Nearshore Americas

Biotech is Booming in Latin America: Here’s Why

Discussing the world of biotech startups can sometimes sound like science fiction. These companies now enable us to perform non-invasive surgery with magnets, detect breast cancer before going to the hospital, destroy infection without antibiotics, and even communicate with pre-mature babies while they are in an incubator.

All of these solutions were born in Latin America. While this region has traditionally lagged behind in biotech, which requires significant upfront investment to get off the ground, entrepreneurs in the life sciences are gaining traction and solving global issues in hospitals and labs across Latin America.

What is biotech?

Biotech, short for biotechnology, can be a hard area to define. The UN defines this industry as “any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use.” This wide definition includes agtech, foodtech, renewable energy, and even animal health. But more than 80% of biotech startups in Latin America focus on human health, and for clear reasons.

One-third of Latin Americans cannot access the healthcare they need because it is too expensive. In Brazil, some patients wait up to 480 days for an appointment with a doctor. There is a pressing need to create affordable, rapid healthcare solutions to treat Latin America’s growing population as the region pushes for economic growth.

Challenges and Opportunities in Latin American biotech

Latin America has traditionally lagged behind in biotech development because government investment in research and development (R&D) has been relatively low compared to top innovation countries like the US and Israel. Brazil is the largest investor in the region, designating 1% of GDP to R&D. Chile invests 0.38% ($87.39 per capita) in R&D, while Argentina and Colombia invest 0.54% and 0.24%, respectively. To compare, the US, Israel, South Korea, and Japan invest up to 3% of their GDP in R&D activities, which directly boost biotech growth.

But between 2012 and 2017, private investment in Latin America’s pharmaceutical industry almost doubled from $68B to $110B. This influx of private capital is also driving the development of new medical devices, treatments, and medications that revolutionize healthcare in Latin America.

The most significant challenge for biotech development is the upfront risk of investing in a product that has not been tested on the market. Many devices and medications must be subjected to clinical trials and tests before they can debut on the market so a biotech startup cannot grow without capital like a bootstrapped fintech company or marketplace.

Most of the investment in a biotech company gets focused on product development, not business model. As this product goes through various phases of development and clinical trials, it can be purchased at any time; if it reaches the final stages, sometimes the exits can run into the tens of billions of dollars. But this type of investment is very risky.

Latin America’s competitive advantage in biotech

Despite these challenges, Latin American startups are taking the biotech industry by storm. Mexico’s Eva Tech and Unima have both reached the Y Combinator with their innovative medical testing devices for breast cancer and infectious disease, respectively. Chile’s Praxis Biotech, Levita Magnetics, and GeneproDX are leveraging experience in Chilean hospitals and labs to pioneer new molecules and surgical techniques from offices in Silicon Valley.

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These startups see a competitive advantage in Latin America: access to top scientists and hospitals with modern technology, for a fraction of the cost of a lab in the US. Furthermore, the Latin American market presents a unique opportunity to make a difference in the quality of life of 600 million people across the region.

While the risk involved in biotech investment might scare some investors, the potential results that these startups are developing could be not only extremely lucrative but also life-changing for the patients they will come to treat. Biotech is a complicated, misunderstood, and exciting industry and Latin America is on the cusp of several breakthroughs that will place the region at the center of life science innovation across the globe.

Pedro Varas

Pedro Varas is the Founder and CEO of Founderlist, an equity crowdfunding platform for high-impact startups in Latin America.

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