November 17, 2008

Volume 86, Number 46

Web Exclusive

International

A Tale Of Three Baltic Start-ups

Three companies that managed to emerge from behind the iron curtain

Sarah Everts

Three Baltic chemistry-based companies are among those that successfully navigated the turbulent 1990s and early 2000s as Estonia, Latvia, and Lithuania moved from Soviet Union occupation to market economies.

Estonian contract research firm Cambrex Tallinn can trace its roots back to 1988, when Soviet leader Mikhail Gorbachev tried to spur the union's stagnant economy by allowing people to start their own "cooperative" businesses. Within a year, a group of chemists at the Institute of Chemistry, in Tallinn, Estonia, began a joint business called Tensiid, which published books on minerals and pop science, operated a travel agency and a photography service, and did some custom synthesis. By the mid '90s the company had focused its attention entirely on custom synthesis, and it changed the named to ProSyntest. In January of this year, East Rutherford, N.J.-based contract research organization Cambrex bought ProSyntest, and the company's 20 chemists began working for the new subsidiary, renamed Cambrex Tallinn. "Cambrex was formerly a client of ProSyntest," says Kaarel Siirde, managing director of Cambrex Tallinn. The move was good for ProSyntest, Siirde says, because Cambrex "knew us and our work and we knew what they were expecting from us." In 2007, Cambrex as a whole company reported operating profit of $51.1 million.

Biotechnology firm Fermentas also owes its origin to Gorbachev's economic reforms. As a result of those reforms, in the late 1980s the Institute of Applied Enzymology, in Vilnius, Lithuania, was also allowed—in principle—to sell restriction enzymes that its scientists had discovered to Western markets. In practice this was a challenge because no banks in the country could make international transfers, says Viktoras Butkus, chief executive officer of Fermentas, the company that eventually emerged from this institute. Formerly a chemist at the institute, Butkus says he moved the company's headquarters in 2002 to Burlington, Ontario, to improve the firm's access to Western markets and to distance it from the Soviet Union, which had a reputation for poor quality products. Fermentas now produces a variety of tools for biotechnology research including enzymes that modify DNA and RNA, nucleotides, and oligonucleotides. The firm's primary research facility is just outside Vilnius and is home to more than 80 scientists. In 2007, Fermentas announced $8 million in profits and revenues of $34 million, which was 26% higher than the year before.

Pharmaceutical maker Grindeks got its start at the Latvian Institute of Organic Synthesis in Riga, which even before independence developed 17 new drugs and produced some 25% of the pharmaceuticals used by the Soviet Union. After independence, the institute's experimental plant was taken over by the new Latvian government and sold to a sequence of investors until it was finally established as a pharmaceutical company called Grindeks. The company now has GMP facilities; in 2007 it posted sales of $106 million and a net profit of $15 million. Grindeks produces Mildronate and Tegafur—two former brand-name drugs developed at the institute which are now sold generically—for international markets, as well as 12 other active pharmaceutical ingredients for a variety of drug companies. The company is planning to expand as a contract research organization, says R&D Manager Eriks Ivanovskis. The company finished building a new pilot plant in Riga last summer and is planning a new capsules and tablets production unit, to be completed at the beginning of 2009.