Lured by Rising Healthcare Demand, Essex Woodlands Enters Latin America

Jan 31 2012

BOGOTA, Colombia—With demand for health care rising across Latin America, Advent International and Essex Woodlands Health Ventures have acquired a controlling stake in Grupo Farmaceutico Biotoscana S.A. in a deal that will fuel the Colombian drug-maker’s growth into Mexico and Brazil.

This is the first Latin American investment for Essex Woodlands, which teamed up with Colombia-based investors from Advent to buy Biotoscana for an undisclosed sum at the end of 2011. The firms are among a growing number of investors seeing opportunity in a region in which more people are gaining access to health care.

For example, Burrill & Co. recently raised $125 million toward a $200 million Brazilian medical fund, while Montreux Equity Partners, TPG Biotech and Votorantim have backed Latin American drug-seller Moksha8 Inc.

Economic growth and government efforts to improve access to health care are sparking interest in the region. Chile put its Regime of Explicit Health Guarantees, a scheme to provide universal access to medical care, into effect in 2005. Mexico established its Popular Health Insurance program, an effort to provide health care for unemployed or self-employed people who lack access to medical coverage, in 2003.

Brazil made health care a right through its 1988 constitution and set up its Unified Health System to meet this obligation. The country is also rich scientifically and academically and has a middle class that’s spending more on health care, said Burrill Chief Executive G. Steven Burrill.

Gross domestic product grew by 4.3% in Colombia, 5.2% in Chile, 5.4% in Mexico, 7.5% in Brazil and 9.2% in Argentina in 2010, according to the World Bank. By contrast, in the U.S., Canada and U.K. that year, GDP growth was 3%, 3.2% and 1.4%, respectively. 

Large and small companies are tapping into this growth. Sanofi SA, for example, said in November that third-quarter net sales in Latin America climbed 12% as revenue from generics and the diabetes drug Lantus increased in the region. Rival GlaxoSmithKline PLC bought Argentine drug-maker Laboratorios Phoenix S.A.C.yF in 2010 and gained access to generics sold under the Phoenix brand. 

Venture-backed Moksha8 formed in 2007. Through deals with companies such as Roche Holding Ltd., Pfizer Inc. and Watson Pharmaceuticals Inc. it sells medicines for mental illness, pain, inflammation and neurological and infectious disease.

All together, the Latin American pharmaceutical market is worth $45 billion, according to a September report from

Advent and Essex Woodlands hope to supercharge the growth of a business that has expanded steadily and now has $100 million in sales, according to Toby Sykes, an Essex Woodlands principal. Biotoscana, which had been family-owned, began operations in Colombia in 1994 and originally concentrated on vaccines and other biologics it had licensed. Over time, it’s secured certain rights to products such as Tracleer, an Actelion Ltd. treatment for pulmonary arterial hypertension with global sales of 1.6 billion Swiss francs in 2010.

The Bogotá-based company obtained rights to Tracleer in all Latin American markets except Mexico and Brazil in 2007. Last year, Biotoscana and Actelion renewed the contract for an additional five years, according to an Actelion spokesman. Biotoscana officials weren’t available for comment.

Biotoscana, which also sells branded generics, has expanded over the years into Peru, Chile, Dominican Republic and Ecuador. It took a small amount of debt to get its start but has since grown organically, Sykes said. Other products in its portfolio include the hypertension medicine Aldomet and the ulcerative colitis treatment Salofalk.

With this infusion it seeks to compete in Latin America’s two largest markets, Mexico and Brazil, establishing sales teams there and acquiring new product rights. As its reach widens it also will emerge as a stronger contestant for Latin American licenses to other big-market drugs, said Andrés Marulanda, a director in Advent’s Bogotá offices. Marulanda has joined the Biotoscana board and Sykes is an observer.

Advent and Essex Woodlands can help it achieve its goals. Advent, a Latin American investor for more than 15 years, has local connections, while Essex Woodlands can use its ties to European and U.S. drug industry executives to connect Biotoscana with licensing opportunities. But mostly, the firms are betting on the entrepreneurship of a team that has shown an ability to acquire products and move into new markets.

“You fight hard for your market share in the Latin American market,” Sykes said. “They have executed very well and continue to be a [trusted] brand.”
by Brian Gormley
VentureWire Lifescience Newsletter January 31, 2012