Biotechnology - Genomic and Proteomics/Give an overall picture of the BGP field

How was this field born and how is it evolving?

Timeline

• 1953, Crick and Watson discover DNA at Stanford
• 1973, rDNA (insertion of foreign gene between two ends of an existing gene) produced at Stanford (Acharya pp. 2)
• 1970's and 1980's – proliferation of private biotech firms
  • 1971, Cetus founded
  • 1976, Genentech founded. First firm to use rDNA technology (Acharya pp. 4)
• 1982, first rDNA product, human insulin, approved in US (Acharya pp. 4)
• 1980's firms grow through heavy outside investment
  • easy financing for firms that chose to go public (Acharya pp. 2)
• 1980's, outside US, pressure to subsidize public-private partnerships for Biotech research (Acharya pp. 3)
• 1987, stock market crash and larger recession push small biotech firms to merge into larger multinational companies
  • 1990, Genentech merges with Hoffman LaRouch to become largest example of this new sort of firm (Acharya pp. 3)
  • 1993, only 14 biopharmaceutical companies record profits (Acharya pp. 5)
  • 1995, Glaxo-Wellcome merge, forming one of world's largest pharma companies

Causes and Culture

• Biotech industry emerged from Bay area in 1960's
  • Stanford's biochemistry and virology (later molecular biology) departments expanded aggressively during this time (Penhoet pp. 6)
  • Bill Rutter, chairman of UCSF's Biochemistry and Biophysics department . His work ethic became the model for the industry (Penhoet pp. 7)
• Herb Boyer, Bob Swanson start Genentech in the mid-1970's
  • first private biotech firm
  • later followed by Cetus, Chiron (Penhoet pp. 8)
• Venture Capital firms already existed to support emerging Silicon Valley, came in to support Biotech ventures as well (Penhoet pp. 8)
• Open attitude towards IP: belief early on that innovation would be sustained, so academics continued to publish their findings, even when working with private companies (Penhoet pp. 8-9)

What are the main business models?

• Platform
  • develop technology platform (e.g. research method) and license it to other companies (Phillips, "Biotech Business Models")
  • Most viable model since the Biotech bust of 2001
  • Broad patent protection will help this sort of business model (Pareras, "Biotech Business Models")
• Product
  • develop a new product (Phillips, "Biotech Business Models")
  • RIPCO (Royalty-Income Pharmaceutical Company) - develop a new product and license to a larger company in exchange for royalty on sales (Pareras, "Biotech Business Models")
    • large potential customer bases and the sooner it can be brought to market, the better
  • FIPCO (Fully Integrated Pharmaceutical Company) - develop new product and bring it to market yourself (Pareras, "Biotech Business Models")
    • much easier to accomplish if you have many products with which to diversify risk
  • NRDO (No Research, Development Only) - buy a 'discarded' drug from a pharmaceutical company and develop it to the point of bringing it to market. Key that you be able to develop the drug in very efficient way, so as to make it profitable (Pareras, "Biotech Business Models")
• Vertical
  • early concept to market (Phillips, "Biotech Business Models")

What are the innovation dynamics in this field?(inputs/outputs, timing of innovation/ disruptive or incremental innovation?)

• Innovations come from uncertain processes involving knowledge and markets (McKelvey pp. 45)
  • Biotech involves intersection of several disciplines – increases the amount of uncertainty (McKelvey pp. 45)
  • There is no clear connection between investment made and products brought to market (McKelvey pp. 46)
  • Innovation in Biotech can come from not just new technological processes, but also from basic scientific discoveries (e.g. the discovery of DNA) (McKelvey pp. 46)
  • Total cost of R&D is increasing (McKelvey pp. 48)
• Biotech creates value in a variety of different ways
  • not usually a direct connection between scientific discovery and industrial application (McKelvey pp. 48)
  • Tendency to form geographic clusters through university centers and tendency towards mergers (McKelvey pp. 49)
• For innovation biotech firms rely on networks between different kinds of actors
  • collaboration between large firms, small firms, and universities (McKelvey pp. 50)
  • much of the research carried out at universities. Bridge organizations "Technology Transfer Organizations" established between universities and companies (McKelvey pp. 50-51)
  • public criticism can have the effect of slowing down development of products, e.g. Genetically Modified Organisms (GMO) (McKelvey pp. 52)
• Firms play increasingly important role in R&D (McKelvey pp. 52)
  • Essential that firms be able to establish links both with universities and with venture capitalists (McKelvey pp. 54)

How does knowledge flow in this field?

this section needs a lot of work

• Innovation activity is increasingly concentrated in the hands of large, merged firms (Gaisford pp. 41)
• Increased use of patents has the additional impact of increasing disclosure
  • Revere engineering makes keeping secrets difficult (Oliver pp. 54)
  • Rapid increase in the amount of knowledge: between 1977 and 1997, the number of patents approved annually increased almost seven-fold (Oliver pp. 56)

Number of Biotech patent approvals
	Drugs	Microbiology	Multicellular organisms	Recombinant DNA
1977	660	591	0	14
1982	730	711	1	111
1987	958	1099	19	204
1992	1691	1965	52	356
1997	3372	4178	318	506

(Table Oliver pp. 59)

Is this field replicating models from other fields?

• Anatomy of the Biotech industry looks a lot like semi-conductors or software (Pisano pp. 118)
  • Market for knowledge
  • University-spawned start-ups focusing on specific pieces of the value chain
  • Role for VC
• However, Biotech R&D different from Silicon Valley R&D: (Pisano pp. 118-119)
  • Persistent uncertainty in ability to bring products to market
  • R&D process cannot be broken into discreet bits
  • R&D process is usually much longer for Biotech products (even though funding process for Biotech is about as short at in Silicon Valley) (Pisano pp. 116)
  • Because there a silos of information within the different parts of the R&D process, there is a great deal of tacit, difficult-to-communicate, background information
  • Murky IP rights makes sharing riskier (Pisano pp. 122)
  • Unlike Silicon Valley (exceptions - GE, IBM, and Xerox), Biotech actually performs basic scientific research
• Results:
  • $300 billion in capital since the industry got started
  • yet only a handful of profitable companies
• Additional note: though not imitating the model of big pharma, biotech is often parasitic upon it:
  • Almost all Biotech companies have to form contractual relationships with Pharma companies (Pisano pp. 117)

How many companies?

• 336 publicly traded companies in the US in 2006 ("Beyond Borders" pp. 19)
• in 2006, 8 largest Biotech companies bring in $35,821,000,000 out of a total market revenue of $55,458,000,000. In other words, eight companies accounted for 65% of the industry's revenue ("Beyond Borders" pp. 18-19)

How much money do they make or how much money do they “move” in the American economy?

• total market revenue in 2006 was US $55,458,000,000 ("Beyond Borders" pp. 18)

How important is research from universities in this specific field?

• Past: Universities very important in developing new processes. Three largest innovations in the biotech field all occurred in university settings (Pisano, Science Business, pp. 26-30)
  • rDNA
    • Herb Boyer and Stanley Cohen (Stanford)
  • monoclonal antibodies (MAbs) - can produce large amounts of a specific kind of anitbody
    • Georges Kohler and Cesar Milstein (Cambridge)
  • combinatorial chemistry - create large varieties of chemical compounds by assembling chemical building bocks in every combination.
    • Jonathan Ellman, 1992 (Berkeley)
• Present: Multiple studies conclude that academic research is the basic driver of innovation in Biotech (Oliver "University Based..." pp. 194)
  • Many industry-university collaborations (Oliver "University Based..." pp. 194)
  • Technology transfer offices have made universities much more ambitious in retaining rents from discoveries (Oliver "University Based..." pp. 194)
  • Several studies show that universities no longer engaged simply in 'pure science' but also specific industrial innovation (Oliver "University Based..." pp. 197)
  • Some universities (e.g., Oxford) build technology-transfer offices with the specific goal of building new spin-off companies (Oliver "University Based..." pp. 198, 203). Possible reason:
    • Potential profits
    • Potential draw for more entrepreneurial professors
  • The strength of the connection between a university and industry depends on the environment fostered by the university. Stanford, which encourages spin-offs and industry collaborations, has greater industry involvement those does Berkeley, a similar institution (Oliver, "University Based..." pp. 204-205)

How important is private funding / venture capital in this field?

• In 2007, VC investments accounted for US $29.6B in capital ("2007 CED North Carolina Venture Report")

Are there any specific public policies (from agencies, federal or state policies) that give incentives for openness or enclosure?

Data

• IP - raw data has to be put into the public domain
• National Center for Biotechnology (http://www.ncbi.nlm.nih.gov/About/glance/ourmission.html) - human genomic sequence put into GenBank. Three methods for maintaining openness:

1. Storing public databases. First among these is the GenBank, but also the "Online Mendelian Inheritance in Man (OMIM), the Molecular Modeling Database (MMDB) of 3D protein structures, the Unique Human Gene Sequence Collection (UniGene), a Gene Map of the Human Genome, the Taxonomy Browser, and the Cancer Genome Anatomy Project (CGAP)" (http://www.ncbi.nlm.nih.gov/About/glance/programs.html). Complete list of online databases and search tools available here: http://www.ncbi.nlm.nih.gov/genome/guide/human/
2. Developing search tools for databases, e.g., the Entrez program for searching the human genome (http://www.ncbi.nlm.nih.gov/About/glance/programs.html). Complete list of tools available here: http://www.ncbi.nlm.nih.gov/Tools/
3. Developing standards for databases. If you publish a gene to GenBank, you have to assign it an NCBI identifying sequence. This makes it publicly searchable (http://www.ornl.gov/sci/techresources/Human_Genome/posters/chromosome/sequence.shtml, and http://www.ncbi.nlm.nih.gov/Sitemap/sequenceIDs.html)

Narratives

• NIH Open Access requirement (http://publicaccess.nih.gov/ and http://sciencecommons.org/weblog/archives/2009/03/17/nih-mandate-made-permanent/)
  • All articles that receive NIH funding must be published in an open access format
• NCBI Bookshelf maintains online, free copies of selected biomedical texts (http://www.ncbi.nlm.nih.gov/books/bv.fcgi?rid=handbook)

Tools

• NIH working group report on research tools: http://www.nih.gov/news/researchtools/
  • Recommends that the NIH promote free use of research tools when chances of commercialization are slim, and that the NIH also promote Uniform Biological Materials Transfer Agreements (UBMTA) to reduce need for case-by-case licensing
• Bay-Dhole: Patents have increased markedly, requiring disclosure of discoveries
• Mice deposit: http://www.nih.gov/science/models/mouse/sharing/5.html
  • Mouse resources (those pertaining to genetically modified mice) created with the help of NIH funding must be distributed publicly
• When at least one of the starting materials or end products are non-obvious, biotech processes can be patented. This probably makes it less likely that people will keep trade secrets if they believe there is a possibility of licensing the process (http://www.ladas.com/Patents/Biotechnology/Durden-ProcessClaims.html)

Further Products

• New FDA policy will require that genetically-modified food products brought to market must be put to public review (Alonso-Zalvidar “FDA pledges openness on gene-altered products”)

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Bibliography for Item 2 in BGP
Biotechnology_-_Genomic_and_Proteomics