Issue cover-dated June 14, 2001, FEER

In a clinical trial in the United States, people infected with HIV, the virus that causes Aids, are receiving an experimental drug that has its roots in the rainforests of Malaysia.

The results so far are promising. The drug, called Calanolide A, reduces the levels of human immunodeficiency virus in the blood. It's also simple to administer and effective against strains of HIV that quickly became resistant to other drugs. It even shows signs of effectiveness against tuberculosis, a major killer of HIV carriers in the developing world. If it's proved successful and commercialised, the drug could be worth $200 million-$400 million per year, in line with the sales of comparable anti-HIV drugs.

The journey of Calanolide A from the rainforest to the market has been paved by a pioneering partnership between an American pharmaceutical firm and a Malaysian state government. It's also a case study of how the discovery of natural compounds now offers financial and technical rewards unimaginable 20 years ago to the countries in which the compounds were found.

For Calanolide A there's still some distance to travel. In the Bulletin of Experimental Treatments for Aids, Dr. Harvey Bartnof of the San Francisco Aids Foundation notes side effects such as fever and a decrease in cells that work with the immune system. He says these issues "will have to be resolved in future studies if this drug is to succeed." Moreover, an estimated $25 million in additional investment needs to be raised for the final round of clinical trials.

The drug's remarkable journey began in 1987, when researchers from the University of Illinois in Chicago roamed the jungles of the East Malaysian state of Sarawak, collecting plant samples for the U.S. National Cancer Institute. They were hoping to find naturally occurring compounds that could be developed into anti-cancer drugs. What they found instead was a substance from the bintangor tree (Calophyllum lanigerum) that in NCI research showed promising activity against HIV.

Since the NCI only conducts initial research, it regularly passes on worldwide rights for specific compounds to private firms. The NCI passed the rights to Calanolide A to a small American company called MediChem Research, which had previously worked on another compound from the NCI. But MediChem lacked the funds to develop Calanolide A. So in 1996 it formed an unprecedented partnership with the state government of Sarawak, which agreed to finance the first stages of Calanolide A's clinical development. A 50:50 joint venture--Sarawak MediChem Pharmaceuticals--based in Woodbridge, Illinois, was born. Profits from future sales of the drug will be split equally between the partners.

The Sarawak government's continuing investment is estimated to be $100 million-$200 million by the time the drug is commercialised, and it will be three to eight years before Sarawak sees a return on its investment, if at all. "We hope there will be some financial reward, but that is not our only consideration," says J.C. Fong, the state's attorney-general. Malaysian scientists have received training at MediChem and some of them will staff a new drug-screening and discovery facility that is being added to the government-funded Sarawak Biodiversity Centre in Kuching.

However, as Sarawak MediChem prepares for the third and final phase of clinical trials, it's uncertain whether the Sarawak government will be able to provide all of the $25 million needed. To obtain more funding the company has invited other investors to come on board. Additional investors would dilute the Sarawak government's share of future royalties. But the actual and potential benefits Sarawak enjoys from this deal are already a far cry from the past experience of source countries.

Historically, Western plant explorers felt no obligation to compensate the countries in which they found new drug compounds. For example China has received nothing for Hycamtin-R, an anti-tumour drug researched by the NCI and commercialised by SmithKline Beecham, which came from a Chinese plant collected in the 1950s. Although pharmaceutical companies could earn as much as $1 billion over the lifespan of a successful drug, they felt no need to share these profits with source countries, since the companies bore all of the research and development costs.

But there's been a growing awareness by biodiversity-rich but cash-poor countries of the value of their natural resources. In the mid-1980s tropical countries began to argue for compensation. This spurred the National Cancer Institute to revise its agreements with the countries its scientists explored in.

Starting in 1991, the NCI required companies that took up NCI-sponsored research to negotiate agreements for benefit-sharing with source countries. Thus, MediChem was required to negotiate benefit-sharing with the Sarawak government. Forming a business partnership with the Sarawak government as well, instead of another pharmaceutical company, was a bonus: It meant just one set of negotiations for MediChem, instead of two.

MediChem chief executive Dr. Michael Flavin says the partnership "could be a good model for other governments and businesses to use in the development of natural product discoveries." Dr. Tuah Jenta, the Malaysian vice-president of Sarawak MediChem, adds: "Even at this stage the partnership has already derived significant benefits and proven a lot of scientific and business principles."

If Sarawak MediChem is an innovative model for profiting from biodiversity, it also offers a cautionary tale: The Calophyllum lanigerum tree from which materials were collected in 1987 had been chopped down by the time a second expedition was mounted in 1993. Samples taken from other trees of the same species were not as high in Calanolide A, so MediChem had to synthesize the compound before it could continue with its research. It's a vivid lesson that the conservation of biodiversity is a prerequisite for its profitability.