Business realities and needs

ABS Business Dialogue

Pretoria, 7-9 October

ICC’s role

ICC, the world business organization, promotes cross-border trade and

investment and the multilateral trading system

Members: companies, chambers of commerce and business organizations of all

sizes and from all sectors from 130 countries

Coordinates business representation in ABS discussions

2

Business realities

Which sectors are affected?

Sectors are diverse:

• Size, turnover, markets (local/global)

• Means of access

• Use of GRs and/or TK associated with GR

• R&D cycles

• Existing ABS arrangements

BUT certain common needs and realities

Sectors affected – depends on scope

Genetic ResourcesBiological

Resources

Derivatives

Products /

Commodities

Plant breeding, Animal breeding, Biotechnology

(pharma, industrial , agro, aquatic), Pharmaceuticals

(decreasing use of GRs), Traditional medicines,

Botanical drugs, Biological pest control etcBiotrade,

fragrances,

cosmetics,

food, drinks,

pets, timber

products etc

Distribution

(wholesale/retail)All

sectors trading

products with GR/BR

component eg

detergents, rice etc

All sectors trading in

derivatives of GRs/BRs

eg alcohol, biscuits

Potentially

millions of

transactions!

Diversity of sectors

• Size of industry sectors vary greatly e.g.:

– Plant breeding (turnover 2005 US$34bn (global world seed market 2008 US$36,5bn); )

– Pharmaceuticals (global market 2008 US$773bn)

– Animal breeding cattle, pig, poultry and fish (global turnover €2.5 billion)

– Biotech (global market 2006 US$153.7 bn )

– Biotech crop (global market 2008 US$7.5 bn

– Pet industry ( EU+US retail markets incl cats and dogs 2007 US$85bn)

– Traditional medicines (global market US$ 60 bn)

– Biocontrol (turnover €200m)

• Many sectors using GRs/BRs consist mainly of SMEs e.g. biotech; seeds; herbal medicines; cosmetics; biotrade; animal breeding; pets

• Very diverse access and use models

GRs : Flows and Access

• Many GRs long since extracted from original environment →

common commodities in trading system e.g. cell lines. Rare or

«new » GRs infrequent.

• GRs have moved and been transformed across continents

throughout history pre-CBD – « origin » impossible to define

All countries mutually interdependent on GRs

• Ex situ access more common in many sectors – in situ much less

common and through local intermediaries

• Every day millions of common transactions of GRs and items

including/deriving from GRs (most not used for genetic properties)

Plant GRs - movement of cotton varieties

Levels of Dependency of Countries on non-indigenous food resources

CountryDependency

(%)Main source of food energy

supplyPrimary region of diversity of crops

ChinaJapanRepublic of Korea

46 - 5543 - 6130 - 54

Non-native - wheat, sugar, maize, potatoNative - rice and soybean

East Asia - rice, soybean,orange, Brassica, millet, tea,onion

BangladeshIndiaNepal

14 - 2135 - 4747 - 57

Non-native - wheat, maizeNative - rice, sugarcane, millet

South Asia - rice, banana, sugarcane, sesame, millet, Brassica rapa, B juncea

KenyaSouth AfricaEthiopia

89 - 9890 - 9828 - 56

Non-native - Phaseolus, maize, sweet potato, potato, cassava, banana, plantain, wheat, riceNative (for Ethiopia) - tef, Avena Abyssinian, Brassica carinata

East and Southern Africa -sorghum, millet, yam

BrazilAndean Region

ArgentinaColombia

81 - 94

89 - 9584 - 94

Non-native - wheat, sugar, rice, maize, soybean, plantain, bananaNative - potato, Phaseolus (for Andean Region); cassava (Brazil)

Andean region – pineapple groundnut, sweet potato, tomato, cocoa, Phaseolus, potato, cassava,

USCanada

77 - 10084 - 99

Non-local - wheat, sugar, soybean, potato, maize, barley, rice, groundnut

North America - sunflower

Source: Palacios (1998)

Dependency between regions on GRs

Region Accessions

originally

collected

from region

Samples

distributed

to region

Gain (%) Flows to

region from

within (%)

Material

'borrowed'

(%)

Asia Pacific 158,153 461,328 292 74 55

Europe 35,560 78,543 221 20 91

N America 16,557 58,987 356 7 94

S America 105,680 96,355 91 45 37

Sub Saharan

Africa

116,695 121,025 104 24 49

West & N

Africa

86,447 79,441 92 32 44

519,092 895,679

Courtesy of Radha Ranganathan, ISF

Trade and Flow of AnGR

Gene flows N→N and N→S and regional

Product flows S→N, N →N, and regional

Animals part of populations

• ABS based systems – contractsh

• Animals privately owned

• Good working legal systems of exchanges of animals in place

• Frameworks for breeds and populations GRsdiffer accordingly to species:

• for farmfish, poultry / often privately owned

• for bovines, sheeps / often collectively managed

Widely used breeds

• Exchange daily practice of dissemination

• Active trade among breeding programmes and between countries

0

20

40

60

80

100

120

140

1 11 21 31 41 51 61 71 81

Rank order of breeds

no. countries

Holstein-Friesian (128 countries worldwide)

Large White

Saanen

Suffolk

Rhode Island Red

Cattle

Breeds with Southern ancestry, or bred in South

Other breeds

Commercial breeds (ancestry not divulged)

Sheep

Goat

Pig

Chicken

Duroc

LandraceJersey

Leghorn

Animal Gene Flow…Product Flow

Courtesy Anne Marie-Neeteson, EFABB

Accessing GRs and related materials

Ex situ access more common in many industries

In situ less common and through local intermediaries

• Biotechnology (pharma, industrial , agro, aquatic): genebanks, certified biological centres, cooperation with local institutions

• Pharmaceuticals (less reliance on natural genetic resources in this sector due to technology advances e.g. synthetic organic chemistry ): library compounds from past programmes, catalogues, purified natural products and fragments

• Plant breeding: genebanks, research institutes, universities, botanical gardens, own collections

• Animal breeding: exchange of animals/semen between farmers and breeding programmes. Use of wild species negligible.

Use of GRs

Used in diverse forms

• original form modified form in whole in part

Does not necessarily appear in/add value to final product: • research tool/catalyst in research or production process (eg cell line; vectors)

step in process (e.g. GRs during cross breeding of plants)

• inactive component (e.g. in herbal medicine)

• test material (pathogens and pests to test resistance)

Relationship between the accessed genetic resource and final products• 1 →1 1 → many many → 1 many → many

The usage of genetic resources may or may not be associated with the creation of intellectual property

uses of GRs will

evolve with time

Use in plant breeding (1)

Direct use

• Recombination

– Modern varieties 90-95%

– Research materials

– Landraces

– Wild relatives

• Gene selection

– Modern varieties

– Research materials

– Landraces

– Wild relatives

– Microbials

– Pathogens

Indirect use

• Plants/Varieties as test plants for comparison

• Pathogens to check for resistance

• Pollinators for seed production

5-10%

Use in plant breeding (2)2

-4ye

ars

6-8

ye

ars

3-5

Ye

ars

Number of

breeding

materials

Number

of test

locations

Main

tenance

bre

edin

g

Selection plant

material

Recombination/ mutation

Evaluation

Trials in several years

and in several locations

Yield, resistance quality

agricultural characteristics

Selection

Parent line/

variety

IP application/

RegistrationOfficial

DUS tests

Modern varieties

Seed production, pre-

basic, basic,

standard/certified seed

Research

material

Landraces

Wild relatives

Varieties to

compare to

Pathogens/pests

Complex Value Creation Procedures Require ABS Regime with Least Possible Additional Input

pro

jects

industrial value creation process

Se

cto

r B

pro

filin

glic

en

cin

g

of

ing

red

ien

t

job

ord

er

pro

du

ctio

n

lice

ncin

g

of p

roje

ct

en

d

cu

sto

me

r

external

purchas

e

own

synthesis

.

.

.

.

.

pre

-

pro

jects

Ma

rke

ti

ng

Ma

rke

ti

ng Sa

les

pilo

t p

lan

t

co

mm

erc

ial p

lan

tremoval

pro

ce

ss d

eve

lop

me

nt

low value

Se

cto

r A

Research Development Production Marketing & Sales

Co

-Sa

les

Verification if providing

organization is

authorized to this effect

Identification of the desired genetic resource

Identification of the country of origin with the lowest

access hurdles

Contacting of authorized Focal Points of the

country of origin

Identification of allnecessary access

requirements

Statement on proposedutilization to obtain

„Prior Informed Consent“

Agreement on provisionsof licence agreement incl. benefit sharing

Ratification of licence agreement

Additional input so far for removal of native genetic resources

Use in biotechnology industry

Lead

optimisation

Hit

Ident

Lead

IdentTarget

Ident

Library compounds from past programmes

Catalogues

Purified natural products and fragments

New compounds made by synthetic organic

chemistry

Enzymes,

GR’s

Non-human

target

( Production technology

and vaccine research)

Use in pharmaceuticals

Pharma: hypothetical scenario (1)

HTS to Lead Series

700,000 compounds

(incl. 2000 natural products)

Typical result of high throughput screening

(HTS):

500 compounds identified as actives (“hits”),

Grouped in 20 clusters

Typical result of filtering of HTS hits: (*1)

Only 1 – 5 clusters selected to explore

Synthesis of 50 – 200 analogues (= “lead generation”)

Typical result of lead generation:

Only 1 – 2 hit cluster full fill lead series criteria (*2)

(*1) filtering criteria: chemical tractability, selectivity, PK, psy, chem, prop.

(*2) lead criteria: similar to filtering criteria, but more stringent.

Courtesy of EFPIA

Pharma: hypothetical scenario (2)

Lead series to market

2 lead series

Typical result of lead optimization:

Synthesis of 10,000 analogues

Max. 1 lead series fulfill criteria

Max. 1 – 2 compound(s) fulfill criteria for development

Finally selected compound incorporates various structural elements that were not present in HTS hits

Typical result of Clinical Development:

Only 1 out of >10 compounds that enter development reaches the market

Not all compounds that are launched are profitable

Courtesy of EFPIA

Two major categories of AnGRs

Local / traditional breeds– Local culture

– Traditional knowledge minor influence on innovation

– Quality schemes resulting in high priced products : sometimes based on breed specificity eg Jamon iberico (pigs, Spain)

– Not much exchange of AnGR*

Modern/commercial breeds– Place of origin ??? (Holstein Frisian NL,GE ???)

– Extensive data recording: performance, pedigree

– Breeding programmes run by• Farmers’ co-operatives

• SMEs

• International companies

– Very active exchange and trade of

breeding animals

Use in animal breeding (1)

Different breeding systems

• Pastoralists - collective ownership; customary law for livestock exchange

• Small-scale farmers- individual ownership of livestock

• Centralized breeding systems with breeding organizations- breeding stock owned by famers cooperatives/private companies

AnGRs privately controlled (private ownership of animals)

Breeding of production animals on farms

• Use of pure or cross bred animals

• Reproduction technology (artificial insemination; embryo transfer)

• Cross breeding requires simultaneous improvement of several breeds

Public Gene Banks for conservation - no exchange of AnGR

Use in animal breeding (2)

R&D: GRs →marketable product

Research and Development

Long term capital intensiveInvestment

Failures

Commercial

Product

GR

Considerable R&D on product

necessary before

commercialisation e.g.

- Pharma : 10-15 yrs; US$1.2b

- Plant breeding: 10-12 yrs;

$US60m

- Bio pest control: 3-5 years,

costs; 5 -10m Euro

Existing ABS arrangementsPlant sector

• FAO International Treaty on Plant Genetic Resources for Food and Agriculture

– multilateral ABS system (64 major food crops)

– standard contracts for material transfer (sMTA)

– covers International Agricultural Research Centres' ex situ collections

• Plant Variety Rights breeders exemption (recognized in ITPGRFA)

– free use for breeding and free commercialization of new product

Animal breeding

• ABS arrangements and policies on the agenda of next FAO Comm for GR for Food and Agriculture –Oct. 2009

Forest, farm fish, micro organisms

• Other GRs covered by CGRFA/FAO (for food and agriculture)

• Discussions of ABS arrangements and policies on the agenda of next CGRFA/FAO – Oct. 2009

Other sectors

• Contracts/ webs of contracts (including industry models/standards)

Standard agreements more suitable for some transactions

Others need flexibility of individually negotiated contracts

BUT all sectors use contracts/agreements

Legal uncertainty/unpredictability

Lack of transparency

Administrative costs

Regulatory costs

R&D costs/risks

Common realities and needs

SIGNIFICANT INVESTMENTS needed → GRs into commercially viable products

RISK + COST (human and financial) v RETURN ON INVESTMENT

RISKS/

COSTS

INVESTMENT

INCENTIVES

Clear legal rights

Simple transparent clear procedures

Good IP protection

Predictability

GR commercial potential

Business decisions

Risk to reputation

Business-friendly IR

Business needs a precisely targeted IR which (is)

• Supports research, economic activity and freedom to innovate

• Flexible to accommodate sectoral differences and future developments

• Coherent with existing international instruments (e.g. IPRs, health and safety) and excludes resources already covered by other fora eg FAO ITPGRFA , ICAnGRFA

• Practical, cost effective system: no heavy administrative burdens

• Does not restrict mutual agreements and encourages use of contracts

• Promotes coherence across borders: mutual recognition of ABS agreements; info system

• Further develops and harmonizes national regimes in spirit of Bonn guidelines;

uses existing national structures; does not create untested new mechanisms

• Promotes national ABS regimes that (are) :

– Predictable

– Provide legal certainty

– Transparent (national focal point and competent authority)

– Non-discriminatory

Legal certainty- transparency- cross border coherence

Legal certainty - essential foundation for investments

• Clear legal rights to GRs - national focal point/competent authority

• Legal clarity concerning downstream products

• Clear enforceable IPRs (no new disclosure requirements)

• Contract-based arrangements – enforceable agreements

• No retroactive legislation

• Clear rules concerning consultation of ILCs/TK associated GR

• Clear definition of « misappropriation »

Transparency

• What GRs are available and their status

• Who to obtain authorisations from and how

• What are rules - how are they applied

Coherence across borders

• No subsequent claims from other countries if bona fide agreement

• Common standards for national ABS legislations based on Bonn Guidelines

• Coherence between systems of information re ABS regimes

Non-discrimination, practicality, cost effectiveness

Non-discrimination on basis of nationality

• All countries GR users AND providers

Practicality

• System has to be workable for every day use for both governments and users – otherwise will stifle legitimate uses of GRs

Cost-effective system

Heavy regulatory requirements and costs

• SMEs and researchers squeezed out

• Users will source other types of products, or go to other sources

CERTIFICATES: Administrative and regulatory costs for governments and users? Practicality? Legal certainty? Efficacy as compliance tool?

Nature and legal implications (PIC/MAT)?

Should not include in IR unless all questions resolved

GRs

l q s

c m

Country A

What is the desired result?

GRs

l q s

b t f

GRs

T r s q

Z y

Country C

Country B

Alternatives to GRs/BRs

- chemical/synthetic compounds

- industrial by products

- other types of products

Too many regulatory « fences » =• discourage access • users → other sources

All countries are users and providers

More benefits from promoting exchange, innovation and collaboration

USER

For more information

Thank you for your attention

Daphne Yong-d’Hervé

dye@iccwbo.org

ICC : www.iccwbo.org

ICC information on ABS: http://www.iccwbo.org/policy/ip/index.html?id=2480