Appendix C
Artemisinin-Based Malaria Therapy: Hypothetical Case Study

This hypothetical case study on artemisinin combination therapy (ACT) for malaria is intended to explore the opportunities and challenges inherent in investment in a new enterprise that would capitalize on a potentially large market for ACTs by taking one or more of the following steps: growing the source plant, Artemisia annua; extracting the active ingredient; manufacturing the drug using the highest-quality processes; coformulating the artemisinin component with the partner antimalarial; and marketing in Nigeria. At present, no company is engaged in all these activities, although there are companies, some of which participated in the meeting, that do produce other antimalarials and have some experience with artemisinins.

Participants in the workshop included persons associated with the University of Ibadan, University of Calabar, XeChem Inc., Neimeth International Pharmaceuticals, the Drugs for Neglected Diseases Initiative, Médicins sans Frontières, and Office Technique d’Études et de Coopération Internationales, Paris (OTECI). The U.S. National Academies were represented by Nancy Bearg, a member of the U.S. National Research Council committee for the project and chair of the workshop; Hellen Gelband, Institute of Medicine; and Michael Greene, project staff director at the National Research Council. The Nigerian Academy of Science was represented by Gabriel Ogunmola, president. A complete list of participants is appears at the end of this appendix.

In its use of the knowledge assessment methodology, this hypothetical case study was unusual in many ways. The methodology is most often



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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria Appendix C Artemisinin-Based Malaria Therapy: Hypothetical Case Study This hypothetical case study on artemisinin combination therapy (ACT) for malaria is intended to explore the opportunities and challenges inherent in investment in a new enterprise that would capitalize on a potentially large market for ACTs by taking one or more of the following steps: growing the source plant, Artemisia annua; extracting the active ingredient; manufacturing the drug using the highest-quality processes; coformulating the artemisinin component with the partner antimalarial; and marketing in Nigeria. At present, no company is engaged in all these activities, although there are companies, some of which participated in the meeting, that do produce other antimalarials and have some experience with artemisinins. Participants in the workshop included persons associated with the University of Ibadan, University of Calabar, XeChem Inc., Neimeth International Pharmaceuticals, the Drugs for Neglected Diseases Initiative, Médicins sans Frontières, and Office Technique d’Études et de Coopération Internationales, Paris (OTECI). The U.S. National Academies were represented by Nancy Bearg, a member of the U.S. National Research Council committee for the project and chair of the workshop; Hellen Gelband, Institute of Medicine; and Michael Greene, project staff director at the National Research Council. The Nigerian Academy of Science was represented by Gabriel Ogunmola, president. A complete list of participants is appears at the end of this appendix. In its use of the knowledge assessment methodology, this hypothetical case study was unusual in many ways. The methodology is most often

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria used to explore the advantages and challenges of creating enterprises that do not currently exist in a country. In this case, however, even though A. annua is not yet commercially grown in Nigeria and ACTs are not widely produced and marketed there, companies are actively striving to do so, including some that participated in the meeting. Moreover, the future market for ACTs in Nigeria may be heavily influenced by external factors, such as broad subsidies by bilateral and other donor agencies or the production of a synthetic equivalent of the active ingredient. Without a major global subsidy, the ACTs market is likely to grow slowly and uncertainly, whereas with a subsidy the market could be transformed. Unfortunately, whether current planning will result in such a subsidy cannot yet be predicted. This uncertainty is, in fact, part of the landscape that must be negotiated in the real world. THE USE OF ARTEMISININ DERIVATIVES Artemisinin, the active ingredient extracted from the leaves of the Artemisia annua plant, has been used for centuries in Chinese traditional medicine to treat fever. Chemical derivatives of artemisinin, in combination with other antimalarial drugs, constitute the artemisinin-based combination therapy, or ACT, which is the most effective treatment for falciparum malaria, the most dangerous form of the disease caused by the Plasmodium falciparum parasite. Malaria kills more than a million people a year, mainly children. Since the seventeenth century, malaria has been treatable, but, historically, there has never been an adequate supply of effective drugs for more than a small percentage of the sufferers. In the 1960s, chloroquine, a synthetic drug, became available at low prices in tropical countries and was effective for decades. Eventually, however, parasite resistance to chloroquine evolved in Asia, and it has now spread throughout Asia and Africa. Chloroquine can be purchased for about $.10 per course of treatment in many places in Africa, but today it is nearly useless against falciparum malaria, because resistant forms of the parasite are now widespread. In 2001 the World Health Organization (WHO) declared that artemisinin derivatives should replace chloroquine as the first-line treatment for uncomplicated malaria; these drugs have since proven to be best for severe malaria as well. There is as yet no known resistance of Plasmodium falciparum to artemisinin-based drugs. In the preferred ACT formulation, derivatives of the artemisinin compound extracted from the plant are coformulated with another antimalarial drug. The main reason for combining drugs is to inhibit the development of resistance to either drug, much like the approach taken today for HIV/AIDS. Thus, if the parasite begins to develop resistance to artemisinin, the other drug will still kill

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria it, and vice versa. It is much more unlikely that the parasite will develop resistance to both at the same time if the mode of antimicrobial action is different. Widespread use of artemisinin monotherapy—that is, using artemisinin alone—is the biggest threat to the long-term viability of this family of compounds. Artemisinin and another antimalarial can be taken together (in combination) in two ways: as two separate tablets taken at the same time—referred to in this report as a blister pack—or as two drugs in one pill—a coformulation or “fixed-dose combination” referred to here as an ACT. To encourage the use of combination treatment over monotherapy, it is clearly preferable to have both drugs in a single tablet. When two pills must be taken, people often will take just one—in this case, the artemisinin. Fifty-six countries have adopted ACTs as the first-line or second-line treatment for uncomplicated malaria, and a majority have a general policy in favor of ACTs. And yet only a fraction of the people needing or receiving treatment in Africa will have access to an ACT. ACTs have been effective wherever they have been tried, including highly endemic areas in Africa. However, the supply of ACTs is currently far lower than the need, and the cost is over 20 times that of chloroquine, the most common treatment drug. The side effects of both chloroquine and ACTs are minimal. The current production situation is evolving. Only one ACT (Coartem) is currently recognized internationally through precertification by WHO, but several others are being manufactured and sold mainly in Asia. Large purchases in Africa—most, if not all, of which employ financing from the Global Fund for AIDS, Tuberculosis and Malaria (Global Fund)—are limited to Coartem or to blister pack combinations, which are also available from a few manufacturers that produce precertified artesunate. Within two years, additional manufacturers are likely to be producing different ACTs. Nigeria has adopted Coartem as the first-line treatment for uncomplicated malaria, but most people in Nigeria, like those in the rest of Africa, are still using the older, cheaper drugs. Coartem sells for a wholesale price of $2.40 per adult course and about $20 retail in the pharmacy. A blister pack artesunate-amodiaquine combination is sold in Nigeria for $6–$7 per adult course under the brand name Artequin or Artekan. About 100 million cases of malaria occur each year in Nigeria. However, the market for ACTs is generally calculated on the basis of the “real demand,” which takes into account not just need based on malaria incidence, but also national policies and the funding available for purchase by consumers, government, or donor agencies. That figure is about 10 million courses per year, or about a tenth of the estimated medical need. Although the distribution of ACTs has been plagued by shortages since the WHO recommendation on use of ACTs, today the global production capacity is

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria higher than the real (i.e., for which payment is available) demand, which is estimated at between 130 and 220 million treatments, with 30 million currently on order—but still much lower than the medical need. It is clear that ACTs will never be available to the majority of those who need it unless the price is lowered, which can happen realistically only with subsidies of some kind. Major current sources of funding for government purchases of anti-malarials are the Global Fund and the (U.S.) President’s Malaria Initiative (PMI). Both of these sources provide funding for all aspects of malaria control, including insecticide-treated bed nets, indoor residual insecticide spraying, as well as drugs. These resource flows are largely (at least to date) limited to the public sector or public sector–like organizations (such as mission hospitals and other health facilities). However, most people do not acquire antimalarials from health facilities; rather, they purchase them through pharmacies or other shops, or in the smallest villages often from drug peddlers. For this reason, the U.S. Institute of Medicine has proposed a “global subsidy” to be applied at the top of the distribution chain (i.e., supranationally) so that it flows through both the public and private sectors, with the aim of an end user price in the range of that charged for chloroquine. The structure of such a plan is currently under development, and the funding, at a level of at least $200 million per year, is still uncertain. HYPOTHETICAL CASE STUDY Participants at the April 24-25, 2006, Paris workshop on artemisinin combination therapy created a hypothetical enterprise to produce and market ACTs in Nigeria and the elements of a business plan. The enterprise. The production and distribution of ACTs encompass several different processes, and it is unlikely, and perhaps not economically feasible, that a single company would carry out all of the tasks and functions involved. However, because the interactions among several partners, if there were such an arrangement, would be a relatively simple part of the establishment of the enterprise, it was convenient to consider the hypothetical enterprise to be a single company that carries out all functions, including production of the artemisinin derivatives through collaboration with an advanced laboratory. The company was given the name Nigerian Anti-malarials Ltd. (henceforth the Company). Statement of purpose. In view of the morbidity, mortality, and economic burden of malaria control and of the growing resistance of the parasites to the other existing antimalarial drugs, the Company proposes to engage

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria in the profitable production of ACTs that would be sold at an affordable price. Specifically, the Company would engage in the cultivation of A. annua in Nigeria the local extraction and purification of artemisinin the production of artemisinin derivatives in collaboration with advanced laboratories the local manufacture of ACTs that are globally competitive using current Good Manufacturing Practices (cGMPs). What is the product? The products would be artemisinin, its derivatives, and artemisinin combination therapies (ACTs). Who are the customers? For artemisinin, the customers would be local pharmaceutical companies, international organizations, and research laboratories; for artemisinin derivatives, pharmaceutical companies; for ACTs, public consumers, international organizations, NGOs, the government, and pharmaceutical distributors. Who is the competition? The competition would be provided by several very different sources, including other foreign and local companies making and marketing ACTs in Nigeria and companies using alternative technologies for producing ACTs, offering alternative products, or benefiting from subsidies and grants that might undercut the price charged by the Company. In a conventional competitive market, other companies, foreign or domestic, might produce a quality product at a lower price, or market it more effectively. But because the process for producing ACTS is highly capital- and technology-intensive, it is unlikely that a new local entrant will emerge that is presently unknown to the Company. Competition from imported foreign products is real, but if the principals of the Company are familiar with the Nigerian market, pharmaceutical community, and environment and are technically well informed, they can expect to remain competitive in the absence of special subsidies to competitors. China leads in the production of artemisia; it is claimed that 20,000 hectares are under cultivation in Chongqing, much of it by large companies. Altogether, it is expected that more than 150 tons of artemisinin will be produced in 2006. In addition, much of the harvest in China still comes from the wild. Vietnam is a big producer of artemisinin, but yields of artemisia are low compared with what might be expected in Nigeria. India and Brazil are important producers as well. In East Africa, East African Botanicals plans to cultivate 4,000 hectares in Kenya and Tanzania in 2006–2007, but reportedly problems will limit the output. Senegal,

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria Madagascar, Ghana, and Cameroon have plans to produce ACTs, and they are at about the same stage as Nigeria. A Chinese producer recently informed the Minister of Health of its intention to manufacture ACTs in Nigeria, using artemisinin from local sources. Among alternative technologies, the most significant in the long term is the development and manufacture of synthetic (small molecule) compounds that act much like artemisinin. Several such compounds are under development by the Medicines for Malaria Venture. Estimates for a marketable synthetic product range from 5 to 10 years, and a transition period of cohabitation is expected. In addition, progress had been made toward the synthesis of artemisinin and related molecules using cell culture. Plant tissue culture to produce artemisia has been tried so far without success. Some traditional malaria remedies will continue to be available and cheaper than any commercial product. Chloroquine is now the drug of choice for most people. Even artemisinin-based monotherapies may become available, and these will be cheaper than and, in the short term at least, as effective as ACTs. Reducing the availability of monotherapies to discourage parasitic resistance to the drug will be primarily a law enforcement problem and must be left to the government. Meanwhile, counterfeit ACTs have already appeared in Nigeria. The question of subsidies is more complex and not yet completely resolved. The various donor funds mentioned earlier may be applied in many ways. Other external sources of subsidies, such as foreign companies hoping to enter the Nigerian market, also have offered the government funds for the purchase of malaria drugs. In the most extreme case, funds may be used to import and distribute ACTs at no charge or for a nominal price through public sector institutions, which might seriously distort an incipient ACT market for local producers. (The government has already announced a program of free ACTs for schoolchildren.) Local producers would benefit if the donated ACTs were to be purchased locally at the same time that the price of ACTs was being subsidized in the commercial market. How such an arrangement might actually work is still under discussion. However, a common thread is that all ACTs purchased locally by international sources or exported by national companies would have to be manufactured using WHO-prequalified procedures. Drugs can be sold on the local market wherever a government permits it. Generally, however, governments rely on WHO certification for current Good Manufacturing Practices, which is the first level for international commerce, to assure quality. To be certified, a company must satisfy criteria related to the purity of materials, processes, inspection of the plant and equipment, quality control, and testing of batches. Several Nigerian companies are cGMP-certified for other drugs. Prequalification is a newer and higher level of approval put in place for AIDS, tubercu-

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria losis, and malaria drugs. Prequalification requires the use of cGMPs in the process, plus demonstrated product effectiveness against the disease. Prequalification of a product is required for sales supported by the Global Fund and will undoubtedly be a requirement for subsidies on the international market. That this requirement is more than procedural is testified to by the fact that so far only one company has been prequalified for ACT production: Novartis of Switzerland for Coartem. Even the numerous Chinese manufacturers of other formulations are not prequalified. WHO has announced an effort to increase the number of companies prequalified for ACTs, including generic manufacturers in developing countries. What are the advantages and challenges for this enterprise in Nigeria? Nigeria has the largest internal market for antimalarials in the world, estimated at 25 percent of the global total. Once Nigerian companies obtain WHO’s cGMP certification, they may be able to serve the large market in other countries of West Africa as well. The Nigerian pharmaceutical industry includes several companies that claim the capability to achieve cGMP certification for ACTs. As for the raw materials, recent trials with a variety of A. annua cultivars suggest that Nigeria has good growing conditions and may be able to produce multiple harvests annually with abundant yields of artemisinin. Monotherapies may still be available in Nigeria at prices lower than ACTs, but the Ministry of Health has stated it will approve only ACTs, and will refuse to register any company that produces or imports monotherapies. The licensees that presently have permits for monotherapies will see all those permits expire in two years, and they will not be renewed. Success at producing ACTS would open a niche market for Nigeria in the West African region and create some jobs for the populace. On the negative side, the inadequacy and unreliability of the infrastructure, including electricity, water, and roads, would be a problem. There are few local suppliers of pharmaceutical chemicals, and many materials would have to be imported, especially the solvents for artemisinin extraction for which no competent local industry currently exists. There is, however, a large market in non-ACT malaria remedies, and a large supplier base for counterfeits and imitations. And, although the government has shown goodwill in addressing some of these problems for the ACTs market, it has a history of not implementing some of its policies. A single-product company runs the risk that in a few years ACTs could lose their effectiveness or that the compounds could be manufactured more cheaply using genetic engineering. The current research and development pipeline contains some new and novel compounds that may

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria join ACTs as effective antimalarials. However, the next wave approaching the market is based on artemisinin coformulations, which suggests that there will remain a market for artemisinin. An advantageous plan would be to concentrate on malaria for Africa and work on gaining prequalification to benefit from international or national subsidies. Political leaders would favor a local company that is a regional leader in malaria control, carrying out research and training. Building on the strengths of the Nigerian situation, the Company would have at least two alternate courses of action. It could begin a phased-in process that would lead to a complete supply chain for the manufacture of ACTs within a few years. That process would consist of (1) developing the capability to grow A. annua; (2) extracting and purifying artemisinin; (3) manufacturing (or contracting for the manufacture) of the derivative(s); and (4) formulating and packaging ACTs. As a variation, an existing pharmaceutical company could be contracted or taken on as partner to manufacture the product while the Company provides the artemisinin derivative and upgraded equipment. It also could help to secure bank financing. Instead of trying to compete in the entire production process, the Company could elect to master steps one by one. Because producing a reliable crop of artemisia and extracting the derivative may take a long time, it might be most advantageous to concentrate on the formulation and local marketing of the medicine using imported derivative. Several Nigerian pharmaceutical companies have cGMP-level facilities, and some European companies are offering turnkey factories that are cGMP precertified. At the same time, the best cultivars could be selected and improved, and land could be prepared for cultivation. Seeds could be multiplied while the pharmaceutical plants are under construction. The middle part of the process—extraction, purification, and derivative manufacture—are more difficult and involve imported agents, and the capability must be created or contracted. Meanwhile, a small export market for artemisia leaves, and even for artemisinin, already exists. For a short period, the Company could supply others with artemisinin and receive the derivative in return. Since the WHO announcement in 2001 recommending ACTs as the first line of treatment, the demand for ACTs has grown exponentially and the price of artemisinin has increased sharply. Even Novartis has had a problem securing materials to support the manufacture of Coartem. As of early 2006, supply and real (paid) demand were about the same, but supply is rising faster than real demand, and the price is expected to fall. The determining factor is the price of leaves, which is presently about $400 a ton at the farm gate. A rule of thumb is that the cost of 1 kilogram of artemisinin is equal to the price of 1 ton of leaves paid to farmers.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria Today, the export price of artemisinin is about $400–$600 per kilogram. It appears that any of the component phases of the business can be operated at a profit: growing artemisia, growing plus extracting artemisinin, or manufacturing ACTs. While in office, President Olusegun Obasanjo created an advisory committee on ACTs. He said that he wanted the ACTs market to be driven by the private sector, and that the government might advance about 40 percent of start-up costs, as was done earlier to encourage the production of cassava by providing cuttings at a subsidized rate. The government might even go so far as to ban the importation of ACTs in the future. The advisory committee’s recommendations to President Obasanjo included restricting allocation of permits for growing, extraction, and manufacturing to separate companies, with growers selling to extractors, and these selling to manufacturers. Manufacturers would begin by importing ACTs for marketing in Nigeria, while growers would be planting, multiplying seeds, and providing the harvest to extractors. As of this workshop, the government had not yet responded to these recommendations. Possible sources of funding. For the process of growing of A. annua and producing artemisinin, funding is needed to pay for seeds, to pay farmers for their harvests or field workers to cultivate Company-owned lands, and to pay for drying the leaves and extracting and then purifying the artemisinin. Possible sources of funding are venture capital, banks, individual investors, and government investment in return for equity in the Company. Several of the workshop participants had had personal experience seeking funding for a Nigerian artemisia project, and they reported a mixed response. Some state governments expressed interest, with the conditions that the enterprise be set up in the state and that a partner be enlisted from the public sector or international donor community. One state was willing to provide the land. Those banks and venture capital companies that were interested insisted on a substantial personal investment by the applicant. One entrepreneur had secured a loan from the U.S. Export-Import Bank (for a different drug), but could not find a local bank that would offer the guaranteed loan at a commercial rate of 25–30 percent. Some of the large oil companies were interested in helping with such a project in order to overcome unfavorable publicity in Nigeria. But they insisted that the farms and facilities be established in their areas of operation regardless of the suitability for producing artemisinin. The pharmaceutical companies, some of which import artemisinin, appeared to be unresponsive, but meetings continue. The development agencies, such as the U.S. Agency for International Development (USAID) and the Japan

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria International Cooperation Agency (JICA), were the most forthcoming, offering the promise of grants. USAID has funded a feasibility study, but it also requires a local nonbusiness partner for a grant, possibly a state government. Producing A. annua. Growing A. annua could be profitable for farmers, and it could enable them to generate income from a new cash crop with a guaranteed market, at least in the short term. A. annua can be grown with other medicinal plants, such as a crop now under study to treat sickle cell disease, and thus would be eligible for the donation of land by the state. Unlike coffee and tea, the major cash crops in the region, A. annua is an annual, and its acreage can be adjusted each year in response to the market. Most experts believe that A. annua grows best in the highlands at a cooler temperature. But it is an easy plant to grow and is found nearly everywhere in the wild. With selection and breeding, yields could be high in tropical Nigeria, with the possibility of multiple harvests. In China and Vietnam, the largest producers of A. annua leaf at present, farmers have one harvest a year, in summer. But in Brazil, India, Nigeria, and other tropical countries, the combination of high light intensity and no cold season would allow two or more harvests a year for many cultivars. In experience reported from India, a first harvest produced 25 kilograms of artemisinin per hectare, but harvesting leaves after four months while leaving the stems in the field and again harvesting two months later resulted in three or four separate harvests yielding a total of 75 kilograms of artemisinin per hectare. However, harvesting this plant is heavy work, and artemisinin content may vary among harvests. Research should be carried out in each geographic area. In Nigeria, trials have been carried out only on a small scale in the humid lowlands in the South-South zone (Calabar), and it was necessary to develop a distinct annual cycle to avoid the dry season. Cultivation can begin immediately after the dry season in February and March, then again in July and August. The use of drip irrigation will help to expand the available seasons if necessary for production on a large industrial scale. The president’s advisory committee recommended trials in six states to cover the six climatic zones of the country: Calabar in Cross River state (South-South zone); Enugu in Enugu state (South-East zone); Ota in Ogun state (South-West zone); Plateau (North-Central zone); Bauchi (North-East zone); and Sokoto (North-West zone). The Federal Universities of Technology might also be approached to participate in experimental farms. The University of Calabar already has nine generations of seed, originally from Brazil, China, and elsewhere, created over four years. At present, a cultivar from Brazil gives the highest yield of artemisinin. An acceler-

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria ated harvesting technique is also used to increase the yield. Leaves are harvested at the peak of their artemisinin content, and the plant is left in the field; the process is then repeated. The process of extracting artemisinin requires precision in harvest timing and subsequent processing. The plants are not permitted to flower, because, once they do, the artemisinin content drops, and the seeds spread weedy plants that may be difficult to control. This method yields three or four harvests a year. A gram of seeds, which contains 12,000 tiny seeds, or enough to sow half a hectare, can be purchased for $70–$80. The traditional methods of thinning and transplanting were found to be too labor-intensive; better results and higher yields were obtained by broadcasting the seeds. More seeds are required, but the cost of labor is less. The crop is fertilized with the usual nitrogen, phosphorus, potassium (NPK) combinations. Drying can be done in the field in the sun. The seed garden is maintained separate from the leaf harvest. Artemisinin is bitter to the taste, and cultivar candidates for the seed garden may be selectable by the taste of their leaves. Presently, the price of seeds is rising in Nigeria, and the available supply is rising as well. Because the yield of seeds is high, a 1-hectare seed garden may be enough to serve the Nigerian market, depending on real demand and which ACT is selected. (Different derivatives require differing amounts of artemisinin per course.) It is clear that the supply of seeds will not be a limiting factor until improved hybrid seeds are available. The wild variety of artemisia growing in Nigeria produces no artemisinin. Nevertheless, it is known and used by people, which suggests it may contain another active compound as yet unknown. Little research has been carried out, because traditionally artemisia has been considered a useless weed. A. annua also contains compounds that are of interest to the cosmetics industry, including 3 percent camphor, and so that industry may serve as another market for seeds. The amount of land required to meet the annual real ACTs demand of Nigeria depends on yield and on the artemisinin derivative used. Table C-1 was developed at the June 2005 Arusha meeting sponsored by the Roll Back Malaria initiative.1 As shown in the table, about 20,000 hectares will be required to produce 100 million courses of ACTs in Nigeria. Arrangements with growers. The Company could contract with local farmers to grow A. annua where possible to gain the support of the local community and the state. But land tenure systems present a difficulty. Inheritance rules in many regions encourage the breaking up of farms into 1 Roll Back Malaria initiative, http://www.who.int/malaria/docs/arusha-artemisinin-meeting.pdf.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria TABLE C-1 Calculation of Required Planting Area to Meet Nigeria’s Need for ACTs Output Lower estimate Average Upper estimate Dry leaf yield per hectare 1,000 kg 1,000 kg 1,500 kg Artemisinin content 0.5% 0.8% 1.0% Artemisinin yield after processing (40–70%) 2.0 kg (40%) 4.8 kg (60%) 10.5 kg (70%) Artesunate yield (70%) 1.4 kg 3.4 kg 7.4 kg Artemether yield (60%) 1.2 kg 2.9 kg 6.3 kg Note: One ACT adult treatment course contains 0.6 grams of artesunate or 0.48 grams of artemether (for the combination artemether-lumefantrine). Therefore, the number of treatment courses that can be obtained from 1 hectare of artemisia, based on variations in yield, artemisinin content, and recovery, are 2,333–12,250 using artesunate (average 5,600) or 2,500–13,125 using artemether (average 6,000). Producing 100 million adult ACT treatment courses would therefore require 8,160–42,860 hectares for artesunate (average 17, 860 hectares) or 7,620–40,000 hectares for artemether (average 16,670 hectares). With a split of artesunate and artemether, 17,000–18,000 hectares would be required. Source: “Summary of Working Group B: Artemisinin Extraction, Storage and Quality Assurance,” Meeting on the Production of Artemisinin and Artemisinin-Based Combination Therapies, Arusha, Tanzania, June 6–7, 2005, convened by Roll Back Malaria Department, World Health Organization, http://www.who.int/malaria/docs/arusha-artemisinin-meeting.pdf. small holdings, and small holders must work through cooperatives or be able to benefit from government procurement in order to make economic use of mechanization. The land also may be forested, adding to the cost of land clearing in the humid tropics. Contract arrangements with growers should provide a guaranteed price that will encourage planting and employment but give no incentive to add filler to the product. In a trial supported by USAID, farmers were given 100 milligrams of seeds, the output of one plant, in the first phase of the trial. They were then required to sell the leaves back to the company in Calabar, and the cost of seeds was subtracted. The price was based on the price of artemisinin; if the international price was $100 per kilogram, farmers were paid $100 per ton of leaves. As a result of the trial, it is recommended that farmers not be paid for tons of dry biomass. If payment is based on artemisinin content, the analysis must be carried out continuously. The crop should be monitored and collected immediately after harvest and dried elsewhere. If the farmer dries the harvest, he is able to add other material without detection. Collecting the wet biomass and transporting and drying it raise the cost, but the alternative is to supervise the drying.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria If land is available to the Company, it would be easier and more economical to contract seasonal labor for planting and harvest, or to contract with an agricultural company and buy back the biomass. The product must be produced following Good Agricultural Practices (GAPs), and it must not be contaminated during the drying process. It can be dried in the sun in for two to three days or in a warehouse; the method of drying does not affect the artemisinin content. Costs of growing A. annua. The cost of cultivation includes: land land preparation, including equipment purchase and maintenance or lease seeds labor for planting and harvesting extension and training for farmers inputs of fertilizer and herbicides, plus irrigation if necessary monitoring to ensure quality plants are harvested at the right time. drying transport of harvested leaves Extraction and purification of artemisinin. The most commonly used process to extract artemisinin from A. annua leaves is solvent extraction. This method is not vulnerable to electrical outage; it can be carried out in the tropics in open buildings with no walls; it operates at relatively low temperatures; it carries no risk of explosion; and it is not protected by patents. Solvents can be recovered and recycled, which lowers the cost and helps protect the environment. The usual solvent is hexane, with an additive to protect against explosion. Other alternatives are petroleum ether, alcohol, or methanol, or the “super-critical solvent process,” which may be too difficult to manage for artemisinin. A new method, the BioX process (HFX134A), extracts a higher proportion of the artemisinin, but the materials are expensive and patented, and so royalties must be paid. Purification can be carried out by crystallization or by chromatography, but both require a heavy investment. Perhaps the best way is to crystallize artemisinin with hexane solvent in a vat and then centrifuge. Impurities can be removed and the crystals vacuum dried to produce pure crystalline artemisinin. In Nigeria, the solvent must be imported. The Company must check costs and then start with the best proven method available at the time. As the Company becomes more profitable, it might upgrade to new technologies as they become available. Initially, it will cost about 15 percent more

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria to grow, extract, purify, and derive locally than directly importing artemisinin derivatives. To encourage local production, the producers could perhaps be subsidized by the government or by a donor agency. The cost of equipment depends on whether a steel or glass unit is selected, and whether the fabrication is local. Turnkey plants are available from U.S. and European manufacturers, but the price is high, and the required output based on anticipated demand is still uncertain. The Calabar group has received a special offer from a manufacturer in China: he offers to import a plant with a capacity of 20 tons per year and operate it for six months for $3 million, apparently below cost. The offer includes another small factory to produce an artemisinin derivative in order to enter the Nigerian market. The demand in Nigeria is about 20 tons, grown on 2,000 hectares, and one extraction plant in one location should be sufficient to start. Initially, the artemisinin product could be sold to Novartis or another established firm, and eventually a partnership could be set up that returns the derivatives for formulation. As of early 2006, the price of artemisinin was about $600 per kilogram, but within one or two years it is likely to drop to about $350. The cost of production depends on the price of leaf and yield of artemisinin, and so the local costs of production would have to be monitored against the cost of importation. The price of the derivative artesunate is $970 per kilogram. If the Chinese offer were accepted, about six months would be required to import, transport, install, and test all equipment. The equipment is not modular, and some elements can be used for other processes. Similarly, six months would be required to grow and dry the raw material. However, to anticipate contingencies nine months should be allowed, and so the process must be started in May to meet the growing season. Regulatory requirements. Minor environmental issues must be taken into account for both the cultivation stage and the production process. A. annua is a weed, and care must be taken in dispersing seeds so that plants do not take over neighboring fields. An environmental impact assessment must be carried out, and a permit from the Ministry of the Environment and Housing will be required. In the cultivation and production of artemisinin, no toxic effects on humans or animals have been identified, but organic reactants should always be used with care. Solvents are recycled, but the effluents generated may present environmental problems. A mini-effluent plant should be built into the extraction plant. Leaf waste will also be produced, and the dry residue will contain solvent. This residue will be difficult to treat and may have to be burned, and the heat and fumes must be dispersed.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria The purification process also produces a waxy substance with no known application that must be discarded. The Company will have to be registered with the drug regulation authority and the corporate affairs commission of the state ministry of commerce and industry. Costs of extraction and purification. The artemisinin production costs will include the following: A turnkey plant. The Chinese offering can be purchased for $3 million. A technical-grade solvent. Ten liters of solvent are required for 1 kilogram of plant material. One liter of hexane costs $.50, and so the solvent required for 1 kilogram of leaves would cost about $5. The solvent is normally recycled, with about 15 percent losses in recycling. The cost of the solvent per kilogram of leaves would therefore be about $.75. Normal operating expenses Security Devices to prevent damage from lightning in a rainy climate like that of Calabar Power Labor Insurance. Manufacture of ACTs. It should be possible for a company to operate under cGMP conditions certified by WHO, thereby allowing the product to be sold in Nigeria and other countries willing to accept the import. But without prequalification, the product would not be eligible for international purchase (e.g., using funds from WHO or the Global Fund), nor for a subsidy if that option materialized. Such a situation would create serious competition from subsidized medicines, either imported or from other local companies. Choice of ACT. All three of the common agents—dihydroartemisinin (DHA), artesunate, and artemether—could be produced in Nigeria, but the clear choice is artesunate or DHA, because artemether plus lumefantrine (AL), the formulation presently adopted by the Nigerian government, is under patent to Novartis as Coartem until 2011. In Nigeria, under the agreement with WHO the price of Coartem is $2.40 per course of treatment. Worldwide, it is available for about 10 times that price in the public sector and for up to $40 in the private sector, where many people buy their antimalarials. ACTs that are less expensive to manufacture than Coartem (in part because the companion drugs are less expensive) are

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria under development and may be available in a few years for a wholesale price of $1 to the public sector and $2–$3 in the private sector. The Drugs for Neglected Diseases initiative (DNDi) is evaluating several different combinations and sponsoring clinical trials in other countries in Africa, and it will prepare an assessment of all trials. Technologies used. The $3 million price of the Chinese offer in Calabar includes a small additional factory that would make the derivative alongside the extraction of artemisinin. The process is not complex and can be done in Nigeria. In one example, artemisinin can be converted to artemether using a well-known two-step process in which, first, ketone is reduced to alcohol at normal temperatures (which gives a 97 percent yield in the laboratory), and then the alcohol is converted to beta ether for artemether. At this point, it may be expedient to send the material to an advanced laboratory to make the derivative at additional cost. Most of the equipment required for producing the product can be purchased off the shelf. This equipment includes a mill, dryer, granulator, packaging tools, and the analytical laboratory. Coformulation will require special equipment, and the process will be spelled out in the license and dossiers provided by WHO for prequalification. Site. ACTs production should be located in an urban center with adequate infrastructure, including electric power, roads, and a water supply. It could be placed near the cultivators, in a city such as Calabar, but that location would mean incurring extra transportation cost to Lagos, the major commercial center in Nigeria where most of the pharmaceutical companies are located. Calabar does, however, offer the possibility of support from the state government. Because malaria is a national concern, treatment therapies are not subject to federal duties, and the equipment and raw materials needed for the production of ACTs should attract no duties in any port of entry into Nigeria. Licensing. To put a drug on the market in Nigeria, a company must be registered with the National Agency for Food, Drug Administration, and Control (NAFDAC). The Company also must register with the state ministry of commerce and industry and receive approval from the Ministry of the Environment and Housing. Finally, it must register with the Pharmaceutical Society of Nigeria, a nongovernmental organization (NGO). The product itself also must be registered with NAFDAC, and documentation must be provided on clinical trials. For an existing formulation, the documentation must demonstrate manufacturing capability and equivalency with the drug approved elsewhere. In principle, new clinical

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria trials might be required, but the Nigerian government will not require new trials for ACTs approved elsewhere. Marketing. The trade name for the product will be an important factor in the marketing plan. Nigerians are accustomed to taking chloroquine and stopping the treatment when and if improvement is felt. The marketing campaign should promote the idea of a cure within a fixed number of days if the course is completed. There would, of course, be different dosages for adults and children. New formulations for adults are likely to require two tablets once a day for three days. Coartem is a course of 24 pills over three days. Therefore, the trade name might incorporate the idea of a three-day cure, and the campaign might emphasize the drug’s advantage over chloroquine in that the treatment need be taken only in one course for a cure. The product should be marketed to NGOs, wholesalers, and member countries of the Economic Community of West African States (ECOWAS), and through educational programs in schools, with emphasis on completing therapy. Presently, much malaria advertising is placed on billboards, but the government has indicated its intention to prohibit billboard advertising for antimalarial drugs. The health system should be utilized as well as possible. Trained field workers could work to ensure compliance. Another marketing strategy could involve age-specific packaging. Different dosages are appropriate for different age groups, and the packages could contain diagrams showing frequency and time of administration. Children under five may be treated presumptively without diagnosis. Implementation plan. There is already considerable momentum toward growing A. annua and manufacturing ACTs in Nigeria. Officers of three companies engaged in these activities were members of the workshop panel, and other Nigerian and foreign companies have demonstrated interest. Financing. It is quite likely that an established pharmaceutical company would play a large role in the manufacture of ACTs, whether as a partner of a new company or as the prime entity that will subcontract the growing of artemisia and the extraction of artemisinin. The established company would likely have to dedicate some of its own capital to the venture in order to qualify for financing from a commercial bank or an international financing agency such as the African Development Bank or the International Finance Corporation. The probable cost of the initiative would be in the range $10–$15 million. For a new company, venture capital companies, particularly the newer “social” venture capital companies, might be interested.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria Cost of a cGMP facility to manufacture ACTs (contributed by Prof. Krishna Kumar, Howard University, Washington, DC). The costs mentioned here would apply to the United States, and so they may differ from the costs in Nigeria, especially where transport and import fees must be added. There are three options for ACT formulation: Direct compression. Involves mixing the raw material and compressing it into tablets. This process would require (1) a V blender with a capacity of 5 cubic feet for a 30–50 kilogram batch, at an approximate cost of $25,000 for used and $50,000 for new; and (2) a tablet press for a 30–50 kilogram batch, at a cost of $30,000 for a used mini-press and $60,000 for a new one, or a cost of $45,000 for a used beta press and $120,000 for a new one. Granulation followed by compression. To the costs in option 1 must be added the cost of granulation and drying equipment. The cost of a granulator and tray drier is $50,000 used and $100,000 new. Powder mixing followed by capsulation. This process would require a V blender with a capacity of 5 cubic feet for a 30–50 kilogram batch, at an approximate cost $25,000 for used and $50,000 for new; and a capsule-filling machine at a cost of $30,000 used and $50,000 new for a table-top model with a capacity of 20,000 capsules per hour, or $65,000 used and $110,000 new for a floor model with a capacity of 40,000 capsules per hour. This option may also require granulation, depending on the formulation and excipients used. In that case, the cost of granulation equipment, as in option 2, would have to be included. Some ACTs would also require film coating to fill aesthetic and stability requirements. The cost of film-coating equipment for a 24-inch pan for 30 kilograms is $30,000 used and $90,000 new, and for a 48-inch pan for 75–100 kilograms is $75,000 used and $150,000 new. In addition to these equipment costs, a minimum packaging suite based on bottles and cartons would have to be included. A basic model consisting of a counter, conveyer, filler and capper, labeler, printer, and ability to pack cartons could be assembled for about $125,000. A new machine could cost up to $250,000 depending on the options. Some of the packaging costs may be reduced by making the operation more labor-intensive, but maintaining GMP conditions and quality could be difficult. To follow cGMP procedures, it also will be necessary to include some in-process quality control equipment such as instruments to measure hardness ($3,500 used, $7,000 new), friability ($3,000 used, $7,000–$10,000 new), tap density ($3,000 used, $5,000 new), and disintegration ($5,500

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria new). Accessories such as a metal detector ($10,000), sonic sifter ($5,000), and dust collector ($3,000–$10,000) also would be needed. If a building that meets cGMP requirements for temperature and humidity control, air handling, and water is not available, the cost of designing and constructing such a building must be added. Government role. The Nigerian government could promote the manufacture and distribution of ACTs in several ways. It could provide seed money for new start-ups or grants to encourage pharmaceutical companies to enter the market and to help companies to achieve precertification. A donation of land for growing artemisia would shorten the timetable considerably. It is important that the government provide political goodwill and an enabling environment. Banning counterfeits, clones, and low-quality products from the market would both help the new manufacturer and protect the public at the same time. Public campaigns calling for using insecticide-treated bed nets, cleaning up standing water sources, and taking the correct medicine, and that promote ACTs and oppose monotherapy would be helpful both to the public and to the suppliers of ACTs. Finally, a program of public education in the schools on the avoidance and control of malaria should be cost-effective and successful, just as similar programs on HIV/AIDS and smoking have been in other places. The government could take the following specific actions to encourage ACTs production: waive any existing duties on imported equipment, raw materials, solvents, and other materials involved in ACTs production donate land for farming of A. annua enforce a ban on antimalarial monotherapies for uncomplicated malaria provide an administrative infrastructure assist in training and research purchase media advertising to promote effective malaria therapy and completion of courses of treatment pass legislation to require the distribution and use of ACTs in all government schools, hospitals, and agencies. Role of the science academies. The U.S. National Academies and the Nigerian Academy of Science could collaborate by designing and preparing the terms of reference for an educational program on malaria control for the schools. The Nigerian academy is prepared to play a strong advocacy role within Nigeria for the local production of ACTs and the exclusive use of ACTs for malaria control. It might also help interested

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria companies become informed about the requirements for cGMP certification and WHO prequalification and stay abreast of developments in malaria drug financing. PARTICIPANTS, ARTEMISININ-BASED MALARIA THERAPY WORKSHOP, PARIS Edith Ajaiyeoba University of Ibadan Nancy Bearg Consultant Ebiamadon Andi Brisibe University of Calabar, Molecular Bio/Sciences Ltd. Yves Champey Drugs for Neglected Diseases initiative Catherine Falade University of Ibadan Hellen Gelband Institute of Medicine, U.S. National Academies Michael Greene U.S. National Academies Jean-Marie Kindermans Médicins sans Frontières G. B. Ogunmola Nigerian Academy of Science, University of Ibadan Folasade Olaiya-Segun Neimeth International Pharmaceuticals Ramesh Pandey XeChem Inc. Jacques Pilloy Office Technique d’Études et de Coopération Internationales George Tyler Drugs for Neglected Diseases initiative

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