THE LIFE SCIENCES INDUSTRY IN BRAZIL

BRAZIL Market Report

Photovoltaic Energy Market

Working Paper
Nr. 5/2012
Pedro Gouveia
IMPRESSUM

Herausgeber: Fraunhofer-Zentrum für Mittel- und Osteuropa (MOEZ)

Städtisches Kaufhaus, Neumarkt 9-19, 04109 Leipzig
Telefon/Fax: Tel.: +49 341 231039-0, Fax: +49 341 231039-199
Email: [email protected]
Internet: www.moez.fraunhofer.de
Copyright: Fraunhofer MOEZ 2012
Redaktion: Pedro Gouveia
Layout: Gritt Wehnelt
Fotos: istockfoto.com
 TA B L E O F C O N T E N T

1 Introduction 2

2 The Brazilian Market 3

2.1 Why Brazil? 3
2.2 Economic And Social Indicators 5
2.3 Outlook for 2012/2013 7

3 The Life Sciences Industry In Brazil 9

3.1 Introduction 9
3.2 Pharmaceuticals 12
3.3 Medical Equipment 17
3.4 Biotechnology 20

4 The Importance Of Tek Parks 24

5 Funding Programmes And Public Support 27

6 Market Trends And Potential 29

Fairs & Events 30

Important Links 30

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EXECUTIVE SUMMARY

1. Introduction
Being one of the fastest growing’s economies, part of the On the fourth chapter the Brazilian technology park
BRIC’s group, and experiencing unprecedented political and network is presented, describing the location of its main
social stability, Brazil is nowadays seen as a true land of infrastructures, expansion projects, and its importance
opportunities for European and American businesses aiming for knowledge and science.
to diversify their activities and avoid recession and stagnation
in their national markets. The fifth chapter introduces main public investment support
policies and identifies the most important funding program-
Brazil is not only a BRIC country, it is also the most stable mes available for the life sciences sector.
one with an established democracy that has successfully and
significantly improved living standard and reduced income Finally, a short conclusion overviewing major market trends
inequality during the last two decades. Furthermore, the and potential is presented.
Brazilian government has been fostering the development
of new industrial clusters, renewable sources of energy and
actively promoting the transfer of technology.

It is namely in this context that this report aims to present an

analysis of the life sciences industry in Brazil. The following
chapters will introduce this sector, describing its major aspects
and developments, and provide guidance for business and
investment opportunities.

This report is organized in five chapters apart from this initial

introduction. The second chapter comprises an introduction
to Brazil, presenting its major economic and social indicators,
and providing an economic outlook for the next two years.
The third chapter introduces the life sciences sector in Brazil.
This part is divided in three topics, each addressing one of the
main sub-sectors that form the life sciences industry. Hence,
these three topics introduce the pharmaceuticals, medical
equipment and biotechnology sectors, describing each
area economic performance and current development, and
presenting the opportunities for investment and technology
transfer that lay ahead.

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 THE BRAZILIAN MARKET

2. The Brazilian Market

2.1 WH Y B R A Z I L ?

Brazil is the largest country and economy in South America. The following topics of this chapter will introduce the most
It is simply too big to be ignored. With an area of 8.5 million important economic and social indicators of Brazil, aiming to
km2 and a population of approximately 190 million, it hosts provide a broad but accurate picture of the country. On the
49.7% of the entire region population and produces 57.4% last topic an outlook over 2012 and 2013 major economic
of its GDP. Also, Brazil has considerable oil and scarce raw prospects is provided.
materials reserves, the world’s largest reserves of tropical
forest, biodiversity and flows of fresh water (25%), a
developed industrial base, high standards in scientific
„
research and considerable human capital. The 5th largest country in the world;
5th largest area, 5th largest population,
„
During the past fifteen years Brazil has experienced 5th largest economy.
unprecedented political stability and economic growth. The
Plano Real economic reforms that were introduced in the last
decade of the 20th century allowed the country’s economy
to successfully take off during the last ten years. In 2010
national GDP grew by 7.5%.

This economic boom, together with federal government

social policies, led to low unemployment rates and great
social development in recent years. The fact that governments
were able to successfully redistribute wealth allowed a
growing number of Brazilians to increase their income, hence
improving their quality of life and allowing them to move up
in the social scale.

This new scenario is creating a whole new middle class with

higher purchase power, thus enabling great growth potential
in many market sectors. Furthermore, Brazil has a strong
science and industrial base, and is considered to be a keen
promoter of technology transfer, hence presenting great
opportunities for foreign companies who are willing to invest
time, money and effort in order to diversify their activity and
profit from a new and fast growing market.

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THE BRAZILIAN MARKET

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 THE BRAZILIAN MARKET

2.2 EC O N O M I C A N D S O C I A L I N D I C AT O R S

To understand Brazil’s current economic, political and social The results of Plano Real where remarkable and could be
environment it is important to analyze its recent history and felt as early as three months after the deployment of its first
the changes that allowed the South American nation to measures, when monthly inflation had already decreased
become one of world’s fastest growing economies and a from 46% to less than 2%. Furthermore, between 1993 and
regional power with growing importance in global political 1995 the implementation of the plan allowed the reduction of
and economic institutions. extremely poor population by almost 20%.

Continuous political instability undermined the potential of In the longer term, the contractionary fiscal and monetary policies
Brazil and diminished its regional and international role until enacted by Plano Real, not only introduced a new currency, which
the mid-1990’s. During the post-war golden age of western controlled inflation and stabilized the economy, but also paved
economies, Brazil struggled to develop and to cope with the way for a long and remarkable cycle of growth. The economy
social inequalities. During this period, the greatest threat to grew from US$ 0.8Tn in 1995 to more than US$ 2Tn in 2010.
development was the volatility of national currency, which
accumulated an inflation of 1.1 quadrillion percent between This new scenario enabled the South American country to
1965 and 1994, historically comparable only to the German overtake the UK and France in 2011, becoming the world’s
inflation in the 1920’s. 5th largest economy. Moreover, international institutions
forecast that this strong growth rates will be maintained,
In order to face this economic challenge and slash inflation, expecting the GDP to increase from USD (PPP) 2.25Tn in 2011
in 1994 the federal government launched the Plano Real. to USD (PPP) 3.35Tn by 2021. For 2013, the IMF estimates the
This was one of the most successful battles against inflation economy to expand more than 4%.
in history, representing a decisive milestone that allowed the
Brazilian economy to stabilize and to have a steady growth Nonetheless, inflation and interest rates are still high when
since then. compared with developed economies. The National Bank
reference interest rate is now 9.5% and inflation has been
around 5-6% during the past decade. However, interests have
been consistently decreasing during this period, achieving a
one digit rate for the first time early in 2012. Also, inflation
can be considered normal for a country with Brazil’s
development stage and growth rates, and has been kept
between the targeted values (2.5% to 6.5%).

„
The Brazilian gross domestic product rose up to
US$ 2Tn in 2010. 15 years ago the country produced
US$ 0.8Tn, approximately 60% less than today.
„
GDP is expected to rise up to US$ 3Tn by 2015.
Chart 1 – Brazilian GDP evolution 1994-2010 (in Reais)

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THE BRAZILIAN MARKET ANHANG: PROJEKTE

The remarkable evolution of the Brazilian economy during Estimates show that, between 2004 and 2009, more than
recent years is shown on the first chart. This shows an average 26 million Brazilians were able to move up in the social scale
growth of 4.6% per year between 2006 and 2010. Recent and become part of the country’s middle class. During this
year’s inflation is displayed on the second chart. period, poor and extremely poor population was also reduced
from more than 43 million to about 27 million. Also, average
As mentioned above, for the next few years growth is income increased by 28% and income inequality was reduced
expected to continue. Its largest contributor will be domestic by almost 6% during this five year period.
demand, mostly due to the expected increase on families’
income. Investment will also significantly contribute to this These numbers show that social policies had a great positive
forecasted outcome due to the need of increasing industrial impact in the improvement of Brazilians living standards.
and services production in order to respond to domestic Nonetheless, the fact that 9 million people are still considered
consumption needs. to be extremely poor shows that a lot of work still has to be
done.
However, economic growth was not the only achievement of
„
modern Brazil. More than being able to generate sustained 30% poverty reduction -
economic growth, the government has been able to signifi- During the past decade, former
cantly reduce social inequality. The social policies employed president Lula da Silva social policies
during the last decade by former president Lula da Silva reduced by almost 30% the number
allowed not only to sustain the economic growth enabled by of poor families, enabling these
Plano Real, but also helped millions of Brazilian’s to significant- people to be part of Brazil’s middle
„
ly improve their living standards. class.

GDP GROWTH 2006-2010 I N F L AT I O N 2 0 0 6 - 2 0 1 0

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 THE BRAZILIAN MARKET

2.3 OU T L O O K F O R 2 0 1 2 / 2 0 1 3

The achievements of economic stability and progress in social Whereas growth in Europe is likely to be kept weak, global
inclusion point Brazil’s development model to be in the right demand is expected to grow in 2012. In Brazil, after
track and to able to maintain its successful record in the stagnating in the end of 2011, the economic activity is
years to come. Nevertheless, a lot of work has to be done expected to accelerate over 2012, speeding up the GDP
in order to sustain growth, continue the reduction of social grow to 3.2% this year and to more than 4% in 2013.
inequalities and make Brazilian institutions less bureaucratic,
more transparent and increasingly efficient in order to improve Also, due to the slowdown of GDP grow in the last quarter
business environment. of 2011, meeting public budget goals will be challenging
due to lower revenues, higher salaries and investment needs.
According to the World Bank, in 2011 the business environ- However, a primarily surplus is likely to be achieved.
ment in Brazil was ranked 120 amongst 183 countries. The Inflationary pressures are expected to remain strong in 2012
country’s general ranking position was penalized by the and 2013, though within the government and national bank
complexity in property registration and construction permits. targets. Hence, the reference interest rate is likely to be
On the other hand, credit concession and investment protec- maintained, after it was reduced to 9 % in April 2012.
tion were considered to be strong. Overall, a positive outlook can be drawn for the Brazilian
economy over the next years. With a successful track both
Regardless the deceleration in the last quarters of 2011, in wealth redistribution and general economic growth, these
which resulted from the global economy slowdown due to numbers show that the Brazilian economy will continue to
Europe’s weaker growth and to the deceleration in emerging offer great opportunities for companies aiming to diversify
economies (which had the lowest growth rate since the their activities and invest in new, promising and fast growing
2008 crisis), 2012 is expected to be a promising year for the markets.
Brazilian economy and for its investors.

Table 1 – Main economic indicators 2010-2013 S O U R C E I M F / B B VA R E S E A R C H

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THE BRAZILIAN MARKET

K E Y FA C T S

LOCATION / AREA South America / 8.5 million km2

POPULATION (2010) 191 million

CAPITAL Brasília (2.5 million)

LARGEST CITIES São Paulo (11.2 million), Rio de Janeiro (6.3 million)

LANGUAGE Portuguese

INDEPENDENCE / CONSTITUTION 07/09/1822 (From Portugal) / 05/10/1988

GOVERNEMNT TYPE Federative Republic (27 States)

WORKING FORCE 101.7 million

LITERACY / LIFE EXPECTANCY 90.3% / 73.1 years

GDP (NER/PPP) US$ 2.5Tn / US$ 2.3Tn

Per Capita GDP (NER/PPP) US$ 12.917 / US$ 11.845

GDP % (AGRICULTURE/INDUSTRY/SERVICES) 6% / 28% / 66%

EXPORTS / IMPORTS / TRADE BALANCE US$ 202Bn / US$ 182Bn / US$ 20Bn

INTEREST RATE (BNB – April 2012) 9%

GDP GROWTH 7.5% (2010) / 3.8% (2011 est.)

INFLATION 6% (2010) / 6.5% (2011 est.)

EXPECTED GDP GROWTH 3.2% (2012) / 4.3% (2013)

S O U R C E S : I M F, W O R L D B A N K , B A N K O F B R A Z I L , I B G E

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 THE LIFE SCIENCES INDUSTRY IN BRAZIL

3. The Life Sciences Industry in Brazil

3.1 IN T R O D U C T I O N

Brazil is considered the Americas’ most attractive emerging According to the Brazilian Trade and Investment Promotion
life sciences market, with its potential underpinned by a Agency (APEX), last year’s pharmaceutical sector revenues
combination of economic, political and demographic factors. increased by 8.4%; from R$ 36.85bn (US$ 20.95bn) in 2010
Governmental commitment to the development of local to R$ 39.94bn (US$ 25.60bn) in 2011. The healthcare and
pharmaceutical, medical equipment and biotechnology medical devices sectors achieved even higher growth rates
industries is also highly responsible for this scenario. with 10.5% and 10.3% expansions. Healthcare revenues
increased from R$ 314.77bn (US$ 178.98bn) in 2010 to R$
The South American country has also structural and current 347.72bn (US$ 222.90bn) in 2011, and medical devices sales
situational characteristics able to sustain and provide future grew up to R$ 7.30bn (US$ 4.68bn) in 2011 from R$ 6.62bn
development for a strong life sciences industry. These include (US$ 3.76bn) in the previous year.
the existence of abundant natural resources, a strong
scientific base and a deep interest in knowledge and These figures result both from a fast growing market for
technology transfer, a leading agribusiness and biofuel health care products and from significant investments in
industry, an aging population and a growing middle class research and development. Combined, Brazil’s skilled
able to boost health care services demand in the next years workforce, technology parks network, and financial incentives
and decades. are responsible for this solid and sustained growth.

Nowadays, the Brazilian life sciences sector already comprises More important, investment in the life science sector is likely
more than 1.000 companies, most of which located in the to increase in years to come, boosted both by the private and
state of São Paulo. Other states in the South and Southeast, public sectors. The PROCIS public program, conducted by
such as Rio de Janeiro, Minas Gerais and Rio Grande do Sul the Health Ministry, will invest R$ 2bn until 2014 in order to
also host a significant number of companies. Smaller but establish partnerships with the private sector for technological
important clusters can be found in the Northeast and Centre- development and to support the construction of scientific
West. laboratories. In the private sector, Brazil Pharma, the largest
pharmaceutical retailer in Brazil, recently secured R$ 414mn
Furthermore, the Brazilian life sciences sector experienced through the launch of its initial public offering (IPO) on the
considerable growth during the last decade. From 2003 to Brazilian Stock Exchange in order to carry out new
September 2009 new investments from foreign companies acquisitions and invest in new retail stores.
accounted for more than US$ 1.5bn. Also, latest economic
figures from different life sciences subsectors show a
remarkable growth of this industry in Brazil, sustaining
optimist forecasts for the next few years.

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THE LIFE SCIENCES INDUSTRY IN BRAZIL

On the other hand, whereas great private investment took

place in manufacturing in recent years, life sciences research
„
is still highly concentrated in Universities and public research The life sciences sector received
centres. Although a considerable increase in the level of more than US$ 1.5bn from foreign
interaction between Universities and industries has taken investment between 2003 and 2009.
place in the last five years, a lot of work still has to be done in These numbers are expected to
„
order to further promote this interaction and to boost private increase in the next decade.
research.

With this objective, Brazilian federal and state governments

are funding the construction of a wide network of technology
parks across the country. These are intended to host large
corporations and to support small entrepreneurial projects in
order to develop a strong national cluster in the life sciences
sector as well as in other technological areas. Due to its
importance, this topic is introduced in the next sections
and further developed on a separated chapter, dedicated
to present and explore the opportunities of this technology
parks network.

However, before introducing this topic and following the

facts presented above, an overview of the main life sciences
subsectors (Pharmaceuticals, Medical Equipment and
Biotechnology) is presented next in order to provide a deeper
understanding of the whole sector in Brazil.
THE LIFE SCIENCES INDUSTRY IN BRAZIL

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THE LIFE SCIENCES INDUSTRY IN BRAZIL

3.2 PHARMACEUTICALS

The pharmaceuticals sector is characterized by heavy

investments in R&D with the rights to sell a product issued by
the concession of patents. These assure to the company who
develops a medicine the monopoly over that product for a
period of 20 years.

In 2011, 25 medicine patents expired, thus representing a

loss of US$ 500mn for patent owners, only in the Brazilian
market. This results from the fact that generic’s producers
are now allowed to manufacture and sell these drugs to
consumers, hence increasing competition and reducing mul-
tinational companies’ profits. Consequently, in order to cope Chart 4 – Brazilian pharmaceutical market value.
with market requirements and sustain profits, pharmaceutical
companies need to innovate both in terms of R&D and
market positioning.

For these reasons, Brazil’s high skilled labour in this field and
public support to research based organizations willing to es-
tablish in the country turn it into a very attractive location for
pharmaceutical businesses. Moreover, Brazil is an emerging
pharmaceutical consumption market that will offer great
revenues over the next decades.

During the last ten years national demand for pharmaceutical

products has grown approximately 10% per year, sustained Chart 5 – Generic medicines market share. (green)
by public social programmes and better income distribution.
In 2011, the whole pharmaceutical market rose up to almost
R$ 38bn.

However, this growth trend in not evenly distributed. Even

though brand medicines sales had a significant increase, the
generic’s market is growing considerably faster. As shown on
Chart 5, generic medicines grew around 20% per year for
the last five years, thus increasing this segment market share
up to 20% in 2010. By 2013, IMS Health expects generics
market share to reach 23%.

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 THE LIFE SCIENCES INDUSTRY IN BRAZIL

As a result of this growth trend, in recent years pharmaceuti-

cal companies have significantly increased their investments in
Brazil, targeting the development of both manufacturing and
R&D. In 2009, pharmaceutical companies invested R$ 3.4bn
in new manufacturing plants, research and marketing.

Furthermore, both large and smaller players expect to

increase their investment in research, distribution, and
production capacity over the next decade. Nycomed Pharma
has recently announced US$300mn investments on
acquisitions over the next five years and Sanofi-Aventis plans
to start building new manufacturing facilities in 2012.

These investments aim to enable companies to respond

towards expected consumer’s health soaring demand, which
largest share is obtained in the retail market. Chart 6 – Pharmaceutical market in Brazil.

In fact, the retail market represents more than 70% of overall

revenues, most of which come from the wealthiest regions of
Brazil. The Southeast region represents 56% of the market
and the South accounts for 17%.

COMPANIES AND GEOGRAPHY

The Brazilian pharmaceutical industry comprises several types

of organizations, with different goals and size. Whereas
large multinational companies that locally produce their
brand-name products are important players, large national
companies hold a significant share of the market. In 2011
there were more than 600 organizations operating in the
Brazilian pharmaceuticals market.

Table 2 shows the largest players in the Brazilian pharmaceu-

tical market. The market share values displayed on this table
show that there is significant competition in the Brazilian Chart 7 – Pharmaceutical regional market share.
market.

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THE LIFE SCIENCES INDUSTRY IN BRAZIL

S O U R C E : I M S H E A LT H ; B R A – B R A Z I L I A N C O M PA N Y
Table 2 – Retail market share of the largest pharmaceutical companies.

A higher market concentration on the generics market is

noticeable on table 2, since the two largest players account
for 55% of the whole market. Furthermore, these data show
that the generics retail market is controlled mostly by Brazilian
companies, which hold more than 70% of this market.

Geographically, the distribution of pharmaceutical industries

is very similar to that of the retail market, with most
companies concentrated in the Southeast. The state of São
Paulo accounts for nearly 39% of the whole industry and
Rio de Janeiro state for almost 12%. The state of Góias
(Center-West) also represents a significant share of Brazil’s
pharmaceutical industry (6%), due to the existence of a
strong pharmaceutical cluster in the city of Anapólis. The
entire Northeast region accounts for 10% and the South for
18% of the total number of companies in the country.

Figure 1 – Geographical distribution of pharmaceutical

companies in Brazil.

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 THE LIFE SCIENCES INDUSTRY IN BRAZIL

GOVERNMENT POLICIES AND REGULATIONS

Following the trend of other sectors considered to have an Nevertheless, aiming to change this scenario and boost
economic or social strategic importance by the government, exports, the government is also deploying large sums of public
the state has an important role in the pharmaceutical funding to support the construction of new technology parks
industry. The presence of a large number of public and to the development of small and medium size enterprises.
laboratories in the market, developing and manufacturing These initiatives comprise important federal and state
vaccines and generic medicines, is a good example of this programmes that will be further developed in the next
strategic positioning. chapters.

Also, the government has a strong influence in this sector

through the establishment of strong regulations. The most
important governmental institutions are ANVISA (National
Health Surveillance Agency) and INPI (National Institute of
Industrial Property).

INPI is a signatory of the Patent Cooperation Treaty, hence

assuring that companies willing to sell their products in Brazil
can extend their rights to the country. However, to guarantee
patents protection in Brazil, companies cannot automatically
extend registration rights from abroad. Instead, they need to
register the international patents and trademarks with INPI.
ANVISA is an autonomous agency linked to the Ministry of
Health. It is responsible for all regulations and controls over Chart 8 – Brazil pharmaceuticals international trade.
the management, imports, storage, distribution and retail of
health products and services in Brazil.

ANVISA has adopted national guidelines for good

manufacturing and laboratory practices, following OECD
standards. These actions promoted the quality of medicines,
which can now be exported without adaptation.

However, as chart 9 shows, pharmaceuticals international

trade deficit is still significant, since only recently large
investments were deployed in order to build a strong
exporting cluster.

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THE LIFE SCIENCES INDUSTRY IN BRAZIL

OPPORTUNITIES

Due to the expected market expansion in the next few years, Nowadays, almost all process equipment is imported, thus
the Brazilian market offers great business opportunities to creating business opportunities for companies willing to export
pharmaceutical companies. this equipment. However, greater opportunities also lay ahead
for companies willing to invest in Brazil and locally produce
However, following a strategy based on local production this machinery.
rather than imports has significant advantages. This is related
with the fact that, even though the federal government For smaller R&D based companies willing to establish in Brazil,
excludes medicines from the payment of the main taxes, the the government also provides important funding. This financial
total amount of taxes on imported medicines is still high. This support, together with Brazil’s high skilled labour force in the-
results from a combination of federal and state taxes that of- se field and lower labour costs also make this a very promising
ten almost double imported medicines costs when compared market for investors.
with local produced ones. Also, ANVISA regulations now ob-
lige importers to have their own quality control laboratories,
hence making it more competitive to produce locally.

Another great advantage of producing medicines in Brazil

is related with production costs. Accordingly to IMS-Health,
Brazil production costs are 4.8 times lower than those in the
United States, thus making it very competitive to produce in
Brazil, especially for exporting companies. Also, producing
pharmaceuticals for the Brazilian internal market is also a very
interesting business, since prices to consumers are only 2.8
times lower than in the US, thus indicating that profit margins
can be higher than in developed countries.

Other activities that do not involve the direct production of

medicines also place interesting business opportunities in this
industry. The increase on medicines sales will also boost the
transportation and machinery for manufacturing businesses.
The demand for pharmaceutical production machines is
estimated in the range from US$ 50mn to US$ 100mn per
year, during the next five years.

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 THE LIFE SCIENCES INDUSTRY IN BRAZIL

3.3 ME D I C A L E Q U I P M E N T

Brazil has the largest medical equipment market in South

America. In 2011, the Brazilian medical market was valued
at US$ 4.4bn. Also, the industry is well established in the
country, comprising local and multinational companies.
According to the Brazilian Association of Medical, Dental,
Hospital and Laboratory Articles and Equipment (ABIMO),
which currently has 320 associates, the local market can be
divided in five areas where most companies can be included:
implants and consumption material, electronic equipment’s,
odontology, radiology and laboratories.

However, many companies operating in other sectors also

develop and sell products for this market. These include
companies like Renault, which produces an adapted van
model for ambulances in Curitiba. Other companies also ma- Chart 9 – Medical equipment sales distribution.
nufacture components or parts of medical equipment, such
as special INOX and Corian counters for industrial kitchens,
surgery rooms and odontology offices.

Worldwide, the medical equipment sector represents more

than US$100 billion and had an average annual growth of
2.5% over the last few years. In Brazil, this sector has been
growing considerably faster. Between 2003 and 2008 the
medical industry grew more than 150%.

The largest contribution for this remarkable growth came

from internal demand, with 90% of revenues obtained in
the domestic market. Furthermore, international trade data
shows that the country is not only unable to exports its
medical devices yet but also that it is still highly dependent on
imports. According to ABIMO, in 2008 exports accounted for
US$ 581 million whether imports rose up to US$2.74 billion.
Chart 10 – Distribution of companies by size.
Chart 9 displays the share of revenues achieved in each sector
by Brazilian medical equipment manufacturers.

17
Even though the Brazilian medical equipment industry is Other regions, such as the South (17%) and Rio de Janeiro
still highly focused on the internal market, its players cover (6%) are also important medical production areas.
a wide range of specialities. Brazilian companies are able
to manufacture 90-95% of the devices needed to equip a Likewise for the pharmaceutical sector, ANVISA is also the
modern hospital. regulating institution for the medical equipment sector. The
latest legislation was released in 2011 in the Compêndio da
Also, the Brazilian medical equipment sector is considered to Legislação Sanitária de Dispositivos Médicos and displays a set
be quite innovative, regarding the high demand for high-tech of technical regulations and certification requirements based
products and the development of new technologies in on ISO standards.
different sectors, such as electronics, IT, and precision
mechanics. Moreover, the development of these new Furthermore, this legislation also set property registration
technologies comprises a considerable mix of different rules and specific procedures for the certification of imported
products and involves both multinationals and small devices, often involving several bureaucratic steps that may
specialized companies. delay return on investments if not carefully planned.

Some of the largest multinationals like Siemens and GE are

amongst the most important companies in Brazil’s medical
equipment sector, importing and locally producing highly
specialized equipment for hospitals. On the other hand, less
complex equipment, such as odontology tools or chairs, are
mostly manufactured by Brazilian organisations.
However, since the Brazilian medical equipment industry is
still on an early development stage, its share on the Brazilian
economy is still small. Also, economic indicators are difficult
to find for this sector.

ABIMO and SINAEMO associations claim that there are 449

companies operating in this sector in Brazil. According to
these data-bases, most of those companies are medium size
enterprises (54%). Micro and small enterprises account for
17%, medium large for 17% and large corporations for only
12%. Together, these companies have more than 31.000
employees and sustain more than 72.000 indirect jobs. Figure 2 – Geographical distribution of medical equipment
companies in Brazil.
Geographically, medical equipment manufacturers are mostly
located in Sao Paulo (68%). The region of Ribeirão Preto (SP)
is the main centre for commercial medical equipment
activities, hosting the largest Brazilian cluster in this sector.

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 THE LIFE SCIENCES INDUSTRY IN BRAZIL

OPPORTUNITIES

The expansion of the healthcare sector in Brazil offers Furthermore, by investing in Brazil companies can not only
great growth potential for medical device companies doing take advantage of the large domestic market but also avoid
business or willing to expand to the South American country. high tariffs on imports and benefit from fiscal incentives,
Opportunities in this market arise as a consequence of higher provided by the government to foreign investors willing to
and better income distribution, increase in public healthcare manufacture their products in the country. Additionally,
spending and aging population. companies can benefit from Brazilian skilled though cheaper
labour force in order to export and increase profit margins.
Moreover, the expansion of the private sector and the
implementation on higher healthcare standards, have For smaller companies great opportunities lay on the
significantly increased demand for cutting-edge and top establishment of partnerships with Brazilian SME in order
quality healthcare services and technology in recent years. to promote technology transfer.
Also, together with private investments, large public spending
in new hospitals and health centres, aiming to provide These opportunities are focused on the of know-how of
better healthcare to the entire population, will drive demand small and medium size European companies that can be
increase in the next decade. transferred to small Brazilian companies in order to increase
local production. Following this approach, European
This scenario opens great opportunities both for large and organisations can benefit from the large potential of the
small foreign companies willing to invest in Brazil. Brazilian market, avoiding high import tariffs and taking
advantage of public technology transfer incentives provided
by the Brazilian government.

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THE LIFE SCIENCES INDUSTRY IN BRAZIL

3.4 BIOTECHNOLOGY

Brazil has the greatest biodiversity in the world. This companies employ no more than 5 people and up to 45%
abundance of natural resources represents a major strategic have no more than 10 workers.
advantage to the development of a strong national biotech-
nology industry; hence enabling the South American country The largest companies are focused on the agriculture market,
to become an important global biosciences centre. which is partly controlled by multinational corporations.
Hence, although this sector represents a significant share
Also, the biotechnology industry has experienced rapid of revenues, it comprises only 10% of biotech companies
growth during the last few years and presents great operating in Brazil.
opportunities for future social and economic development.
However, excluding agricultural and biofuels areas, the Also according to BRBIOTEC, most of the smaller firms centre
biotechnology sector is relatively recent in the country. Hence, their business in the human health sector (about 40%). Animal
in order to boost this potential the right strategic decisions health, and environment and bioenergy are also important
must be taken. business fields, each representing around 15% of companies
in the market.
So far, Brazil has conquered a leading position in agriculture
biotech. It is now the world’s second largest producer of plant
biotech crops. Moreover, biotech crops area is estimated to
increase by 16% in 2012 from the previous year. These
figures are highly related with the increase of biotech
plantations, which result from recent approval of new
legislation and higher availability of subsidized credit to
farmers.

However, even though agriculture represents a significant part

of the Brazilian biotech market and has future expansion
perspectives, the most promising businesses rely in other
sectors, such as human health, animal health, and
environment and bioenergy.

In these areas, most companies are micro and small size

organizations, most of which are still relying on public
funding. According to the Brazilian Association of Chart 11 – Distribution of companies across different
Biotechnology (BRBIOTEC), there were more than 230 biotechnology sub-sectors in Brazil.
companies operating in the Brazilian biotech market by the
second quarter of 2011. Most of those (60%) were founded
after 2000, and 45% after 2005. Also, 20% of those

20
 THE LIFE SCIENCES INDUSTRY IN BRAZIL

These different sectors manufacture and develop a great

diversity of products. The human health sector includes
companies performing drug development, recombinant
proteins, cell therapy and vaccines. The animal health sector
also produces drugs and vaccines for animals, and works on
genetic improvement and animal reproduction. The
environment sector is focused on waste management and
recovery of degraded areas, and the reagents industry
develops bioactive molecules and enzymes.

Similarly to the agriculture sector, which is focused on the

development of transgenic seeds and biological pest control,
the bioenergy sector is a leading industry in Brazil.

In this specific sector, foreign companies willing to establish

partnership´s with bioenergy Brazilian firms can benefit both Chart 12 – Percentage of companies per state.
from the large revenues of the Brazilian biofuels market and
from the Brazilian know-how in this area.

Geographically, and following the trend of the life sciences

subsectors presented before, biotechnology companies are
highly concentrated in the Southeast of Brazil, namely in
the states of São Paulo, Minas Gerais and Rio de Janeiro.
Furthermore, as shown on chart 12,95% of companies are
located in only 6 out of the 27 states.

The state of São Paulo alone, host 40% of Brazil’s biotech

companies. This high concentration of bio businesses is
sustained by a large network of Universities and public
research organizations which develop partnerships and
provide funding to small and medium size private
organizations.

„
Leader in the biotechnology sector,
the state of São Paulo host 40% of
„
national biosciences companies. Figure 3 – Geographical distribution of biotechnology companies
in Brazil.

21
THE LIFE SCIENCES INDUSTRY IN BRAZIL

THE IMPORTANCE OF UNIVERSITIES GOVERNMENT POLICIES AND FUNDING

AND BUSINESS INCUBATORS
The approval of several kinds of genetic modified seeds and
As mentioned above, the large concentration of biotech plants by the government, and the existence of significant
companies in the region of São Paulo is highly related with subsidies and funding programmes has supported the
the existence of a strong network that includes not only other emergence of strong national biotech clusters in the fields
private companies but also public organizations, such as of agriculture and biofuels.
universities and research centres.
Important funding programmes focusing on technological
Likewise other life sciences sectors, such as pharmaceuticals, innovation have also an important role on the development of
to which the biotechnology sector is strongly related, other biotechnology sub-sectors, supporting research funding
scientific research have a vital importance to this industry and needs of almost 80% of the companies. A good example of
is often promoted and supported by technology parks and these funding mechanisms is the “Programa de Pesquisas em
business incubators. For that reason, the Brazilian technology Caracterização, Conservação e Uso Sustentável da Biodiver-
parks network and its importance to the life sciences sector sidade do Estado de São Paulo - Biota-Fapesp” (Programme
will be further discussed on the next chapter. in Characterization, Conservation and Sustainable Use of
Biodiversity of São Paulo state). Other programmes, such as
According to research performed by BRBIOTECH and BIOMI- “Fundo Setorial de Biotecnologia” and “Capital Semente”,
NAS associations, up to 95% of biotech companies do have a supported by FINEP and BNDES, also play an important role on
relationship with universities or research institutes. The main the emergence and expansion of these firms.
objectives of these partnerships are the co-development of
products or processes and the share of infrastructures. Due to the importance of these funding programmes to
companies aiming to enter or to establish partnerships in the
However, the dependence of biotech firms on public Brazilian market, further information is provided in a separate
institutions is highly related with small investment from chapter of this report (chapter 5).
private funding mechanisms, such as venture capital. This lack
of funding does not enable companies to hire more highly
skilled people (the large majority of MSc and PhD still work in
„
universities), to invest in R&D, and to expand production. Public funding is essential for the
development of the Brazilian biotech
Another outcome of current capital shortage is the low private sector: almost 80% of the
contribution of exports for global revenues. Since small companies rely on this funding to run
„
organizations do not have the money to develop and grow, their projects.
only one quarter of companies are able to sell their products
abroad. On the other hand, these companies are highly
dependent on imports to supply their needs for reagents and
equipment.

22
 THE LIFE SCIENCES INDUSTRY IN BRAZIL

OPPORTUNITIES

The previous topic showed that there is a strong political

commitment in Brazil towards the development of a national
biotech cluster. Also, biotechnology companies operating
in Brazil are likely to achieve significant growth within the
next few years by taking advantage of the country’s richest
biodiversity and considerable market growth.

Hence, Brazil should be considered as a serious candidate for

foreign companies looking forward to expand business and
invest in new markets.

In order to take advantage of local natural resources and

market potential, these investments can either take the form
of direct investment and local production or through the
establishment of partnerships with local companies.

The establishment of partnerships with local companies can

be achieved by promoting technology transfer or through
funding high potential small companies. By investing in
Brazilian SME and start-ups, foreign companies can support
this companies that are still significantly dependent on public
funds and path the way to benefit from the large revenues
and growth that the Brazilian biotech market is expected to
deliver in the next decades.

23
T H E I M P O R TA N C E O F T E C H N O L O G Y PA R K S

4. The Importance of Technology Parks

According to the International Association of Science and Modern technology parks offer the most advanced business,
Technology Parks (IASP), these infrastructures can be IT and communication tools in order to provide a physical
described as “organization managed by specialized environment needed for the development and flourishing
professionals, whose main aim is to increase the wealth of its of scientific innovations. These objectives are achieved by
community by promoting the culture of innovation and the economies of scale that allow the reduction of investment in
competitiveness of its associated businesses and infrastructures as well as in operational costs. Furthermore,
knowledge-based institutions“. by bringing the right people together, they promote the
technology transfer between firms established within the
Since the concept was created in the 1950’s, technology park.
parks have played an important role in technological capacity
building and development. As stated before, the development of technology parks is a
wide spread phenomenon in today‘s technology era. Hence,
Aiming to narrow the gap between companies and research following the results achieved by some of the most advanced
institutions, technology parks bring together in the same economies, developing nations like Brazil are now deploying
location organisations such as, manufacturing companies, significant public and private funds to the development of
testing and analytical laboratories, technology and business strong and efficient technology parks networks.
incubators, financing institutions, and industrial services.
With a proven track of success in scientific and economic
development in many knowledge based societies, technology
parks became widely spread in recent years. Also, these
centres now offer a complete range of services able to foster
its main purpose: the share and development of knowledge
and ideas.

24
 T H E I M P O R TA N C E O F T E C H N O L O G Y PA R K S

THE BRAZILIAN NETWORK

The Brazilian network of technology parks is still small for a

country with its size. Until recently, only 25 technology and
innovation parks were operating all over the country. Also,
most of these organisations are located in the South and
Southeast regions. The state of São Paulo alone, host 10
technology parks.

Nevertheless, the results achieved by this small network were

remarkable. The contribution of technology parks to the
economic development of local communities, by promoting
innovation and supporting the emergence of new high value
economic activities, has been significant.

One of the best examples that show the great positive role of
technology parks for local development is the Florianópolis
Park in Santa Catarina. This infrastructure allowed regional
GDP to take off; IT companies now account for 45% of the Figure 4 – Geographical distribution of the 25 existing parks
entire city GDP and made it known as the South American in Brazil.
Silicon Valley.

Though there are no magic formulas, governmental incentives The 74 planned parks cover a wide range of industries and
to support innovation and entrepreneurship proven to be a research sectors, including IT, nanotechnology, pharmaceu-
major tool to encourage the creation and development of ticals, medical equipment, renewable energies, environment
new technology parks. Consequently, this experience led and biotechnology. Also, these institutions are built upon
the government to create an ambitious plan to expand this strong bounds with local governments, universities, and
network. private companies; hence fostering the development of truly
successful clusters.
This expansion plan includes a total of 47 new technology
parks, 17 of which are now under construction or ready to The role of public institutions is essential, since Municipal, Sta-
open. Another 30 are also planned. te or Federal governments are considered as crucial partners
to promote and to provide funding to these organisations. So
Considering that the 25 parks operating today include 520 far, local, state and federal governments accounted for 55%
companies and generate annual revenues over €1 billion, the of all the investments in these parks.
new projects can significantly increase the contribution of
high technology to national income.

25
T H E I M P O R TA N C E O F T E C H N O L O G Y PA R K S

THE LIFE SCIENCES INDUSTRY

As previously stated, the development of technology parks

is still a new trend in Brazil. Hence, in most cases parks are
not dedicated to a single research/industrial sector. However,
higher specialization in certain fields can be found in almost
all of them.

The life sciences sector is spread all over the country, with
companies located in a large number of technology parks
as well as other locations. However, certain areas can be
identified as important centres for each of the three scientific
areas presented on this report.

The technology park of Ribeirão Preto (SP) is the most

advanced centre of research and production on the medical
equipment sector. On the biotechnology field, Bio Rio (RJ)
park plays a significant role, and the state of Goiás (Centre-
West) has one of the most advanced research and industrial
areas in the pharmaceuticals sector.

Nevertheless, it is important to highlight that the area of São

Paulo, due to its size in terms of population and economic
strength is a major centre for all these activities. Cities of
Porto Alegre (RS) and Belo Horizonte (MG) are also important
life sciences polo’s, with technology parks that concentrate
a considerable number of companies operating in the life
sciences sector.

26
 FUNDING PROGRAMMES AND PUBLIC SUPPORT

5. Funding Programmes and Public Support

Likewise other high technology sectors, the greatest the improvement and expansion of the technology parks
challenges faced by life sciences organizations are associated network, as described in the previous chapter.
to long development cycles and large capital needs. In order
to cope with these requirements and handle fierce foreign Even though the demand for specialised infrastructures is still
competition, Brazilian companies require a favourable busi- an important bottleneck for the development of this industry,
ness environment which stimulates private investment, fosters new projects now under construction are likely to improve
innovation, and strengths its competitive advantages. this scenario.

The previous topics showed that this favourable environment Regarding the support of technology transfer, great progress
is already partly in place due to the Brazilian life science was obtained with the recently approved Federal Innovation
market attractiveness and expansion prospects. However, Law, which, by giving special treatment to the interaction
government support is also essential to build and sustain between universities and companies, as well as between
this favourable atmosphere. Moreover, just as important as national and foreign organizations, now strengthened the
having support and incentive tools is their continuity and the technological base and innovative potential of the life science
establishment of long-term policies. sector, also making it more attractive for foreign companies
willing to establish in Brazil or to develop partnerships with
Brazilian public authorities are responsible for a considerable local institutions.
number of important initiatives, ranging from technology
transfer support and infrastructures construction to funding THE IMPORTANCE OF CAPITAL
and financing special programmes. Nevertheless, some weak
points can be found in this strategy, namely, the effectiveness According to the description presented on the previous chap-
of long-term support and, often, the absence of an overall ters, most companies operating in the Brazilian life sciences
chain view. industry are small and medium size organisations. Moreover,
most of those are still highly focused on research, hence
Regardless the fact that improvements between different being unable to independently generate enough revenues.
spheres of federal, state and local government could be For these companies funding supply, either from public or
achieved, in order to enhance regulatory frameworks and private investors, is essential.
stimulate this sector, a significant number of important public
programmes can already be used by companies aiming Main government funding contributions are related to
to establish and develop their business in the Brazilian life support of seed and venture capital funds which invest in
science sector. the life sciences sector. These funding mechanisms offer
attractive lines of credit or non-reimbursable funds to supply
One of the best examples of governmental support is the companies’ capital requirements.
deployment in recent year’s of considerable investments in

27
FUNDING PROGRAMMES AND PUBLIC SUPPORT

The National Bank of Social and Economic Development (BN- innovation, and the empowerment of national companies, by
DES) and FINEP, a research and innovation projects financing supporting them on acquisitioning and merging processes.
agency, linked to the Ministry of Science and Technology, are
the most important public funding institutions in Brazil. The second phase of this programme, which was launched in
2007 and is still running, aims to provide R$ 3bn funding to
Aiming to support and develop the federal government the Brazilian life science sector.
policy of promoting the emergence of a national and globally
competitive life science industry, these institutions have FINEP, on the other hand, is mostly focused on providing
implemented programmes that specifically target this sector. non-reimbursable funds for research in order to support both
profit and non-profit organisations on every stage of the
These programmes can significantly improve credit availability scientific and technological development cycle.
to small and medium size companies, due to its favourable
conditions. For example, BNDES provides funding charging a One of the most important FINEP programmes, considered
3% interest rate, which is considerably lower when compared to be one of its priorities, is the Health Industry Complex
to Bank of Brazil reference rate (9%); hence making money programme, to which the agency provided more than R$ 600
much cheaper for companies. between 2002 and 2009.

As mentioned before, the number of companies in the life Other federal programmes mentioned on the previous chap-
sciences sector aiming to access these funds is considerable. ter, such as PROCIS, Fundo Sectorial de Biotecnologia and
Accordingly to several Brazilian life sciences associations, such Capital Semente also represent important funding resources.
as BIOMINAS and BRBIOTEC most biotech companies (70%)
expect to raise funding from Federal funding programs, with All the programmes supported by these public organisations
most of them willing to apply these funds primarily in R&D provide funding for national and foreign companies willing
(80%) and secondly in the establishment and expansion of to invest in Brazil, hence representing great financing mecha-
infrastructure (60%). nisms for foreign companies aiming to expand production to
Brazil or promote technology transfer to the South American
Amongst the public programmes offered by public agencies country.
such as FAPESP, CNPq, as well as BNDES and FINEP, one of the
most important programmes is Profarma, which specifically
target the pharmaceuticals industry.
„
Profarma programmes provides
Profarma is supported by BNDES and during its first R$600mn annual funding for
phase (2004 – 2007) it leveraged investments of R$2bn. the pharmaceutical
„
Major spending’s addressed manufacturing improvement and biotechnology sectors
(supporting the construction, expansion and modernisation
of production capacity), innovation, by supporting the
promotion of radical or incremental products and processes

28
 MARKET TRENDS AND POTENTIAL

6. Market Trends and Potential

The previous chapters disclosed Brazil’s life science sector Moreover, public investment in the construction of new
remarkable and sustained development trend over the last hospitals and health centres, as well as specific programmes
decade. Also, the data introduced and analysed in this report targeted to support companies willing to establish and invest
shows that these results were built upon a strong bid towards in Brazil are also major reasons for companies to consider
innovation, education, and social development, rather than Brazil as a serious expansion market.
relying on other Brazilian competitive advantages, such as
lower salaries. Henceforth, for foreign companies looking for new and inno-
vative markets to expand, Brazil can offer great opportunities
Furthermore, government’s support to the development of both for technology transfer and direct investment.
high-tech and high add value industries, together with wealth
redistribution policies, is creating a virtuous circle of prosperi-
ty, which is likely to foster a multiplier factor in the growth of
many economic sectors.

The life science sector is not an exception to this rule. In fact,

the preceding topics displayed significant growth rates across
different sub-sectors of this industry over the last few years.
As mention on the second chapter, Brazilian and international
organizations forecast current economic growth to be sustai-
ned over the next decade. Social inequalities reduction is also
likely to continue and, likewise most developed nations, the
percentage of elderly people is expected to increase.

These scenario arises great business opportunities for the

pharmaceuticals and medical equipment industries, since it is
likely to boost demand for its products.

Considering the biotechnology sector, impacts are also

expected to be significant, mostly due to the importance
of the human health sub-sector, but also to the emergence
and development of other areas. These include the expected
growing demand for genetic modified seeds, animal health
products and biofuels.

29
FUNDING PROGRAMMES AND PUBLIC SUPPORT

FAIRS & EVENTS

CPHI SOUTH AMERICA – 21-23 AUGUST 2012
Pharmaceuticals fair.
http://www.cphi-sa.com

IMPORTANT LINKS

APEX BRAZIL (BRAZILIAN TRADE ANVISA (SANITARY SURVEILLANCE

AND INVESTMENT PROMOTION AGENCY) NATIONAL AGENCY)
http://www.apexbrasil.com.br http://portal.anvisa.gov.br/wps/portal/anvisa/home

BNDES (NATIONAL ECONOMIC INTERFARMA (PHARMACEUTICAL ASSOCIATION)

AND SOCIAL DEVELOPMENT BANK) http://www.interfarma.org.br
http://inter.bndes.gov.br
ABIMO (MEDICAL EQUIPMENT ASSOCIATION)
FINEP (PROJECT FINANCING AGENCY) http://www.abimo.org.br
http://www.finep.gov.br
BIOMINAS (BIOTECHNOLOGY ASSOCIATION)
MINISTRY OF DEVELOPMENT, INDUSTRY http://www.biominas.org.br
AND EXTERNAL TRADE
http://www.desenvolvimento.gov.br/sitio BRBIOTEC (BIOTECHNOLOGY ASSOCIATION)
http://www.brbiotec.org.br
MINISTRY OF SCIENCE, TECHNOLOGY
AND INNOVATION
http://www.mcti.gov.br

30