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TWN Info Service on Biodiversity and Traditional Knowledge (Oct14/01)
7 October 2014
Third World Network

Dear friends and colleagues,

When the Convention on Biological Diversity (CBD) entered into force in 1993, a wave of optimistic bioprospectors flooded into rainforests worldwide, looking for “green gold”. Shaman Pharmaceutical was a prominent California-based company that received media attention and praise from many quarters for its “embrace” of the CBD.

More than 20 years and US $200 million later, the corporate transformation from the now defunct Shaman to Jaguar Animal Health, which announced a new product launch on 29 September, tells a cautionary tale. 

The report below by Edward Hammond of Prickly Research (USA) reveals that derivatives from the sap of sangre grado, an Amazonian tree used in indigenous peoples' traditional medicine, have become part of corporate portfolios but the outlook for benefit sharing for Amazonian indigenous peoples remains bleak. 

The report states that “the Nagoya Protocol to the CBD, which enters into force on 12 October 2014, is intended to ‘put meat on the bones’ of the Convention's access and benefit sharing requirements. Mobilizing the private sector to finance biodiversity conservation and sustainable use is another growing call from some quarters.” 

However, “the continuing saga of Shaman/Napo/Jaguar, and the indigenous peoples who have been failed in that effort, however, warns that private sector investment – even if ostensibly in support of the CBD and its objectives – doesn’t necessarily translate into effective benefit sharing and productive partnerships with indigenous peoples and local communities to conserve and utilize biodiversity.”

With best wishes,

Third World Network


Sangre grado:  The Amazonian Medicinal Plant that Keeps Giving (Life to New Companies)

By Edward Hammond

With a gushing news release, on 29 September 2014, Jaguar Animal Health launched its first product, an anti-diarrhea pill for calves that is derived from the sangre grado, an Amazonian tree.[1]

California-based Jaguar is on a public relations push, having recently announced a US $70 million initial public stock offering.[2] It is wooing investors on the promise of a series of products, based on active ingredients from the same plant, to treat gastrointestinal problems in farm animals and family pets – from camels to cats.  Jaguar has applied to list its stock on NASDAQ, a major United States stock exchange, and says it will become a significant player in animal health.

For the people who run Jaguar, it's been a long and twisty road, started in 1989, to go from the Amazon rainforest to September’s product launch at a dairy farming convention in Wisconsin.  Jaguar's quarter century trip revolves around the sap of an Amazonian tree used in indigenous peoples' traditional medicine but, until recently, cows had nothing to do with the story.

Investors and customers may not realize that Jaguar is a company in its third incarnation.  Most of the products it has announced to date are reformulations of the same ingredients, from the sangre grado (Croton lechleri) tree,[3] that Jaguar's corporate predecessors sought to sell as human pharmaceuticals for more than two decades.

For the management of Jaguar, work with sangre grado has been a career. They have raised and spent over US $200 on the project, have a new $70 million stock offering on the table, and a recently-approved human pharmaceutical that has begun to generate income, albeit probably not in the way Jaguar’s managers may have planned.

For Amazonian indigenous people, the benefits of this spending and corporate activity have been fewer, and the value less clear.

The Brief and Unhappy Life of Shaman Pharmaceuticals

Longtime followers of access and benefit sharing at the Convention on Biological Diversity (CBD) will remember the early 1990s, when the CBD was new and a wave of optimistic bioprospectors flooded into rainforests worldwide, looking for “green gold”.

Prominent in the first wave of CBD-inspired bioprospectors was a California-based company named Shaman Pharmaceuticals.  Founded in 1989, Shaman was led by the same duo that now runs Jaguar Animal Health - Lisa Conte, an entrepreneur with a knack for fundraising and attracting attention, especially from wealthy American liberals, and Steven King, an ethnobotanist with the environmental cachet of having gone into drug development from a job at the US NGO, The Nature Conservancy.

Unusual among pharmaceutical companies in the mid-1990s, Shaman embraced the CBD, at least an idea of it, expressing admiration for indigenous peoples and their traditional knowledge, seeking relationships with indigenous peoples' organizations, and declaring its intent to sell and share benefits from drugs derived from traditional medicinal plants, especially from the Amazon. Many praised it as a good corporate citizen.

Shaman was most active in the western Amazon. It amassed traditional knowledge and medicinal plants from the region, including collections from the famed Jivaroan peoples of the Mara๑on River basin in Ecuador and Peru – the Shuar, Achuar, Huambisa, and Awajun peoples, who fiercely resisted Inca, Spanish, and later corporate predations on their territories. Shaman supplemented these collections with plants from collaborations in West Africa and possibly other regions.

Back in the mid-1990s, Shaman raised over US $100 million in funding from high profile investors including Microsoft co-founder Paul Allen. The company’s fundraising success and promises of benefit sharing raised hope among indigenous peoples in the western Amazon that their traditional knowledge and genetic resources might be transformed into products in a tangible timeframe, and in a just relationship with bioprospecting partners.  While it may seem na๏ve today, in both the Peruvian rainforest and on the shore of the San Francisco Bay, it seemed at that time as if just a few years might separate a rainforest remedy from a blockbuster drug and large scale benefit sharing.

The buzz that Shaman's activity created in South America was hottest around sangre grado, leading to the tree's exploitation by a number of companies in homeopathic-type products and a demand, not always well regulated from medicine and environmental standpoints, for the tree's blood red latex.

But as time wore on without news of progress from Shaman, by the late 1990s the company’s reception from Amazonian indigenous peoples was getting cold.  The company's promises of benefit sharing had not materialized; its patents were increasingly predatory on traditional knowledge, and its actual benefit sharing paltry at best.

Shaman refused to discuss approaches to knowledge other than agglomerating patents on indigenous peoples' plants under its name and exclusive control, a strategy, the company said, that its investors demanded.  Sure, the company had bought some sangre grado for research use, providing a small economic stimulus, and for benefit sharing it had provided a few grants for small community projects, but the vision wasn't materializing.

As relationships soured, Shaman hired an activist away from Rainforest Action Network to help manage increasingly thorny exchanges with indigenous peoples and NGOs, and it tried to lower expectations saying that benefits would come when it reached the commercialization stage.

Transformation into Napo Pharmaceuticals

By 1999, having spent over $100 million, Shaman found itself unable to pay the cost of clinical trials for its sangre grado-based anti-diarrheal drug, its only product with a serious shot at approval. Cash-squeezed Shaman had to give up the idea of bringing a pharmaceutical to market,[4] and after a brief dalliance with selling the drug as an “herbal remedy” (without need for US FDA approval), the company folded in early 2001, declaring bankruptcy.

Sort of.  Shaman Pharmaceuticals was legally dead, but its leadership had merely molted. A new company named Napo Pharmaceuticals quickly appeared,[5] with the same leadership as Shaman. Napo bought Shaman's key assets out of the previous company's bankruptcy and picked up where Shaman had left off. Napo pursued a strategy of entering into research and development agreements for the sangre grado drug with other, wealthier, companies. As these studies progressed, in 2006 Napo raised a further $24 million on the stock market, thought an offering on the London Stock Exchange. (The company was only briefly publicly traded before being delisted in 2008.[6])

Napo chose to work with two companies. Salix Pharmaceuticals, in North Carolina, which obtained rights in the US, Europe, and Japan, and Glenmark Pharmaceuticals, of Mumbai, India which obtained rights in 140 developing countries.

With assistance from Glenmark and Salix, a sangre grado drug for treatment of diarrhea in AIDS patients finally achieved US approval at the end of 2012 (and later in India).  It has since come to market – more than 20 years after Shaman began research.[7] Called Fulyzaq (crofelemeler), estimates of US sales of the new drug vary, but may be $20 million per year (modest in industry terms).[8] Glenmark, the Indian partner, manufactures crofelemer for Salix, and for its own sale.  Glenmark has published much larger estimates of potential sales in the countries where it has rights, but it is too early to know if these will prove accurate.  Details of Glenmark's supply chain, and what benefit sharing obligations it inherited from Napo/Shaman, are unknown.

While Napo's strategy of licensing the sangre grado intellectual property (IP) advanced crofelemer to market, the business relationships did not go forward smoothly. In 2011, Napo unsuccessfully tried to revoke the licenses it granted the North Carolina and Mumbai companies.  It lost legal battles with both and, in the process, Napo appears to have lost control of the sangre grado-based drug.

In early 2014, Salix prevailed over Napo in a suit in which the latter claimed $150 million in damages and sought to force Salix to invest more in crofelemer marketing.[9] Napo also lost a legal fight with Glenmark, which defeated Napo's attempt to cancel its license to sell crofelemer in 140 countries. Glenmark alleged, and arbitrators agreed, that Napo had breached the agreement by revealing data to Laurus Labs, a Glenmark competitor.[10]

Napo's current financial and IP situation is not clear. The outcome of lawsuits suggests the company has largely lost control of crofelemer for human use. Napo's website appears to be abandoned and its key employees have new jobs.  It is possible that Napo shareholders will receive some income from Salix or Glenmark sales; however, apart from potentially receiving royalties from former business partners, Napo does not appear to be a viable concern.

Enter Jaguar Animal Health

But, as with the death of its predecessor Shaman Pharmaceuticals, the demise of Napo hasn't meant the end of the road for the same management team that has run the concern since the beginning, or its focus on sangre grado as the core product of their company.

While Napo licensed Shaman’s crofelemer patents to Salix and Glenmark for human pharmaceutical applications, it retained rights to veterinary use.  The new company led by Conte and King, Jaguar Animal Health, has now licensed veterinary IP from Napo, much of which originated with Shaman.

Jaguar has also inherited rights to Shaman’s medicinal plant and traditional knowledge collections, which it declares to be a major asset. Jaguar's website boasts of “access to powerful compounds,” and “exclusive worldwide license to a large medicinal plant library”. Such claims, resting on decades-old collections from indigenous peoples, are fundamental to Jaguar’s 2014 pitch to potential investors.

On the cusp of becoming a new publicly traded company, and having launched its first product, Jaguar's future rests on sangre grado, just like Shaman and Napo before it.  If Jaguar's $70 million initial public offering succeeds, the sum Conte and King's companies will have raised for development of sangre grado drugs over the last quarter century will approach or exceed $300 million.

Money for Sangre Grado[11] [12]

Shaman Era

1989-90

$10 million in venture capital

1990-91

$20 million, venture capital

1993

$63 million, NASDAQ stock offerings

1998

$20 million corporate note

1999

$8 million corporate note

Napo Era

1999

$650,000 “angel investors” (reportedly to buy Shaman's intellectual property)

1999-2008 

$61 million, private investors

2006

$24 million, LSE stock offering

Undisclosed investments from Salix and Glenmark

Jaguar Era

2014            

$5 million, BioVeda China Fund

2014

$70 million, NASDAQ initial public offering (planned)


Total:            

$211.7 million, plus investments from Salix and Glenmark and pending IPO. Some estimates are higher.

Sales Income

2014+                         

Estimates vary. Salix crofelemer sales are perhaps $20 million per year. Glenmark sales are unknown, although the company has estimated a market as high as $300-$500 million annually where it has rights.[13] Napo may receive undisclosed royalties.


No Healing for Indigenous Peoples

Although human and veterinary drugs based on sangre grado are now commercialized, the Amazonian indigenous peoples whose traditional medicinal knowledge and genetic resources are used have received very few benefits from Shaman, Napo, and Jaguar’s exploitation of sangre grado.

Indigenous peoples’ knowledge and resources have been repeatedly patented, while hundreds of millions of dollars have been mobilized to support the work of three companies over more than two decades, but precious little has changed for Amazonian indigenous peoples, for whom the primary “benefit” has been to collect and provide sangre grado latex to companies as a raw material, an extractive activity reminiscent of the more than hundred year old Amazonian rubber trade.

Will the situation change now that human and veterinary drugs are being sold?

Since the days of Shaman Pharmaceuticals, Conte and King have said that they will share benefits with through an NGO, of which they are directors, called the Healing Forest Conservancy (HFC).  Even when Shaman was a viable entity this structure came under criticism, since it appeared that benefit sharing had been less spelled out in contractual arrangements and more construed as a voluntary activity by an American NGO.  Adding to the criticisms was the HFC's focus on activities designed to curry favor among researchers, such as an ethnobotany prize, which did not qualify as benefit sharing in the perception of many indigenous peoples and observers.

While the HFC once appeared at CBD and ethnobotany meetings, since the 1990s it has drifted into oblivion. The small grants given to HFC by Shaman dried up, its holding of Shaman stock became worthless, and it even ceased to award its prize for ethnobotanists.

Although HFC has been essentially inactive since the early 2000s and is little more than a memory of an experiment gone badly, in 2013 Jaguar's Steven King confirmed that HFC remained the benefit sharing mechanism for Napo Pharmaceuticals, which he said had “informally” adopted Shaman's benefit sharing obligations.[14] And in 2014, King and Conte's official biographies at Jaguar note that they are HFC directors, suggesting a philanthropic type intent, but not mentioning benefit sharing at all.

So far, however, Jaguar has made no public statements on benefit sharing, and HFC remains a pipe dream.  In its most recent filings with the US Internal Revenue Service, for fiscal year 2012, HFC declared assets of $194 in cash and 30,000 shares of Napo Pharmaceuticals, with a fair market value of $1.[15] The Conservancy made no grants, and hasn't done so for many years.

If Napo's fortunes change, although there is little to suggest that they will, HFC had better hurry with benefit sharing, because Napo's income potential appears linked to the Shaman patents it has rights to.  Key claims on crofelemer expire in 2018, four years from now, and there is little time to pull together a benefit sharing program that many would argue was ill-conceived from the beginning, and decades overdue.

Conclusion

Twenty-five years after Shaman was founded, and with over $200 million and counting spent to commercialize sangre grado, the outlook for benefit sharing for Amazonian indigenous peoples remains bleak.  Although a human sangre grado pharmaceutical has recently come onto market, it appears that Shaman's corporate heir, Napo Pharmaceuticals, no longer controls the drug.  To what extent, if any, that Napo's erstwhile business partners Salix and Glenmark inherited Shaman's benefit sharing commitments, to the extent they were ever made clear, is not known but is likely limited.

Some might note that Shaman/Napo/Jaguar are based in the United States, about the only country left that is not a Party to the CBD, and suggest this might explain the situation. But Shaman's arrangements were inspired by the CBD and intended to be in harmony with it, and the company's partners over the years have frequently been in countries that are Parties to the Convention.

In many senses what the CBD was supposed to stop is exactly what happened anyway. A new drug is put on the market, one that is indisputably derived from indigenous peoples' knowledge and resources. The drug was developed by a company ostensibly committed to the CBD, yet for all the commotion and money spent, these developments have made little difference for indigenous peoples and biodiversity.

The management of Shaman/Napo/Jaguar has always promised to rectify such imbalances. Leveraging its good intentions as a business asset, Shaman and Napo have even successfully recruited wealthy American backers of indigenous peoples rights as its investors. Yet the management's chosen benefit sharing mechanism, the Healing Forest Conservancy, has less than US $200 in assets, hasn't made a grant in perhaps 15 years, and was a minor entity even when it was active.

Despite this deplorable situation, Jaguar Animal Health is pushing new animal drugs based on sangre grado into the market, and investors are being invited to sink a further $70 million into the affair. Little to nothing of that, it can be reasonably anticipated based on Shaman and Napo's track record, will go to help indigenous peoples defend and develop their biodiversity, culture, and territory.

The Nagoya Protocol to the CBD, which enters into force on 12 October 2014, is intended to “put meat on the bones” of the Convention's access and benefit sharing requirements. Mobilizing the private sector to finance biodiversity conservation and sustainable use is another growing call from some quarters.

The continuing saga of Shaman/Napo/Jaguar, and the indigenous peoples who have been failed in that effort, however, warns that private sector investment – even if ostensibly in support of the CBD and its objectives – doesn’t necessarily translate into effective benefit sharing and productive partnerships with indigenous peoples and local communities to conserve and utilize biodiversity.


[1]Jaguar Animal Health (2014). Jaguar Animal Health, Inc. Launches First Product, Neonorm™ Calf, at World Dairy Expo (press release). Business Wire. 29 September.  URL:  https://secure.marketwatch.com/story/jaguar-animal-health-inc-launches-first-product-neonorm-calf-at-world-dairy-expo-2014-09-29

[2]Jaguar Animal Health (2014).  US Securities and Exchange Commission Form S-1. URL: https://www.sec.gov/Archives/edgar/data/1585608/000104746914007210/a2221253zs-1.htm

[3]Also called sangre de drago, with both Spanish common names translated as “dragon's blood”, a reference to the tree's dark red latex.

[4]Abate T (1999). Shaman quits the drug business. San Francisco Chronicle. 3 February.  URL: http://www.sfgate.com/business/article/Shaman-Quits-The-Drug-Business-2949240.php

[5]The company's names have always referenced its rainforest connections. Napo was named for a river in Ecuador.   The jaguar, name of the current company, is the big cat native to the western Amazon, and an iconic symbol for Jivaroan and other peoples of the region, who attribute magical powers to the beautiful but dangerous feline.

[6]Napo Pharmaceuticals (2008).  Napo Pharma Inc. NAPL Cancellation of Listing (press release). 16 October.  URL: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aW4FFb7.TnQc

[7]US Food and Drug Administration (2012).  FDA approves first anti-diarrheal drug for HIV/AIDS patients (31 December).  URL: http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm333701.htm

[8]Edney A and R Bostick (2012). Salix Wins FDA Approval of Dragon’s Blood Drug for Diarrhea. Bloomberg. 31 December. URL: http://www.bloomberg.com/news/2012-12-31/salix-wins-fda-approval-of-dragon-s-blood-drug-for-diarrhea-1-.html

[9]Salix Pharmaceuticals (2014).  Salix Wins Napo Pharmaceuticals Litigation (press release). 25 February.  URL: http://www.salix.com/news-media/news/index.aspx/salix-wins-napo-pharmaceuticals-litigation

[10]Reuters (2012) India's Glenmark gets arbitrator nod to sell Crofelemer drug. August 23.  URL: http://www.reuters.com/article/2012/08/23/india-glenmark-napo-idUSL4E8JN0SR20120823

[11]Coster H (2010). One Pharma Entrepreneur's Never Ending Quest. Forbes. 30 December.  URL: http://www.forbes.com/forbes/2011/0117/entrepeneurs-pharma-prescriptions-lisa-conte-mission-impossible.html

[12]Jaguar Animal Health (2014). Jaguar Announces Initial Close of Series A Round (press release). 5 February. URL: http://www.prnewswire.com/news-releases/jaguar-announces-initial-close-of-series-a-round-243778101.html

[13]Somvanshi KK (2013). What does crofelemer approval mean for Glenmark? Economic Times. 3 January. URL: http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/what-does-crofelemer-approval-mean-for-glenmark/articleshow/17873401.cms

[14]Mader LS (2013). Update: FDA Approves Crofelemer as First Oral Botanical Drug. Herbalgram 97:69-69. URL: http://cms.herbalgram.org/herbalgram/issue97/hg97-legreg-crofelemer.html

[15]Healing Forest Conservancy (2013).  IRS Form 990-PF for FY 2012.

 


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