Journal of Science and Technology Policy Management

Iranian firms in biopharmaceutical value chain: where to go now?

Masoud Afshari-Mofrad, Ali Salim,
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Masoud Afshari-Mofrad, Ali Salim, (2019) "Iranian firms in biopharmaceutical value chain: where
to go now?", Journal of Science and Technology Policy Management, https://doi.org/10.1108/
JSTPM-12-2018-0123
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Iranian firms in biopharmaceutical Value chain

value chain: where to go now?

Masoud Afshari-Mofrad and Ali Salim
Institute for Trade Studies and Research, Tehran, China

Received 18 December 2018

Abstract Revised 24 February 2019
Purpose – Motivated by the huge potential of biosimilars in the near future and rapid growth of Iranian Accepted 15 March 2019
biosimilar producing firms in recent two decades, this paper aims to explore the positioning of these firms in
biopharmaceutical value chain and their path of technological capability building to extract policy-relevant
advice.
Design/methodology/approach – As part of a two-year research project, an online questionnaire was
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designed and sent to biopharmaceutical experts in Iran between May and October 2016. Respondents came
from biopharmaceutical firms. Also, 12 semi-structured interviews were conducted to analyze the path of
capability building in Iranian biosimilar-producing firms.
Findings – The findings show that Iranian biopharmaceutical firms (BPFs) are mostly concentrated on
“pharmaceutical development,”, “drug manufacturing” and “ after-sales services’ activities.” The study also
demonstrates that most BPFs in Iran are at the “assimilative” level of capability and a few of them have
recently moved toward the “adaptive” level.
Originality/value – The findings show that Iranian BPFs are mostly concentrated on “pharmaceutical
development,” “drug manufacturing” and “after-sales services” activities. The study also demonstrates that
most BPFs in Iran are at the “assimilative” level of capability and a few of them have recently moved toward
the “adaptive” level.
Keywords Iran, Biopharmaceuticals, Value chain, Technological capability, Policy making
Paper type Research paper

1. Introduction
Biotechnology and genetic engineering have opened their way into the modern medicine and
many products including diagnostic and therapeutic monoclonal antibodies, genetic testing
and analysis kits, therapeutic proteins produced by recombinant DNA technology and gene
therapy and infertility services products; are manufactured benefiting from these
technologies. Biopharmaceuticals, also known as biologic medical products, are the most
important result of using biotechnology in the field of medicine. These drugs and drug
therapies are produced through the use of living cells that treat, control and cure conditions
(Gurau, 2004).
Worldwide prescription drug and OTC pharmaceutical sales show that in 2015
biopharmaceuticals have accounted for more than 24 per cent of global drug market share,
and it is expected to increase to 29 per cent in 2022. In the meantime, the top selling
pharmaceutical product in the world in 2016 was a monoclonal antibody, namely,
Nivolumab which was designed by biotechnology (EvaluatePharma, 2016).
Despite the relatively higher efficacy level of biopharmaceuticals compared with
traditional drugs (Geigert, 2013) and their bright future ahead because of their high costs of
Journal of Science and Technology
The authors would like to declare their appreciation to Institute for Trade Studies and Researches Policy Management
and Vice Presidency for Science and Technology for their financial support for this study (Grant © Emerald Publishing Limited
2053-4620
Number 94632156945). DOI 10.1108/JSTPM-12-2018-0123
 JSTPM discovery and complex manufacturing processes, most firms cannot afford developing a
new drug. Therefore, many biopharmaceutical firms (BPFs) have focused on producing
similar existing biopharmaceutical (Biosimilars) and ignored research and development
activities.
In the past two decades, a few Iranian firms have started producing biosimilars and
supplied $220m worth of biopharmaceuticals in to Iran’s pharmaceutical market 2015.
These BPFs used purchased cell lines from foreign firms and concentrated on production
processes. In recent years, a few Iranian BPFs have absorbed the design knowledge of
biosimilars and are able to generate cell lines and design drugs locally.
In spite of the rapid growth of biopharma industry in the world, there have been a few
studies scrutinizing the industry’s value chain. Also, no previous study has been conducted
to investigate the positioning of Iranian BPFs in this value chain. Thus, the current study,
firstly, tries to provide a detailed value chain of biopharmaceutical industry. Second, the
study explores the positioning of Iranian firms in this value chain and describes their path of
capability building.
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To do so, the rest of this paper is organized as follows: Section 2 provides a brief
presentation of biopharma development in Iran and reviews the literature on biopharma
value chain and capabilities of BPFs. In this section, the value chain is presented. In Section
3, the research methodology is described. Section 4 is devoted to the findings of the study
about the position of Iranian BPFs in the value chain and their path of capability building.
Section 5 discusses the findings and proposes a matrix for improving the value creation of
BPFs. Finally, Section 6 proposes some policy recommendations.

2. Research background
In this section, after presenting the current status of Iran’s biopharmaceutical market, the
literature on biopharma value chain and capabilities of BPFs is reviewed.

2.1 Development of biopharmaceuticals in Iran

Producing biologic medicines has a relatively long background in Iran and as a consequence
of 1918-1919 influenza pandemic in Persian regions which killed hundreds of thousands of
people, some institutes for the microbiology and immunology research were established in
the country (Nezhad Fard et al., 2013). These institutes (such as Pasteur Institute) tried to
produce vaccines and other biologic medicines like Insulin. After development of
biotechnology in the world and consequently in Iran, some of the researchers of these
institutes, in cooperation with some academicians who were working in the field of
biotechnology, tried to establish a few spin-off firms to produce genetic testing and analysis
kits in the late 1990s. After a few years and in cooperation with German, Indian and Cuban
BPFs, Iranian leading firms started investing in production of biosimilars in early 2000s.
Today, in addition to institutes and firms producing biologic medical products, there are 18
private BPFs producing 18 biosimilars approved by ministry of health (MOH). Table I
shows these biosimilars and their related firms.
In 2015, these BFPs supplied more than 30 per cent of Iran’s biopharmaceutical market.
Figure 1 shows Iran’s biopharmaceutical market size in terms of imported and locally
produced drugs.
Iranian firms have recently started to export their products to countries such as Russia,
Turkey, Iraq, Syria, Pakistan, Armenia, Azerbaijan, Malaysia and Kazakhstan, but in 2015,
they could only export less than $14m. Table II shows the leading Iranian biotech exports.
 Products Companies
Value chain
1 IFN a 2 b PooyeshDarou
2 Peg-IFN a 2 b PooyeshDarou
3 IFN b 1a CinnaGen, Actoverco
4 IFN b 1 b ZistDarouDanesh
5 IFN g Eksir
6 Insulin Eksir, Daroupakhsh, Razi, Ronak, Pasargad, Vista, Vitan
7 Antihaemophilic Factor 7 AryoGen
8 Antihaemophilic Factor 8 SamanDarou
9 Filgrastim CinnaGen, PooyeshDarou, AriyaTinaGen, Ronak, Zahravi, Armanpharmed
10 Peg-Filgrastim CinnaGen
11 EPO CinnaGen, PooyeshDarou, NoTarkib
12 Smatropin PooyeshDarou, Sobhan, Homapharmed
13 Gonadotropin PooyeshDarou, Daroupakhsh, Homapharmed, Roozamad
14 Retaplase Osveh, Zahravi
15 Rituximab CinnaGen, AryoGen, Sobhan
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16 Etanercept AryoGen
17 Trastuzumab Razi
18 Follitropin CinnaGen, Osveh Table I.
19 Teriparatide CinnaGen List of biosimilars
20 Bevacizumab Ozan produced by Iranian
21 Streptokinase Homapharmed, DarmanAra BPFs

Produced Imported

600

500 494
457
400

300 292 300

250
224 220
200 210 Figure 1.
146 138 Value of produced
120
100 91 and imported
biopharmaceuticals
0
2009 2010 2011 2012 2013 2014 2015 2016
in Iran (million $)

2.2 Biopharmaceutical value chain

Biopharmaceuticals are relatively new types of medical products and the industry is almost
a young one. Therefore, researchers have recently started studying different aspects of this
industry and its related literature is still narrow. An extensive review of the literature
showed that a few researchers have investigated the value chain of biopharma industry. For
instance, Guru (2004) has divided the value-added chain of the biopharmaceutical sector into
three stages including:
(1) Stage 1: Product innovation including generating the seed idea, testing the idea,
gathering necessary resources for the development of the idea, creating the product
prototype and patenting the product and the production process.
 JSTPM Name of product Producer Explanation

CinnoVex® CinnaGen A drug for controlling the progression of multiple

ReciGen® (Interferon Beta-1a)
Cinnal-f® (follitropin alfa)
CinnoPar® (Teriparatide)
Pd Poetin
ZIFERON®
Interferon gamma 1 b
Aryoseven®
Table II.
Leading Iranian
biotech exports Source: UNCTAD, 2016
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sclerosis (MS) by using recombinant DNA technology
A recombinant DNA origin based hormone identical to
a follicle-stimulating hormone (FSH)
Help to form new bone, increase bone mineral density
and bone strength. (Osteoporosis)
Pooyesh Darou Recombinant human Erythropoietin Alfa.
Zist Daru Danesh Interferon in the treatment of relapsing-remitting MS.
Exir Interferon gamma 1 b
AryoGen Recombinant activated human blood coagulation
Factor VII

(2) Stage 2: Product development including starting a pilot-scale manufacturing,

testing the product (preclinical study and clinical evaluation) and obtaining the
approval of the drug.
(3) Stage 3: Product commercialization including initiating the market research
process, identifying the needs of potential customers, designing and implementing
market strategy and developing the market.

He has indicated that the process of product development is complex, lengthy, highly
expensive and risky. To develop a new medicine, a huge number of candidate substances
must be screened and tested (the success rate is less than 1 in 4000). This process can take at
least 10 years and costs more than $300m. Therefore, most BPFs try to develop new products
through joint ventures and strategic alliances (Guru, 2004). Emphasizing on the costs and
risks of drug discovery, Wang et al. (2009) enumerated drug discovery, drug research, drug
manufacturing and drug sales as the main elements of biopharma industry value chain.
In another research, Choy et al. (2011) have identified key activities and technologies on
the R&D value chain including early research, lead discovery, preclinical, pharmaceutical
development and Phase 1 to 4 of clinical trial. They found that China’s biopharma R&D
sector has developed significantly in recent years and the capabilities of Chinese firms is
attracting multinationals to move from simple outsourcing to strategic partnership. In
contrary, Behme (2015) has just concentrated on the hindmost of the biopharma value chain
including development, production and marketing. He divided these activities into more
detailed activities such as clinical trial, manufacturing, distribution, sales/marketing,
reimbursement and post marketing.
From another point of view, Reynolds et al. (2016) have investigated the role of Brazilian
BPFs in biopharma global value chain. They have broken down the biopharma value chain
into four primary activities including discovery, product development, manufacturing and
improvement. They have also divided these primary activities into nine secondary activities
including understanding disease mechanisms, validation of targets, develop compounds,
preclinical development, clinical trials, effectiveness research, regulatory approval,
manufacturing and post marketing research. The results of their study show the
development of biopharma industry in Brazil in the recent century and the inclination of
multinational firms to invest in local production of biopharmaceutical products in the
country.
 Based on the findings of the above-mentioned researches, some parts of the value chain Value chain
were recognized. To complement other parts, three semi-structured interviews with Iranian
experts in bio-pharmaceutical industry were conducted and a complete value chain of the
industry was mapped. Figure 2 depicts the biopharmaceutical industry value chain.

2.3 Capabilities of biopharmaceutical firms

Traditionally, the positioning of firms in any industry’s value chain is shown in a U-shaped
curve which is known as the ‘smiling curve’. In most industries, much of the value is created
in the upstream or downstream stages of the value chain (R&D and after-sales services in
Figure 3).
Biopharmaceutical industry is not an exception to this curve but the difference in added
value between different stages of this industry differs from other industries. In other words,
because of the knowledge-based nature of this industry, biologic drug production is a
relatively high value added activity. However, the added value of R&D and marketing
activities are still higher than production process.
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Based on their resources and capabilities, different firms focus on different stages of the
value chain as their core competency. For instance, Sabatier et al. (2010) have divided core
competencies of BPFs into three categories including:
(1) Drug discovery: As mentioned before, the drug discovery is a time-consuming and
risky process which needs huge amounts of financial resources while the expected
returns of launching a new drug onto the market are very high.
(2) Knowledge architecture: Firms with knowledge architecture competence are able to
develop new drugs by absorbing knowledge from external sources. Here, time to
market and risks are medium but expected returns are high.
(3) Process optimization: Efficient industrialization of R&D, production process and
after-sales services is another competency of BPFs. It’s generally characterized by
short “time to market”, low (or medium) risks and small returns.

In addition to above-mentioned competencies, most of BPFs focus on production of

biosimilars as their core competency. In fact, because most BPFs do not have enough
resources to discover and introduce new drugs, they try to develop generic substitutes for
original biologics which are called biosimilars. At this level, BPFs are able to acquire, install,
use, troubleshoot and assimilate existing production technologies. After mastering in
production of biosimilars, some BPFs might try to move toward adaptation of technologies
and absorption of design knowledge to make some minor changes in their current products.
If they can learn the design knowledge well enough, they would gradually be able to
generate and develop products and technologies close to the international frontiers. Finally,
after passing these capability levels, a BPF might be able to generate and develop original
technologies and new drugs. These levels of capabilities are shown in Table III.
As mentioned above, most BPFs have only the capability of acquisition of existing
technologies and produce biosimilar drugs. For such firms, it is expected to be more active in
the production and (in some cases) development activities. When BPFs put more efforts to
development, pre-clinical and clinical activities, they find the ability to change the design
and processes of production. Such firms can upgrade their capabilities and reach to the
adaptive level. If a firm reaches generative capability, it is expected that a range of activities
from lead discovery to production are performed by the firm. Finally, those firms who are in
the strategic capability level are active in all activities alongside the value chain and they are
more concentrated on the research and development activities.
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JSTPM

Figure 2.

value chain
Biopharmaceutical
Research (Discovery) Development Production Sales
Early research Lead Discovery Preclinical Pharma Clinical Manufacturing Distribution Marketing After sales
Target Target Compound Lead Trial
Identification Validation Generation Screening Optimization Development

Genetic Functional Compound Assay Formulation Working Cell bank Drug life
Analog Prep Pharmacology Clinical Drug safety
Research genomics synthesis execution Packaging cycle mgmt
Mgmt: surveillance
Inoculum Preparation
Proteomics Protein Synthesis Assay SAR evaluation Process Data Logistics Scientific Consultancy
PKDM
biochemistry development R&D management marketing
Production Bioreactor
Chemo- Drug design
informatics Disease Medicinal Toxicology Scale-up Regulatory Wholesale
models chemistry Primary recovery
Structural `
Bio - Chemistry
informatics Cell culture Purification Export
Genetically Cell-based Animal model
environment corridors
modified models for for efficacy
mice Analytical efficacy
Basic Polishing
chemistry Clinical
molecular
Bioimaging supply
biology
Antibody
Protein optimization Bulk drug substance
crystallography and
engineering
 Value chain
Research Services
(Discovery)
Added Economic Value

Marketing

Development
Logistics:
Distribution

Production

Base Price Figure 3.

Location of value
added in value chain
Source: Adapted from Warwick (2013)
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Levels
Dimensions Assimilative Adaptive Generative Strategic

Technological Acquisition, Adaptation of Generation and Generation and

activities installation, use, technologies, development of development of original
operation, design technologies close to the technologies and new
troubleshooting, activities and international drugs driving the
and assimilation of absorption of technological frontier international frontier
existing design
technologies knowledge
Knowledge Predominantly Mainly design R&D-derived S&T R&D-derived knowledge
bases operational knowledge knowledge in core and non-core fields
knowledge which distinguishes the
company from
competitors
Table III.
Source: Dantas and Bell, 2011 Levels of capabilities

It should be noted that going up on the ladder of capability development needs various
components and relationships which are known as ‘Sectoral System of Innovation’ in the
literature. As mentioned by Malerba (2002), in addition to the Manufacturing Sector,
improvements in Governmental Policy and Strategic Directions, Human Resources
Development, Knowledge and Technology Generating Sector, Interactions among firms and
institutions such as Intellectual Property Rights Regime are essential for encouraging firms
to move toward innovative activities in a sector. Also Malerba and Nelson (2011)
emphasized on the role of factors such as “firms learning,” “access to foreign know-how”
and “skilled human capital” in capability development and catch up in pharmaceutical
sector across different countries. Finally, Hu and Hung (2014) concluded that the intellectual
property regime is the main reason for failure of Taiwan’s sectoral system of innovation in
the pharmaceutical industry in comparison with India. These studies show that policy
making for capability development through biopharmaceutical value chain needs a
systemic approach and main pillars of a sectoral innovation system must be taken into
account.
 JSTPM 3. Research methodology
To investigate the status of Iranian BPFs in biopharmaceutical value chain and their
technological capabilities, we interviewed representatives from 12 BPFs between May 2016
and October 2016. As mentioned previously, there are 18 BPFs active in this field of which
only 12 firms were accessible. It is necessary to note that these 12 BPFs have the highest
level of activity in the field of biopharmaceutical development in Iran. Before starting our
interviews, we went on a sight visit to the production plant of “AryoGen Company” and
conducted a meeting with its board to get more familiar with the production processes.
Of the two different questionnaires designed, the first questionnaire which contained 50
‘Yes/No’ questions dealt with the activities that the firm is currently doing in the
biopharmaceutical value chain. For instance, respondent companies were asked if they are
doing genetic research, proteonics, etc. or not. Since, in some cases, more than 1
representative from a BPF was interviewed, the questionnaire was filled in only by the
highest ranking officer of each firm. For instance, three representatives from “CinnaGen Co.”
were interviewed but only the CEO was asked to fill in the first questionnaire.
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The second questionnaire was designed for a semi-structured interview about

technological capabilities of the firm. The firms were asked a number of questions regarding
their capability in producing drugs such as:

RQ1. How did you acquire your production technology? Through licensing, reverse
engineering, participation with foreign BPFs or local R&D?
RQ2. Does your firm have the ability to change the design of your present products?
RQ3. Has your firm ever produced a drug close to the quality of frontier firms?
RQ4. Has your firm ever developed and introduced a completely new drug to the
market?
RQ5. How does your firm select a drug to produce?
RQ6. What is the core competency of your firm in terms of knowledge base, operational
knowledge, design knowledge, R&D derived knowledge or new molecule
development knowledge?
RQ6. What is the vision of your firm in the long term? Do you have any plans to move
toward development of new molecules in the future?
Each interview took approximately 2 h and each one was recorded and transcribed. After
every interview, a summary of the discussion was prepared and documented for analysis.
The list of our interviewees and their related company is shown in Table IV.
It’s noteworthy that that before asking the respondents to fill in the questionnaires, two
experts active in BPFs and two academicians were asked to answer and edit the questions
for the sake of content validity of the questionnaires. Also, after analyzing the results of the
interviews, the experts were asked to review and rectify) our findings if necessary. Finally,
after a few revisions, they confirmed the findings.

4. Findings
Based on the questions of the study and analysis of the results of the interviews, this section
describes the status of Iranian BPFs in the value chain and their level of technological
capabilities.
 Name of Company Position of interviewees
Value chain
1 CinnaGen CEO
Chairman of the board
Marketing manager
2 AryoGen CEO
Quality deputy
3 Pooyesh Darou CEO
4 Aria Tina Gen Board member
5 Zist Daru Danesh CEO
6 Kowsar Biotech CEO
7 Pasteur Institute Director
8 Shafa Pharmed Board member
9 Saman Daro Production Deputy
10 NoTrakib CEO
11 Arna Gen Avisa CEO Table IV.
12 Orchid Pharmed CEO List of interviewees
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4.1 Iranian firms in biopharma value chain

It was mentioned before that most Iranian BPFs are currently producing biosimilars. They
buy the cell line or develop it in cooperation with foreign partners and then concentrate on
the production processes. The results of the responses to the questionnaires show that
pharmaceutical development, drug manufacturing and after-sales services activities have
the highest frequency among Iranian BPFs. These firms are less concentrated on lead
discovery, preclinical studies and marketing activities, and they have totally ignored early
research’ activities (Figure 3).
It is not surprising that those firms who are concentrated on producing biosimilars, do not
allocate any resources to early research on new drugs discovery. Even those firms who claimed
that they are performing some discovery related researches –such as compound synthesis or
assay execution – or preclinical studies are conducting such researches for improving their
biosimilars and not discovering new drugs. Also, it is normal that such firms need to perform
clinical trials to obtain the approval of the drug, provide the facilities for scale-up the production
and set up the production line. Finally, as most of the biosimilars are used for rare and refractory
diseases, manufacturers need to provide special after-sales services for the patients. To some
extent, it is normal that BPFs in a country start with producing biosimilars because they don’t
have enough expertise and financial resources to discover new drugs. But the main issue emerges
when they are stuck in the middle-income trap which means such firms are satisfied with their
revenue from biosimilars and may ignore development toward higher levels of capability.

4.2 Capabilities of Iranian BPFs

Although it is less than 20 years that Iranian firms have started moving toward
biotechnology-based drugs, they have shown idoneous progress so that some of them are
currently exporting their products to other countries. The results of interviews showed that
in early 2000s, Iranian firms tried to buy the cell line from German and Cuban BPFs and
start production processes in Iran using the purchased cell line and production equipment.
Despite all obstacles such as sanctions on some manufacturing equipment (especially bio-
reactors) and limitations resulted from intellectual property rights, they could finally
produce a few biosimilars in the country. In 2006, CinnaGen Company produced CinnoVex
(for MS patients) and Pooyesh Darou Company produced Erythropoietin (which is used in
 JSTPM dialysis). In these years, Iranian BPFs have gained the ‘assimilative’ capability. Recently,
five leading firms have started generating and developing cell lines through internal
research and development programs. They have also gradually learned how to design
biotechnology-based drugs and are able to make minor changes in their biosimilar products.
In other words, a few Iranian BPFs have obtained the ‘adaptive’ capability.
These firms are able to use reverse engineering methods for analyzing patents and drugs
which are registered and produced by leading international BPFs. Based on their analysis,
they can realize the molecule used for producing the drug, the genetic manipulation in that
molecule and the drug combination. They are currently performing such analysis on patent
expired drugs with high market share in Iran. Figure 4 depicts the path of capability
building of Iranian BPFs in the last two decades.
As shown in this figure, in about 10 years, 22 BPFs gained the capability of producing
biosimilars using the cell line purchased from foreign partners. But in the past five years, 2
of them (including CinnaGen and AryoGen) have obtained the capability of producing
biosimilars using domestically generated and developed cell lines.
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5. Discussion
As shown in Figure 3, discovery of new molecules and marketing activities are the highest
value-added activities in biopharma value chain. On the other side, it was stated that
research and discovery of new molecules are so high-risk, time-consuming and expensive
that most firms, including Iranian BPFs, cannot afford. Now, the question is “what should
these BPFs do?” Should they keep producing biopharmaceuticals for the local market or
they need to move toward exporting their products?
Reviewing the success stories of the Southeast Asian countries in industrialization process
show that they used a proper combination of protecting infant industries and promoting
export-oriented products (Forbes and Wield, 2002). In fact, these countries protected their
industries but at the same time, encouraged them to export their quality products. For instance,
South Korean government passed 2 promotion acts for biotechnology in the context of
pharmaceutical industry and also made changes in policies related to market selection to
encourage firms to promote their exports (Hwang, 2015). Of course this method is not limited to
Asian companies and the case of vaccine industry in Brazil shows how protected market and
export promotion policies helped to develop the industry (Zuma Medeiros, 2011).
Currently, Iranian BPFs are benefiting from a protected local market share which is
determined by the ministry of health (MOH). But on the other side, there are almost no
effective R&D and export promotion incentives. The result of such policy is that these BPFs
are producing about 220$million annually but their export value is less than $14m. Of course
it is logical for the MOH to adopt an ‘import substitution strategy’ to reduce its dependency
on foreign sources and increase the accessibility of patients to drugs but the Latin American
Countries’ experiences showed that a proper ‘export promotion strategy’ is vital to complete
the puzzle (Jenkins, 1991).
Putting together the approaches toward investing in R&D (producing biosimilars or
discovering new molecules) and market selection (local market or international market) as 2
high value added activities in this industry, we came up with a 2  2 matrix that can
describe the strategies ahead Iranian BPFs (Figure 5).
Our interviewees believed that currently Iranian firms cannot afford moving toward
discovery of new molecules. They argued that promoting the export of existing biosimilars
and investing the resulting revenues in R&D can be a good solution for Iranian BPFs (Path
A). This is what Kale and Wield (2008) mentioned as exploitative use of existing
technologies to raise capital and explorative investment of that capital in R&D to develop
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Research (Discovery) Development Production Sales

Early research Lead Discovery Pre- Pharma Clinical Manufacturing Distribution Marketing After sales
Target Target Compound Lead clinical Development
Generation Screening Optimization Trial
Identification Validation

Genetic Functional Analog Prep Compound Assay Formulation Working Cell bank Drug life
Pharmacology Clinical Packaging Drug safety
Research genomics synthesis execution Mgmt cycle mgmt surveillance
Inoculum Preparation
Proteomics Protein Synthesis Assay SAR evaluation PKDM Process Data Logistics Scientific Consultancy
biochemistry development R&D management marketing
Production Bioreactor
Chemo- Drug design
informatic Disease Medicinal Toxicology Scale-up Regulatory Wholesale
models chemistry Primary recovery
Structural `
Bio - Chemistry Cell culture Purification Export
informatics Genetically Cell-based Animal model
environment corridors
modified models for for efficacy
mice Analytical efficacy
Basic Polishing
chemistry Clinical
molecular
Bioimaging supply
biology Antibody
Protein optimization Bulk drug substance
crystallography and
engineering

Number of Firms

1<X≤5
5 < X ≤ 10
10 < X ≤ 12
10
Value chain

chain
Iranian firms in
Figure 4.

biopharma value
 JSTPM

Strategic
Generative
Levels of capability

Generating cell line

Adaptive

and absorbing drug

design knowledge
Assimilative
vee

Acquisition of cell line

Figure 5. from external sources
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Biosimilars
Path of capability and focusing on
production
building of Iranian
biopharma firms Early 2000s - 2012 2013 - Present

innovative products in Indian pharmaceutical firms. This trend has also been observed in
software services industry where most new technology-based firms initially focus on
assimilating existing mature technologies and then leverage the knowledge and capital
earned to move into developing innovative products (Krishnan and Vallabhaneni, 2010). In
fact, this trend is a common catch-up path entitled ‘generics strategy’ which is used by many
latecomer firms (Hwang, 2017).
In case that Iranian BPFs can be successful in exporting their biosimilars and spend the
resulting revenues on R&D for discovering new molecules, they can pass both path B or path C.
Path B would be a choice if these BPFs have the capability of registering a new drug to FDA
and EMA which is currently impossible for Iranian firms because of the sanctions on Iran. Path
C would be another choice which can gain high added value for the firms by discovering new
molecules and selling the patent to foreign BPFs (like some Australian BPFs).
Anyway, given the current status of Iranian BPFs, Path A should be the priority of both
government and BPFs which needs appropriate policies and strategies.

6. Conclusions
Given the importance of knowledge-based development for Iranian Government and the
knowledge-intensive nature of biopharmaceutical industry, it is important for the
government to help this industry grow rapidly. Since the first step of policy making cycle is
identifying the status quo, this study tried to provide a clear picture of the capabilities and
positioning of Iranian firms in the industry. To this end, the paper presented a detailed map
of value chain of the industry including four primary activities (research/discovery,
development, production and sales) and nine secondary activities (early research, lead
discovery, preclinical, pharmaceutical development, clinical trials, manufacturing,
distribution, marketing and after-sales services). Surveying active Iranian BPFs showed
that most firms are concentrated on “pharmaceutical development,” “drug manufacturing”
and “after-sales services” activities. Also, the results of interviewing managers of 12 BPFs
using a semi-structured questionnaire demonstrated that Iranian BPFs are currently at the
“assimilative” level of capability and in recent years, a few of them have moved toward the
 “adaptive” level. In fact, as most Iranian BPFs are currently focused on production of Value chain
biosimilars using purchased cell lines from foreign firms, it is natural that manufacturing-
related activities have the most frequency among these BPFs.
To find out how these BPFs can increase their added-value, a 2  2 matrix was
developed consisting of marketing capabilities and investment in R&D. The matrix showed
that currently BPFs in Iran are producing biosimilars for the local market but a few of them
have already started exporting their products abroad. It was proposed that following
generics strategy for their international market entry can be a logical path in which Iranian
BPFs should first try to export their products and at the same time, leverage the resulting
revenues for investing in research and discovery of new molecules.
To do so, both government and firms need to consider some policies and strategies. The
most important policy and strategy recommendations are presented below:

6.1 Policy recommendations

Although the government of Iran is protecting BPFs by guarantying their market share and
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providing financial support, there is the need to make some changes in these policies based
on the level of the maturity of the BPFs. To help BPFs to go through Path A (Figure 5), two
vital policies should be considered.
6.1.1 Regulatory framework for merger and acquisition. Although merger and
acquisition (M&A) is a common option for managing innovation and productivity deficit
among foreign BPFs (Mittra, 2007), this option has not been used by Iranian firms due to
some regulatory gaps in the trade law of the country. As most Iranian BPFs are small and
medium sized enterprises (SMEs), they are not currently benefiting from economies of scale
in their production. Facilitating fusion among these firms would help them to put their
resources together and export their products more easily.
6.1.2 Export promotion incentives. Exporting the existing products of the BPFs is the
main base of path A. Although the Iranian government is currently granting some
horizontal export promotion incentives such as providing low-interest loans for exporters,
but BPFs need some vertical incentives such as subsidies on registration fee and clinical
trials cost in the export destination country. Another smart incentive can be providing R&D
grants as a percentage of the value of exported goods.
6.1.3 Intellectual property rights regime. Despite recognizing the Industrial Property Law
in Iran based on international conventions such as Paris, Madrid and Lisbon, the execution
of aforementioned law is suffering from major weaknesses. More importantly, Iran has not
yet joined the World Trade Organization and does not follow the TRIPS agreement.
Although it might be an opportunity for Iranian firms for producing biosimilars and develop
Marketing

Producing biosimilars Producing new drugs

for export B
for export

A
C
Discovering new
D
Producing biosimilars molecules and selling Figure 6.
for local market to international giants Value adding matrix
R&D for Iranian BPFs
 JSTPM their basic capabilities, but it is vital to join the agreement in a designated timeframe for
pushing BPFs toward innovation and capability building.

6.2 Strategy recommendations

Defining appropriate strategic goals is of vital importance for high-technology based firms
(Azadeh et al., 2012). Iranian BPFs need to consider some strategic goals for moving toward
Path A (Figure 5) such as.
6.2.1 Vertical integration. As this industry is almost infant in Iran, some parts of its supply
chain (such as gene sequencing and scientific marketing) have not fully developed. Therefore, BPFs
have to find other solutions such as purchasing required knowledge form foreign firms or non-
specialized Iranian firms. To overcome such shortages, a good solution can be vertical integration
by gathering or establishing specialized firms throughout the supply chain. For instance, in the case
of CinnaGen, the company established a specialized firm for its marketing needs.
6.2.2 Marketing capabilities. Iranian BPFs need to improve their marketing capabilities
to be able to compete with foreign competitors either in local or foreign markets. Currently,
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most of these firms are utilizing traditional methods of marketing such as granting
commissions for pharmacies. But the quality of the drug and methods of introducing the
quality product to the consumers would be the key for sustainable growth. Therefore, BPFs
in Iran need to move toward scientific methods of marketing to compete with international
giants in foreign markets.

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in Iran”, Avicenna Journal of Medical Biotechnology, Vol. 4 No. 4, pp. 200-205.

About the authors

Masoud Afshari-Mofrad has received his PhD in Science and Technology Policy from Tarbiat
Modares University. He is currently working as the manager of Technology and Innovation Studies
group, Institute for Trade Studies and Research. He has published in journals such as Technological
Forecasting and Social Change, Computers and Education and so on.
Ali Salim Received his PhD in Technology Management from Islamic Azad University, Science
and Research branch. He is currently working as the Research Deputy at Institute for Trade Studies
and Research.

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