to conduct research with the JV, the parties will negotiate an agreement that will stipulate an interest in the intellectual property to the joint venture in exchange for subsidized rental rates to the company for space at the research facility or elsewhere on the island.
The negotiated rate will depend on several things, one being the stage of the research. Early-stage candidates may require a higher percentage of IP to the JV than research that is well-defined and closer to completion. However, in all its dealings with business, Barbados bases its decisions about incentives on four judgments: 1. What level of foreign exchange will the enterprise create? 2. What level of employment will it generate? 3. What tax revenues will it generate? and 4. What kind of skill and technology transfer will the country get?
Business risks will be shared between the company and the Barbadian public-private entity. “If the product proves successful,” Kirton says, “in exchange for subsidized premises and equipment, the company will share some of its royalties or profits with the joint venture entity.” If, on the other hand the research proves fruitless, both the company and the JV share the loss.
While there are no set prioritization criteria for accepting companies to the site, there is one key requirement. Companies must be able to show legal ownership of the intellectual property.
Research And Development Center And Reduced Overhead
The laboratory and office complex will be built by private capital. Several companies have approached the government to take on the construction and form the joint venture.
Researchers would have access to private and shared labs, equipment, offices, and administrative resources. Individual laboratories will be furnished with equipment common to most biotech research centers. Larger, more expensive equipment is planned to be available on a scheduled basis. Administrative staff will be provided, as well. A company is free, of course, to bring any specialized equipment or personnel it chooses.
Developers feel that overhead costs could be reduced significantly. Since all the costs of common use areas and equipment will be shared, redundancy would be eliminated for the most part. Additionally, there is the subsidy for rent and equipment. This will free initial start-up funds for research rather than overhead.
Doing Business In Barbados
A common concern when doing business internationally is intellectual property protection. Barbados has laws that protect private IP that follow modern interpretations. It is also party to all major international conventions on IP.
Both the government and industry of Barbados share pride in being recognized for doing things legally and properly. Barbados is second only to Canada in the Western hemisphere in Transparency International’s scoring of countries for transparency and low perception of corruption. Business has done well. As a result, Barbados is on the World Bank’s list of high-income economies.
Ian Hickling, president (manufacturing) Lenstec, credits the business climate in the country with much of the success Lenstec has achieved. He says the island has one of the highest literacy rates in the West, and the university provides a workforce with a pool of science-degreed graduates. When asked how the government helps business, he says, “The good thing here is the government stays out of the way.” He says it’s a country that sets high standards and has a good reputation as a result.
As support, Hickling points out that Lenstec manufacturing is an entirely Barbadian company with only two expatriates. The company develops specialized implantable ocular lenses, which it has successfully marketed globally from Barbados. In January, two of the company’s lenses were approved by the FDA for sale in the United States. There have been no impediments to shipping product around the globe or getting resource material to his plant.
One of many advantages he sees for a Barbados start-up is the ability to choose a marketing strategy that stages product launches. For instance, based on resources, a company could choose a market with low barriers to entry to begin sales. The company can bank funds from those sales to build for future entries into other markets globally. He feels it’s an easier process from Barbados since there are fewer governmental regulatory delays.
In the end, Hickling says getting a product approved by international regulatory agencies is difficult. “It’s not the country,” he says, “It’s about the quality of the research.” In Barbados things get done right.
Barbados is a treaty-based jurisdiction and is expanding its network of treaties to reduce barriers and improve international business. There is no capital gains tax for business, and due to treaties, there is favorable treatment of taxes on pharmaceuticals by Barbados and Europe. Kirton says this offers a successful start-up an excellent environment for business. If it sells its research, it won’t be taxed on the gains. If it builds the business, there are favorable tax rates for export and import.
Recommendations for the new planned Barbadian biotech regulatory agency should be completed by June 2011. That would be followed by cabinet and legislative actions to formally establish the agency and appropriate laws. The expected date for completion of construction on the research facility is mid to late 2012. In the meantime, Kirton says a company considering Barbados can and should contact Invest Barbados now. Since the project is still in formulation, it would be possible to influence decisions for future activity.