Publication: Budapest Business Journal
Provider: New World Publishing
Date: March 28, 2005

Venture cap fund buys into biotech firm

U.S.-based venture capital fund Primus Capital Partners LLP has invested $300,000 in local biotech firm Nebotrade Kft, the fund's managing director Zoltán Bruckner told the BBJ last week. The sum represents the largest amount Primus may invest in a single company, and secures the fund a 25% stake in the Hungarian firm, which produces soil culture media and engages in molecular biological research and development. Nebotrade manufactures more than 160 self-developed micro­biological products, and has been a profitable operation almost from its outset eight years.

In the past two years, it has increased revenues by 50%, posting revenues in excess of Ft 300 million (€1.22 million) in 2004, according to Attila Karsai, managing director of the biotech firm. Growth has been almost entirely driven by exports, Karsai added. The company exports its powdered culture media, which are used in medical diagnostics, the food industry, water quality analysis, and for breeding bacteria for research and development purposes, to 12 countries – principally to Brazil, Saudi Arabia, Germany, the U.K. and Turkey.

In the CEE region, Nebotrade is the sole exporter of powdered culture media that has its own manufacturing capacity, stressed Bruckner, who said the firm's competition comes from lower-quality domestic products or higher-priced imports. Bruckner stated that the purpose of Primus' investment is to further develop Nebotrade's powdered culture media exports, conquer new markets with new products, and find markets for its ready culture media products in neighboring countries. Nebotrade's products are much cheaper than the German and French imports that currently account for over 90% of the Ft 4 billion-Ft 5 billion Hungarian market in ready culture media, noted Bruckner.

He added that at present buyers of such products from Nebotrade include GlaxoSmithKline Biologicals Kft and TEVA Pharmaceuticals Rt, as well as numerous domestic health, higher education and research institutions. Nebotrade exploits the high margins it secures on the manufacture of culture media to finance its more risky, but potentially highly profitable molecular biological research, explained Bruckner. The firm currently has several products used in the medical sphere in Hungary that can help to determine whether a person is genetically susceptible to a certain disease, he added. In addition, Nebotrade works closely with microbiological researchers at Eötvös Loránd University (ELTE) in the area of product development. Nebotrade was founded by young Hungarian researchers, initially producing educational and laboratory tools and equipment for the domestic market. Karsai, a biologist and engineer by training, recalled that he and his colleague Ottó Lévai, a pharmacist and economist who is now the firm's financial director, realized that Nebotrade had the capability to develop culture media products of a similar quality to its West European rivals, but which would be both much cheaper to produce, and much cheaper to buy.

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