Draft V1.0Ver 02 November 2016

Guidance Document for the Biotechnology sector

1.Introduction

1.1. Coverage

1.2. Sector activities

1.3. Sources of genetic resources in the biotechnology sector

1.4. Actors

2.Classification of activities in relation to utilisation

2.1. Introduction

2.2. Due diligence declaration and due diligence obligations

2.3. Specific activities and further examples

2.3.1.Collection of genetic resources

2.3.2.Observation and initial screening

2.3.3.Targeted research

2.3.4.Development, regulatory and performance trials

2.3.5.Other activities (activities that cannot be allocated to any of the steps above)

2.3.6.Multi-component examples

4.Remaining issues

5.Unresolved issues

6.Annexes: Background information

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1.Introduction

All industries creating value by means of biotechnological processes or products are affected either actually or potentially by the implementing provisions of the Convention on Biological Diversity (CBD), the Nagoya Protocol (NP), and its implementation in the EU (Regulation (EU) No 511/2014) (hereafter referred to as “EU ABS Regulation” or the “Regulation”) respectively. There can be no single answer to the question as to how far individual sectors of the industry are affected. In detail, this will depend particularly on the definition of their activitiesand their position within the industrial value creation chain. Nevertheless, the provisions of the EU ABS Regulation are applicable across value creation chains and throughout value creation networks, if the specific conditions for utilisation are satisfied that are laid down in the EU ABS Regulation.

This document is part of a series of seven sectorial guidance documents that aim to complement the EU Commission guidance[1] on Regulation (EU) No 511/2014 and is intended to be used in harmony with this EU Commission Guidance. The EU ABS Regulation implements in the EU those international rules which govern user compliance pursuant to Article 15-17 of the Nagoya Protocol, the EU is bound to take measures to monitor and enhance transparency by designating one or more checkpoints.

As for all sectorial Guidance Documents, the main purpose of the Guidance Document for the Biotechnology sector is to lead to a shared interpretation of the terms “utilisation” and “research and development” in relation to the development of biotechnology products. It provides a general description of the types of genetic resources being used within the Biotechnology sector, of the research and development activities being part of the product development process in the Biotechnology sector; and list activities within or outside the scope of the EU ABS Regulation illustrated with concrete cases.

Therefore this Guidance Document for the Biotechnology sector is meant to help users to establish whether activities carried out are considered utilisation within the meaning of and fall within the scope of the EU ABS Regulation, and when due diligence, documenting and reporting requirements are triggered. The contributors of this document wish to point the importance of the future jurisprudence to build, with the guidance documents, the effective legal substance of the "Regulation" in time. This document is to prevent as much as possible misunderstanding while jurisprudence is to correct wrongdoing.

1.1. Coverage

Biotechnology is defined by Article 2 of the CBD as “any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use”. This definition is also included in the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity (Article 2).

The OECD has defined biotechnology as:“The application of science and technology to living organisms, as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services.”

An organisation that performs activities in one or more categories is defined as a biotechnology organisation. The OECD definition and description is used to define the scope and range of activities covered by the biotechnology sector. It is NOT an alternative or substitute or addition to the definition of biotechnology in the CBD.

Biotechnological activities share a number of common features that justify treating involved biotechnology organisations as a separate sector within the context of the sectorial guidance documents. They are focused on technical achievements, which result from first understanding the mechanisms of living organisms and thereafter designing ways to influence and use them, accessing innovative technical tools and platforms that can often be applied across different sectors. Examples are DNA sequencing, DNA synthesis, DNA diagnostics methods, DNA engineering techniques, but also biochemistry analytical methods for molecules other than DNA.

In contrast to end product-oriented sectors, biotechnology covers tools, services, and intermediate products. Biotechnology makes use of biological systems and processes to manufacture products that reach end-consumers via a diversity of other sectors.

Initially, the following sectors were significantly linked with biotechnology:

  • Healthcare and animal health: Healthcare biotechnology refers to a medicinal or diagnostic product or a vaccine that consists of, or has been produced in, living organisms and may be manufactured by combining DNA sequences that would not naturally occur together (recombinant DNA). It encompasses medicines and diagnostics that are manufactured using biotech processes as well as gene and cell therapies and tissue engineered products;
  • Agriculture, livestock and aquaculture: Agricultural biotechnology encompasses i.a. a range of modern plant and animal breeding techniques. It is used in fisheries and forestry, animal feeds and feeding practices. The best-known technique is genetic modification, which means that existing genes are modified or new genes introduced in an organism. The crops may be used for animal feed, food, biomaterials, medicinal use or energy production. Agricultural biotechnology provides opportunities to reduce land use and greenhouse gas emissions since the same harvest can be achieved on a smaller area, more stably and with less applications of plant protection products; and
  • Industrial applications: Industrial biotechnology uses living cells (microorganisms, algae, etc.) and components of cells (e.g. enzymes) to make biobased products in sectors such as chemicals, healthcare, animal health, food and feed, detergents, paper and pulp, textiles, biobased materials and bioenergy (such as biofuels or biogas). In doing so, it uses renewable raw materials and is one of the most promising innovative approaches towards producing biopharmaceuticals, food and feed, but also lowering greenhouse gas emissions.

Irrespective, techniques and tools offered by biotechnology are applied in many sectors. They support a broad scale of activities in basic research, applied research, development and production.

In contrast to the examples in which applications of biotechnology are organised in relation to the sector to which they contribute, marine biotechnology is defined by the origin of the genetic resource rather than by the final use: exploration of the sea biodiversity could enable development of new products (e.g. pharmaceuticals or industrial enzymes) or can withstand extreme conditions, and which consequently have high economic value. In terms of Access and Benefit-Sharing, this constitutes a fundamental difference. By defining the resource, marine biotechnology potentially sets a specific perimeter, also in legal terms, to access. It does not, however, delimits specific types of utilisation. The type of utilisation is defined in the downstream use of the genetic resource, and can be part of agricultural, industrial and medical biotechnology R&D chain.

In terms of access to genetic resources, as long as the resource originates from an area that falls under the jurisdiction of a coastal state, there is no difference between a marine or any other type of genetic resource. Indeed, the text of the Nagoya Protocol does not even contain the term ‘marine genetic resource’. However, marine genetic resources originating from Areas Beyond National Jurisdiction, consisting of the Area and the High Seas and as such, roughly 60% of the global oceans, are not governed by any national access legislation, nor by the Nagoya Protocol or the EU ABS Regulation (EU) No 511/2014. Access for these resources is currently unregulated, though this might change, since marine genetic resources are part of a package deal for an Implementing Agreement to the UN Convention on the Law of the Sea (UNCLOS) currently under negotiation. Since activities with genetic resources from marine origin are subject to the same rules as activities with other genetic resources, marine biotechnology will not be treated separately.

1.2. Sector activities

As pointed out before, it is not meaningful to discuss the biotechnology product development chain as such. Rather biotechnology contributes in different steps in the R&D chain of diverse end-product oriented sectors, including:

  • Replacement of raw materials: Biotechnology can open the use of raw materials that so far were not feasible sources for certain end products. The shift to renewable resources is an important global objective and biotechnology is one of the enabling keys;
  • Innovative products: Biological products can show a high complexity, impossible to reach by chemical synthesis. Also delivery mechanisms can be further improved by design. Examples include vaccine development and gene therapy using a diversity of vector systems;
  • New production and process technologies: Biotechnology may improve existing production and processing methods and/or provide alternatives. Applications include fermentation in bioreactors, bioleaching, biopulping, biobleaching, biodesulphurisation, bioremediation, biofiltration, biotransformation, and enzyme immobilisation; and
  • Improved and new analytic and diagnostic tools: Screening tools incorporate innovations in genomics, transcriptomics, proteomics and metabolomics, possibly combined with high throughput screening.Typically, improving analytic tools for high-throughput screening does not always involve utilisation of a genetic resource, since these techniques are often applicable to a number of species rather than a specific genetic resource, may not require any genetic resource in their improvement process and are used for routine analysis and characterisation that is not R&D as defined above. Considering applications of personalised medicine or directing selection of improved crops, molecular tools provide insight in the genetic determinants to an unequalled level of sensitivity. Once established these analytical techniques can be used in R&D projects and become a tool in the utilisation of a genetic resource. Examples of other applications include DNA profiling for tracing population origins, DNA fingerprinting for forensic analyses, disease diagnostics, forest health assessments, possibly predicting health declines from anticipated climate change or development/use of tools to meet regulatory requirements (e.g. toxicity tests, efficacy test).

Depending on the application one or more of these biotechnology contributions might be integrated in the specific development process of the relevant sector. Yet, in order to master these applications, activities are required to further elucidate molecular structures and mechanisms, biochemical as well as physiological aspects. These activities might also include essential techniques of cell and tissue culturing and engineering. Such activities might constitute “Utilisation” under the EU ABS Regulation.

As biotechnology contributes to several product development processes, the following R&D process is being considered. This approach allows the allocation of cases to specific stages and/or activities of the R&D process (see Chapter 2).

Figure 1 – The Biotechnology R&D process

The value chain in biotechnology can be visualised in a simplified conceptual diagram that pictures the flow of materials.

Figure 2 – Simplified R&D Process

The above flow chart is only indicative, and a final conclusion requires more detailed analysis in each specific case.

  • Step 1,2,3 are part of general characterisation, where genetic resources are not yet part of an integrated process involving research with an aim to development. Step 1, 2 are normally not considered utilisation. The characterisation in Step 3 can use biochemical or genetic methods. However, this is mere description and not yet part of an overall R&D process. The purpose of this characterisation is to enable selection of genetic resources for possible further activities, and does not yet include a development component;
  • Step 4 and 5 do not involve physical access to genetic resources;
  • Step 6 (cfr step 3) is an initial screening step, with multiple genetic resources. The majority of these genetic resources will not continue to R&D;
  • Step 7 is a decision making process;
  • Step 8 includes crosses, random mutagenesis, transformation, etc. This may in some cases comprise utilisation, depending on the method used;
  • Step 9 can comprise utilisation that brings certain genetic resources into scope, and that can lead to a due diligence declaration in Step 11. In this R&D process, we would envisage that the EU ABS Regulation would apply to genetic resources involved in step 9 and 11, and thus, step 9 and 11 function as a checkpoint for compliance monitoring;
  • Step 10a reproduces observations on plants with known characteristics, and this is typically not utilisation;
  • Step 10b covers regulatory trials and obtaining permits, which is not in scope of the EU Regulation;
  • Step 12 is production, which is not R&D and therefore normally out of scope of the EU ABS Regulation; and
  • In Step 13, the genetic resource not being the object of research itself, but only serving to confirm or to verify the desired features of other products developed or under development. Since the genetic resource is not the subject of R&D when it is used as a testing/reference tool, such activity is NOT considered utilisation.

In reality, the value chain in sector biotech is more complex. The activities undertaken during the R&D process take place in a multi-faceted value chain, including not only a multitude of actors in the different activities of the R&D process, but also a broad diversity of actors including the private sector, the public sector and academia, as well as service providers (often with a cross-border nature). Biotechnology has a strong participation from public sector, and a large number of PhD students, also in developing countries. E.g. the Rockefeller foundation international program on rice has educated numerous students from developing countries, and offered them biotechnology training in top Universities. Quite some work is “pre-competitive”, and quite some work receives research funding. Also often activities start in the public sector or academia and the results are later on transferred or licensed to a spin-off, or a private company.

A lot of improvement is incremental: for each discovery, one will further investigate and try to further fine-tune in subsequent discoveries. Also a product can be further fine-tuned to make a next-generation product. Such innovation is enabled and facilitated by the availability of a broad pool of information and by general enabling technologies. Value chain processes regularly have steps with utilisation, followed by activities that are not utilisation, and then again utilisation.

Value creation in/with biotech is not linear; it takes place in a value creation network. A single company does not necessarily discover and exploit all value creation potentials on its own. Any multiple value creation for a genetic resource will take place inside and outside the acquiring company, which has a significant influence for the practical handling of genetic resources under the provisions of the EU ABS Regulation and the CBD. Ratifying the bilateral agreement, taking physical possession of the genetic resource and transferring the genetic resource to the utilisation resource defined in the contract, marks the beginning of the industrial value creation process.

Figure 3 – Value creation in biotechnology

The first step is usually to screen the genetic material to identify the main sought characteristics. The sought characteristics, as also the development and screening targets established for them, may differ completely in both content and procedure, depending on the particular sector of the industry doing the screening.

Whereas the pharmaceutical sector, for example, looks for new therapeutic active substances, the main focus of interest in the crop protection industry may be a morphological or metabolism-specific characteristic for transfer into crop plants, or, in plastics research, a more efficient production process for particular substances. Moreover, the same industrial sector can have a great variety of different targets when screening new genetic resources for possible commercial advantages. For instance, the following development targets are conceivable in the pharmaceutical industry alone: as starting point for the development of a new active substance, as component of a vaccine, as inactive component of an end product, as “enabler” in an R&D process, or as a means of increasing production efficiency.

This makes it abundantly clear that a single company is not necessarily in a position to discover and exploit all value creation potentials on its own. It must therefore be assumed that any multiple value creation for a genetic resource will take place inside and outside the acquiring company, and although this may not always be evident to outsiders, it has a significant influence on the implementation regulations for the practical handling of genetic resources under the provisions of the EU ABS Regulation and the CBD.

In general, it can be said that the first step towards identifying the essential characteristics is made by the research function, which gives an idea of the possible range of uses and leaves further work on the materials to the appropriate development department. If the company which originally acquired the resource is merely a technology provider, or if the discovered spectrum of effect or one of the main characteristics does not fit in with the company’s value creation model, then it is here, at this interface between the research and development functions, that the resource can be transferred for the first time to a legally autonomous company active in a different area – and thus bring in a commercial profit. But it also evident that, with every development step, the succeeding companies will get closer to a further value creation, which in turn will be subject to the benefit sharing rules envisaged by the CBD. It is irrelevant in this context whether the development target now being followed was already covered by the PIC obtained by the acquiring company. To secure the benefit sharing for the country of origin in the spirit of the CBD, measures must be taken to ensure that, when a genetic resource is transferred, the original obligation of the acquiring company should be passed on by contract (using the sMTA) to the next user, who will then enter with complete responsibility into the modalities of the CBD and EU ABS Regulation respectively – thus assuming the obligation to notify the new intended use, which had not been recorded in written form in the PIC, to the country of origin, and to share all resulting material benefits with the country of origin. Genetic material can be transferred in this way to third parties at every step of the value creation chain. In addition to the research/development interface, the transfer could also be made at the end of product development, i.e. prior to approval of the product, followed by large-scale production and marketing or at the end of production to various legally autonomous distribution channels.