ngin - Norfolk Genetic Information Network
23 June 2002


A. Biotech fever burning out - ISIS via AgBioIndia
B. Blair's Biotech Vision Clouded - ISIS


1. Biotech fever burning out
from the AgBioIndia Mailing List
June 23, 2002

The London-based Institute of Science in Society (I-SIS) is headed by the distinguished scientist, Dr Mae-Wan Ho. We bring you the latest analysis from her, which makes it very clear that unlike the IT industry, the biotechnology bubble is refusing to be created. It tells us how the Asian governments are being taken for a ride by the biotechnology industry, probably being lured under the garb of foreign direct investment.


1. Biotech Fever Burning, Burning Out?
2. Biotech Fever Grips South East Asia -- India's Karnataka trying to
engineer biotech boom
3. Executive Summary of Brookings Institution study


1. Biotech fever burning, burning out?

Biotechnology is a risky business, according to a new study in the United States, the nation that leads the world in biotechnology. Nor is there likely to be a biotech boom resembling that of information technology. Chee Yoke Heong <> and Mae-Wan Ho <> ask whether it is wise for Third World governments to be caught up in the biotech fever.

As South-East Asia is in the grip of the biotech fever, (see next item Biotech Fever Grips South East Asia) the question uppermost in the minds of both policy-makers and the electorates must be: what does it take to create a thriving and financially successful biotechnology centre?

The answer is far from comforting, according to a new study carried out by Brookings Institution, a policy research institute based in Washington DC.

The study looks at the growth and decline of biotech centres in the 51 major metropolitan areas in the US. It finds that the industry is highly volatile (half of the biotech companies formed in the 1970s have folded or merged with other companies). The process of setting up a successful company is protracted, requiring substantial funding. The uncertainties in product development and economics are so great that most small biotech companies have failed over the last two decades.

"The apparent scale of research funding required for becoming a biotechnology center may be beyond the reach of most metropolitan areas," the study concludes, adding that most biotech firms operate at a loss, spending large amounts on research and development for several years in advance of earning any sales revenue. The typical biotech firm spent about $8.4 million on research and development and earned revenues of just $2.5 million in 1998.

Biotechnology activities are highly concentrated within those metropolitan areas that combine a strong research capacity with the ability to convert research into substantial commercial activity. These are places with a high concentration of capital flow, a critical ingredient in the development process, as well as leading universities and research institutes as sources of intellectual and human capital.

Only nine of the 51 metropolitan areas surveyed contained the necessary ingredients, with Boston and San Francisco emerging as the two established and dominant centres of the US biotech industry, which also has the largest density of biotech research firms in the world.

Government financing, a criterion that would be taxing especially to developing country governments, is also required to boost growth. The study notes that the biotech centres in the US receive heavy support and subsidies from the government; for example, the National Institutes of Health provide substantial research funding, totaling US$229 million in 2000 to the biotech centres with three-fifths going to the nine key areas.

The study concludes that it would be a mistake to believe biotech centres would take off like those of the computer technology centres. Unlike the boom created by the personal computer and internet, biotechnologies are often quite expensive and most biotech products are applicable to only a narrow fraction of the population.

Another shortcoming of the biotech centres is that even the successful ones do not contribute significantly to the economies in terms of job creation. Most biotechnology firms are quite small: nationally only 44 have more than 1,000 employees. Biotech firms typically contract with global pharmaceutical firms to produce, market, and distribute successful products rather than attempting to create their own capacity to do so. In the two largest concentrations of biotech activity, Boston and San Francisco, none of the largest biotech firms is among either region's 25 largest private employers


2. Biotech Fever Grips South East Asia -- India's Karnataka trying to engineer biotech boom

Karnataka, whose capital is Bangalore, has 72 biotechnology companies employing around 3,500 scientists. Eleven new firms started last year.

The bulk of the new investment would come from Europe's second largest drugmaker AstraZeneca , which will invest one billion rupees, while Aurigene Discovery Technologies, a unit of New York Stock Exchange-listed Indian drug maker Dr. Reddy's Laboratories plans to invest 500 million.

But a good deal of Bangalore's ambition to build homegrown companies rests on infant start-ups that mainly focus on contract research for global corporations, or combine software skills with biotechnology to tap the emerging field of bioinformatics.


Singapore, whose economy is reeling from a slump in technology exports is moving into biotechnology in a big way. It wants to build the research expertise needed to position itself as the life science "hub" for South-East Asia in order to support the development of a lucrative biomedical/pharmaceutical industry. It is constructing a 'Biopolis', an 18 million square foot biomedical sciences hub housing public research institutes, corporate research and development centres and start-ups - due to be completed in 2003. In addition, a Biomedical Research Council is to be established and a Biomedical Grid, a high-security network enabling the biomedical research information to be shared and distributed between interested parties.

To make up for the lack of home-grown expertise, it has recruited foreign talents, including Dr. Edison Liu, Director of the US national Cancer Institute's Division of Clinical Sciences, and Alan Colman from PPL Therapeutics, the Scottish company that helped create Dolly the world's first cloned sheep.

Singapore has around 30 life science start-ups. Around half working in the biomedical sphere and half in agriculture and environmental sphere.

The country has attracted some pharmaceutical giants. Eli Lilly is spending US 140 million on research over the next five years and Novartis is spending US£119million over five to 10 years.


China is developing the largest plant biotechnology capacity outside North America, according to a report in Science.

Research in agbiotech in China began in the mid-1980s. A research program on rice functional genomics was started in 1997. Fifty plant species and more than 120 functional genes are now used in plant genetic engineering.

Government funding predominates. Plant biotech funding increased eight-fold from 1986 to 1999. The total budget is estimated to be $112 million. About 9.2% of the national crop research budget was allocated to plant biotech in 1999, up from 1.2% in 1986, far exceeding the 2 to 5% level of other developing countries. India's budget is about 20% that of China, China accounts for more than half of the developing world's expenditures on plant biotech. But it is less than 5% of the total annual expenditure in industrialised countries, estimated to be about $2 to $3 billion, 45% of which is public. Thus, China supports more than 10% of publicly funded agbiotech.

In early 2001, China announced plans to raise plant biotech research budgets by 400% before 2005. If that is achieved, it could account for nearly one-third of the world's public plant biotech expenditure.


Malaysia too, sees biotechnology as one of the five core technologies that will transform it into a highly industrialised nation by 2020, and is investing up to 4 billion RM (about £800 million) on a 'Bio-Valley'.

A National Biotechnology Directorate (BIOTEK), headed by Dr. Abdul Latiff Ibrahim, was established in 1996 to promote and coordinate biotech R& D activities in the country, and to encourage private-public sector participation in the national biotechnology programme. Dr. Ibrahim has said publicly that the Malaysian government would at least match the billions of dollars that Singapore plans to invest in providing world-class research facilities for companies. He hopes to secure between US $10 billion and US $12.2 billion worth of investment from companies in the are within the next 8 to 10 years.

At the 1st National Conference on Life Sciences held in Selangor in May, Malaysia's Minister of Health, Chua Jui Meng told the delegates that the 21st century is the "century of life sciences", when scientists will look to the "internal universe of life itself instead of outer space". The "thousands of meters of blood and nerves" could be the source of "untold wealth" and "untold possibilities".

Dr. Ibrahim gave a sketch of the Bio-Valley project, complete with artist's impression. It would be built on a lake, with three National Institutes of Biotechnology, for Agricultural biotechnology, Genomics and Pharmaceuticals respectively. " There would also be a special institution to look after intellectual property rights and financial exploitation. And most importantly, luxury lake-side housing for scientists to attract the best.


1. "Indian state sees jump in biotech investments" Reuters Business, April 15 2002, Bangalore

2. "Biopolis or Bio-Bubble? Asia's Choice" Ian Ferguson, Business on Line Special Report May 2002, 20-25

3.  Huang J, Rozelle S, Pray C and Wang Q. Plant biotechnology in China. Science 2002, 295, 674-7.

4.  "Biotechnology in Malaysia" Briefing paper, Ministry of Science, Technology and the Environment, Malaysia.


3. Signs of Life: The Growth of Biotechnology Centers in the US

(Executive Summary)

By Joseph Cortright and Heike Mayer

The biotechnology industry is concentrated within nine of the nation's 51 largest metropolitan areas. These nine areas account for three-fourths of the nation's largest biotechnology firms and for three fourths of the biotech firms formed in the past decade. Two of the nine metropolitan areas, Boston and San Francisco, established themselves as the research leaders in biotechnology in the early days after the industry's founding in the1970s and continue today to be the dominant centers of the biotech industry. Two other metropolitan areas, Philadelphia and New York, have substantial concentrations of biotech activity, related chiefly to the historical presence of the headquarters of the nation's largest pharmaceutical manufacturers. Since the 1970s, three other metropolitan areas have emerged as significant centers of biotech industry - San Diego, Seattle, and Raleigh-Durham-each of which has built upon a well-recognized and well-funded medical research establishment and has been the site of many start-up firms.

Two additional metropolitan areas, Washington/Baltimore and Los Angeles, also have a concentration of biotech activity. Washington, D.C., has a significant biomedical research establishment and is home to the National Institutes of Health (NIH); in addition, several firms related to the exploration and mapping of the human genome are located in the Washington/Baltimore area. Los Angeles is home to the nation's largest biotech firm, Amgen, located in Thousand Oaks.

These nine biotech regions are leaders because they have two necessary elements for industry growth: strong research capacity and the ability to convert research into successful commercial activity. The present analysis suggests that the critical factor in the development of a biotechnology industry is not only the availability of pre-commercial medical research but also the availability of continuing private-sector investment in product development. Most biotech firms operate at a loss, spending large amounts on research and development for several years in advance of earning any sales revenue. These money-losing biotech research firms depend on venture capital investments, on research contracts and equity investments from large pharmaceutical companies (usually in exchange for marketing rights), and on sales of their company stock in public markets.

Biomedical research activity is now relatively widespread, but thus far only a few of the country's 51 largest metropolitan areas have demonstrated the entrepreneurial and financial capacity required for consistently generating significant numbers of new biotechnology-related businesses. Five of the nine top biotechnology metropolitan areas - the leaders (Boston and San Francisco) and three other areas in which biotech is growing rapidly (San Diego, Seattle, and Raleigh-Durham) - account for the bulk of the growth of new biotechnology firms. Together these five areas have accounted for 75 percent of the new venture capital in biopharmaceuticals in the past 6 years, for 74 percent of the value of research contracts from pharmaceutical firms, and for 56 percent of the new biotech businesses formed during the 1990s.

Thus far none of the other 42 largest metropolitan areas in the United States has developed a significant concentration of biotechnology activity. These other 42 metropolitan areas are divided into three groups, as follows: Four metropolitan areas (Chicago, Detroit, Houston, and St. Louis) can be classified as research centers with limited commercial activity because they rank above average in research activity but below average in commercialization.

Twenty-eight metropolitan areas have some biotechnology research and commercialization but at levels well below the average of the 51 metro areas in the sample. These may be regarded as median metropolitan areas. Ten metropolitan areas (Charlotte, Grand Rapids, Jacksonville, Las Vegas, Louisville, Norfolk, Orlando, Phoenix, San Juan, and West Palm Beach) have no significant biotech research or commercialization, with levels of both research and commercialization at less than 10 percent of the average of the 51 metropolitan areas in the sample.

Development of a successful biotechnology cluster requires a considerable amount of time and investment. Established concentrations of medical researchers and research institutions change slowly. It often takes a decade or more to develop biotechnology-based products, and perhaps one in 1,000 patented biotech innovations produces a successful commercial product. The historically low odds of success and the extended stretch of time associated with developing and securing regulatory approval for commercial biotechnology products mean that metropolitan areas seeking to develop a biotech industry will need to invest a significant amount of time and resources.

Although growing rapidly, the biotechnology industry is still a small portion of most metropolitan economies. To date, even successful biotechnology industry clusters have produced only modest returns to their regional economies. Most biotechnology firms are quite small: nationally only 44 have more than 1,000 employees. (Institute for Biotechnology Information 2001) Biotech firms typically contract with global pharmaceutical firms to produce, market, and distribute successful products rather than attempting to create their own capacity to do so. In the two largest concentrations of biotech activity in the nation (Boston and San Francisco), none of the largest biotech firms is among either region's 25 largest private employers.
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B. Blair's Biotech Vision Clouded - ISIS

Blair's vision of biotechnology and science is outmoded and out of touch with market reality. Dr. Mae-Wan Ho asks why Blair and other governments are throwing even more public money away at a sinking titanic of enterprises, while vital health and agricultural services are disintegrating for want of rational investments.

Frustrated by escalating protests against GM crops in Britain, Prime Minister Tony Blair gave a keynote speech in London's Royal Society, accusing the anti-GM of being anti-science - an impression that the pro-biotech scientific establishment in Britain has been trying to project all along. But Blair only has to count the number of scientists presenting evidence against placing Aventis' Chardon LL transgenic maize on the National Seed List in the recently resumed public hearing to realize that there are genuine scientific disagreements over the safety of GM crops.

Still more worrying is Blair branding any objection to anything scientists do as anti-science. "The fundamental distinction is between a process where science tells us the facts and we make a judgement; and a process where a priori judgements effectively constrain scientific research," he said, "So let us know the facts; then make the judgement as to how we use or act on them."

Blair's view of science is hopelessly anachronistic. He sees science as a collection of irrefutable, neutral 'facts', divorced from ethics or politics, and independent of how we observe at the fundamental level. This view of science has been deconstructed by generations of western philosophers beginning with Kant, and including Goethe, Hume, the later Wittgenstein, Whitehead and Popper; and dealt the death-blow by quantum physics. And I am not even referring to the tired thesis of science as "social construction".

Unfortunately, naïve positivism, for that's what it is, is endemic to the scientific establishment, which effectively gives scientists carte blanche on what they can do. And that is why irresponsible, unaccountable, discredited science and dangerous, useless technologies continue to be foisted on society in the name of progress.

But let's concentrate on Blair's vision of biotechnology for Britain, which is making him throw lots of taxpayer's money away. It appears to have come straight out of a biotech company's pr brochure, based on the assumption that genes determine all: drugs "tailored to an individual's genetic make-up", doctors pinpointing "flawed genes and gene products", predicting diseases and so avoiding them.

To help realize this vision, the Blair government is funding a controversial 'BioBank' project, to amass human DNA samples to be analyzed and stored alongside personal data and health records. Critics have already pointed to the potential misuse of the database, of genetic discrimination against those carrying real or putative 'disease-associated' genes and the erosion of privacy.

More seriously, the BioBank project is motivated and promoted on a faulty understanding of genetics. It doesn't take account of how dynamic and flexible the genetic material is, and how the environment strongly affects both the function and structure of the genetic material (see "GMOs 25 years on", this series). Some of us have even predicted years ago that the entire project of genetic engineering is bound to fail, as it goes against everything we know about how genes really work.

There is a real danger that further scientific talent and financial resources are both going to waste on genomics research, while more promising approaches to improving health languish from a total lack of investment.

Britain does have great strength in science, as Blair pointed out. But the disproportionate concentration of research funding in market-oriented biotechnology is far from conducive to scientific creativity.

Britain has produced 44 Nobel laureates in the last 50 years, more than any country except the US, but only eight of those are in the last 20 years. Blair blamed that on having "relied for too long on tradition and sentiment" instead of strong funding and public support. And so his government has been putting that right.

Apart from having increased funding for science by 15% in 1998 and by 7% in 2000, the Blair government is establishing strong links between universities and business through specific schemes - such as University Challenge, Link, the Faraday Partnerships and the Higher Education Innovation Fund. These links would ensure that most of the increase in science funding is tied to work with industry. Notably, £2.5 billion has already been earmarked for genomics and related research over five years from 1999, again heavily industry-oriented.

In addition, the British government has just introduced further new tax credit for research and development: "a £400 million boost to innovation, affecting £11 billion of expenditure by 1,500 large companies in the UK".

In1999-2000, 199 companies were spun off from our universities, compared with 70 a year on average in the previous five years, Blair proudly announced. The number of patents filed was also sharply up. And the percentage of university research funded by industry was higher than in the US. Unfortunately, very few companies were making any profit, even with such large public subsidies.

"Biotechnology is at the forefront of these developments," Blair said, "The biotech industry's market in Europe alone is expected to be worth $100 billion by 2005. The number of people employed in biotech and associated companies could be as high as three million, as we catch up with the US industry - currently eight times the size of Europe's."

But, a study of biotech centres in the US just released (see "Biotech fever burning, burning out?", this series), shows most biotech firms operate at a loss. The typical biotech firm spent about $8.4 million on research and development and earned revenues of just $2.5 million in 1998. Nor do biotech firms contribute significantly to job creation. Most are quite small; nationally only 44 have more than 1,000 employees. Biotech firms typically contract with global pharmaceutical firms to produce, market, and distribute successful products rather than attempting to create their own capacity to do so.

The study concludes that it would be a mistake to believe biotech centres would take off like those of the computer technology centres. Unlike the boom created by the personal computer and internet, biotechnologies are often quite expensive, and most biotech products are applicable to only a narrow fraction of the population.

I have seen an estimate made by Britain's Department of Trade and Industry in 1998, which anticipated that by 2000, UK revenue from biotechnology would be £9bn. This was out by a factor of seven. Britain's biotech revenue, the largest of any European country, amounted to just over ?2 bn in 2001. The total biotech revenue in 2001 for the whole of Europe is under ?8.7 bn. Does Blair really believe it will grow by more than ten fold to $100 billion come 2005? Yet, it is this kind of wild projection that has driven research and development in biotechnology, that in turn, impact on the health and food security of billions around the world.

The focus on biotechnology and 'wealth creation' over the past twenty years may be as much to blame as the lack of funding for failing to generate the expected numbers of Nobel laureates in Britain over the same period. It would not surprise anyone to find an inverse relationship between scientific excellence and science driven by rampant commercialism that effectively turn our scientists into corporate slaves through misguided government science funding policies.

Despite heroic efforts to keep the biotech bubble inflated, industry has not benefited on the whole. In April, the UK House of Commons Trade and Industry Committee sent out a general call for submissions "on the current and future prospects for the UK biotechnology industry, including genomics and related aspects of the pharmaceutical industry". Is that a sign of creeping doubt that the prospects are less than rosy?

The Tufts Center for the Study of Drug Development released research last December showing that the 'biotechnology revolution' during the past two decades has slowed the development of drugs while increasing costs. Industry's enthusiasm for the promise of genomics has been muted.

In January, Craig Venter, president and chief scientific officer of the private company Celera that sequenced the human genome, reportedly "quit (or was told to leave)" the firm created for him in 1998. He returned to run the Institute for Genomics Research, a non-profit organisation that he founded earlier. If Celera's fiscal 2002 ending June follows the pattern of 2000 and 2001, loss will outstrip sales two to one: $350 to 375 million on sales of $140 to $180 million, making Celera's total loss almost three-quarter of a billion dollars.

Blair also mentioned stem cell research, closely associated with 'therapeutic' human cloning by the nuclear transplant technology that created Dolly the first cloned sheep. Unfortunately, things have gone from bad to worse, as neither the transgenic nor the cloning technology has progressed beyond the initial insurmountable hurdles. PPL Therapeutics, the "cash-strapped creator of Dolly the sheep", is in talks to sell its stem cell research to Singapore-based ES Cell International, a drugs company that recently poached PPL's research director, Alan Colman. Separate negotiations are under way to sell the company's US-based business in xenotransplantation - a pointless, cruel and hazardous technology that should have been abandoned long ago.

The company further spent money expanding its high-security farm in New Zealand, which contains more than 1,000 sheep, many of which have been genetically altered. A spokesperson for ING Barings recently stated they have had doubts about the viability of transgenic animals for some time. To date there have been no medicines made from transgenic animals, a process that's inefficient and ineffective by all accounts.

Celera and PPL are not the only biotech companies in trouble. Investment in biotechnology has been going down with the rest of high technology.

Venture capital investments in start-up companies in the US dropped 23% from $8.1 billion to $6.2 billion in the first quarter of 2002 compared with the previous quarter. Investments have been decreasing for the past two years.

This reflects a sharp reduction in demand for the stocks of new technology companies. Investments plunged 35% to $752 million in biotech companies doing gene research to speed the creation of drugs. That was a setback because biotech had replaced e-commerce as a favourite among venture capitalists.

Venture capital investments are seen as the primary precursor to economic growth, they have fueled the dot-com boom in the 1990s.

Another increasingly important factor determining investment is ethics. Britain's Co-Operative Bank reported record annual profits in April as it reaps the rewards of ethical investment. The bank has now ceased to do business with biotech companies involved in genetic modification or cloning.

The decision followed consultation with its customers, who are genuinely concerned about a wide range of issues, including the uncontrolled release of GMOs into the environment, negative impacts on developing countries, patenting of life-forms, in particular, of indigenous knowledge, and cloning; in particular, of animals for non-medical purposes.

Despite all these signs that the anticipated biotech boom is not going to happen, our governments are caught in a frenzy of new tax cuts and other corporate subsidies. Britain is not alone. Germany, France and the entire European Community are following suite.

Philippe Pouletty, president of France Biotech, the national industry association, has pushed successfully for the adoption in France of "Plan Biotech 2002", part of a finance bill to mobilize public and private investment to help France' biotech sector. It consists of a ?50 million fund to promote new start-ups and ?90 million in bank loan guarantees.

In the mid-1990s, Berlin granted three regions including Munich ?25 million to match private capital going into start-ups. Under separate programs, federal and state banks also matched private investment. That means each biotech start-up could triple its venture capital with matching grants.

At the Gerona meeting of research ministers, Pouletty urged them to set two goals for Europe's biotech: head-to-head with US in 2007 and ahead by 2017. To get there he proposed a string of measures: uniform European patent and litigation laws, doubling university research budgets every five years, creating a European Corporation for Innovation to provide tax exemptions for entrepreneurs, investors and corporations across Europe, subsidies of ?5 billion annual support to private biotech companies and EU guaranteed long-term bank loans to help promote mergers and acquisitions within Europe or to take over US firms.

The European Commission has already taken some initiatives seriously: drafting an action plan for the biotech industry that calls for strengthening sources of risk capital and a common simplified regulatory framework.

In short, governments are throwing even more public money away in the hope of salvaging a sinking titanic of enterprises, while vital health and agricultural services are disintegrating for want of rational investments.

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