Image by Getty Images via DaylifeIn Science Business
Well, according to a report by Burrill and co, in 2008 the biotech industry made it’s first aggregate profit. You can look at this in many ways. It’s the first profit that the industry has made in 40+ years, so it’s worth celebrating. That it did this in 2008, not exactly the best of economic years, is something worth applauding. However, there is the dark side as well. Only 67 companies were profitable, and 85% of the $9.4B in net profit came from three companies, Amgen, Genentech (which is being acquired by Roche) and Gilead Sciences. That’s putting all your eggs in too few baskets.
The question I often ask myself (and I don’t have a good answer yet) is whether, profitability is the end goal for the biotech industry? Or is the lack of profitability the result of a bad business model. It’s a very hard industry to predict, heavily dependent on R&D with a poor record of bringing product to market. Sometimes, OK often, I feel that we need a layer between the academic labs where ideas are germinated, and the VC funded biotech companies. A filter, a gestation layer that takes the ideas that are mature enough for product forward, sends ideas that are promising, but need work back to the basic research phase, and kills off ideas that are just not good enough. What do you think such a layer might look like? A pooled resource? University Incubators? A better SBIR system? The biotech equivalent of angel funding? Non-profit incubators (an idea I quite like)?
More topics to pursue as this series continues.
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4 Comments
When I was an undergraduate, I use to think of the biotech industry as a promising, energetic, lucrative, but I suppose in the grand scheme of things, it's actually rather small. I find interesting your assessment that it's actually quite risky with not much chance for a return on investment. I also like your observation that there's a treacherous gap between those academic labs–and even the incubators themselves–and the big money. When I think about spinoffs that came about from CS PhD or masters theses, I think that maybe the real difference is that biology is just plain hard to work on, and that we only know enough to bump into confounding factors.
Both the University of Georgia and Virginia Tech have these “incubators” and my impression is that they're probably a quite widespread practice. I've only ever spoken to two professors who underwent this process. One had quite a successful at it, Mike Adang, who helped develop Bt Cotton at Monsanto. The other, whose name escapes me at the moment (I thought it was Mike Avery but I can't find him on Google search), was excited about something to do with protein production and chicken eggs that he had patents for, but I don't think it went anywhere. As I said above, I think it's just hard problems and sometimes researchers get lucky enough to bite off something they can chew; most times, they don't.
Also, at least in my experience, many scientists/professors think their ideas are worth more than they really are. Another think I have a problem with is that in many cases the people who have invested the most time and energy into various discoveries, i.e. grad students and postdocs, don't often get to run with those projects cause of the way the whole tech transfer process is set up. I'd actually love to hear more from people on this particular subject (University tech transfers)
When the biotech industry started there was a belief that rDNA would have the same effect on pharmaceutical development that the transistor had on the electronics industry. Investors assumed that there would be little technical risk and products would flow. The opposite has occured. In addition, the origins of the biotech industry in academia caused the biotech industry to adopt an academic research model for pharmaceutical development. This resulted in venture backed companies doing basic research in a field in which not all of the science is well-understood and where technical risk is hight. Contrast this to corporate research which focuses on products whose development path is more certain. The results that Gary Pisano describes in his book were predictable.
Profitability must be the end goal of any business. The question is how to achive profitablity in a science business as Pisano defines it. Incubators are usually physical structures that provide companies with space at belwo market rates. That will not solve the science business problem. What is needed is an innovation carrier that bridges the gap between the point where university research ends and corporate research starts. Organizations that fill that role inlcude the Michael J. Fox Foundation and Myelin Repair Foundations. Unortunatley there aren't too many others because it is difficult to find funds to support research and development in the gap.
When the biotech industry started there was a belief that rDNA would have the same effect on pharmaceutical development that the transistor had on the electronics industry. Investors assumed that there would be little technical risk and products would flow. The opposite has occured. In addition, the origins of the biotech industry in academia caused the biotech industry to adopt an academic research model for pharmaceutical development. This resulted in venture backed companies doing basic research in a field in which not all of the science is well-understood and where technical risk is hight. Contrast this to corporate research which focuses on products whose development path is more certain. The results that Gary Pisano describes in his book were predictable.
Profitability must be the end goal of any business. The question is how to achive profitablity in a science business as Pisano defines it. Incubators are usually physical structures that provide companies with space at belwo market rates. That will not solve the science business problem. What is needed is an innovation carrier that bridges the gap between the point where university research ends and corporate research starts. Organizations that fill that role inlcude the Michael J. Fox Foundation and Myelin Repair Foundations. Unortunatley there aren't too many others because it is difficult to find funds to support research and development in the gap.