Biotechnology – short term fad, long term future or neither
Prime Minister Dato Seri Abdullah Ahmad Badawi’s recent trip to San Francisco to visit the world’s largest biotechnology event, the BIO 2004 Conference is a clear indication that Malaysia’s fascination with biotechnology is now a real policy initiative. This would no doubt go down well with many biotechnology researchers but it is obvious from several reports that many people indeed do question the viability of Malaysia venturing down this path.
What are the facts about the biotechnology industry that should concern our policy makers? Firstly, there has been a lot of flak directed towards Biovalley, Malaysia’s biotech cluster based in Cyberjaya. Research by the Brookings Institution, a leading American think-tank shows that the success of the United States biotech industry has been centred very much around nine leading biotech centres mainly clustered around the East and West coasts of America which included San Francisco and San Diego on the West Coast and Boston and Raleigh-Durham in the East Coast.
In fact these nine centres accounted for 77 percent of all new biotech firms in the US, 88% of all venture capital for biopharmaceuticals and 96% of the Dollar value of research alliances with pharmaceutical firms. Incidentally 92% of the most active biotech venture capital firms were located in or around these nine centres.
The reason for such an agglomeration of activities around these leading centres is the critical mass of firms and researchers around these centres and also due to the connection these centres have with research Universities like MIT in the East Coast and University of California in the West among others. The centres are not however “organised” clusters like Biovalley but have sprung up over many years due to the formation of research organisations and firms that have spun out of research Universities.
Understandably Malaysia cannot wait 50 years for the mere possibility that this may happen; in fact it is almost a certainty that we will never have a successful biotech industry without Government intervention. If ever we want to create a successful industry a critical mass of firms centred around a cluster like Biovalley is probably the way to go.
However, a cluster alone is not enough for success. The Brookings study also clearly shows that some centres are more successful than others because of the availability of venture capital funding for biotechnology. There are many specialist biotech VC firms in America but how many are there in Malaysia, one, two? We also don’t have another pre-requisite for success, a critical mass of highly educated biotechnology science graduates and by this I mean those who have degrees that are world class. We probably have a small number of them but we need a critical mass of possible a few hundred a year at least.
On the economic side, we also need to appreciate the fact that the Biotech industry is not a major economic contributor. According to a US Department of Commerce biotechnology survey in 2003, biotech business amounts to a mere 0.33% of the US GDP and almost 60 % of the firms have less than 50 employees and 90 % have less than 500 employees. The entire biotechnology industry in the US (excluding the multinational pharmaceutical firms) employs only a measly 200,000 people according to the Brookings Institution. By any standards these are all very, very small numbers.
The number of biotech start-ups formed in the US in the last 12 years since 1990 is around 300 or an average of only 25 new firms a year. For a nation the size of the US this is quite an insignificant number.
Another interesting statistic about the biotech industry is that all the biotech firms listed on the New York Stock Exchange collectively did not return a single profitable year in the last 10 years! This is astounding considering the amount of hype that permeates the biotech industry in the media and around the world.
Most discoveries are also ultimately never manufactured or marketed by these research firms, they are instead licensed to the large pharmaceutical firms who take over the manufacturing, marketing and sales of these discoveries and make the real big bucks from the hard work of the few. This is why many firms never obtain real profitability and remain “research firms” not standout biotech or pharmaceutical firms. It is a known fact that the large pharmaceutical companies control the sales and distribution channels which makes it extremely difficult for a newcomer, even one with a significant discovery to market its own product.
I do not wish to dampen the enthusiasm that the Government has for biotech, but these statistics clearly show that the biotech industry is hardly what everyone makes it out to be. If these firms have a tough time surviving in the most entrepreneurial of countries – the USA - what chance do Malaysian firms have?
Furthermore, it may take a decade for biotech firms to show some semblance of success or marketable discovery so our enthusiasm for this industry must be tempered with realism. Should we ignore this industry? No, certainly not, but it is important that we keep it within the right perspective. There is no fast track to success in biotechnology so the Government must look at this as a very long-term developmental project and not one that will bring any sort of immediate returns. In fact it may never bring any economic or financial returns at all, yet the learning and scientific aspects of biotechnology are invaluable.
If the goal of the Government in adopting biotechnology as a national project is to find a new contributor to economic growth or a new industry to take over from manufacturing, then we are in for a painful and dramatic fall. Even in the US decades of biotech research has contributed virtually nothing to its GDP, so I am absolutely sure it will be no different in Malaysia or anywhere else for that matter. It will also not create many jobs for Malaysians.
What it will do for Malaysia is to foster greater interest in science and technology, create the potential for research and development in the life sciences and provide an avenue to generate scientific discoveries from our vast flora and fauna. The possibility that these discoveries will lead to million Ringgit businesses is slim to nothing, but who knows we may get lucky. We must not ignore the industry as it has other benefits but we must be very careful about promoting it as the next big thing, because it isn’t.
21 June 2004
What are the facts about the biotechnology industry that should concern our policy makers? Firstly, there has been a lot of flak directed towards Biovalley, Malaysia’s biotech cluster based in Cyberjaya. Research by the Brookings Institution, a leading American think-tank shows that the success of the United States biotech industry has been centred very much around nine leading biotech centres mainly clustered around the East and West coasts of America which included San Francisco and San Diego on the West Coast and Boston and Raleigh-Durham in the East Coast.
In fact these nine centres accounted for 77 percent of all new biotech firms in the US, 88% of all venture capital for biopharmaceuticals and 96% of the Dollar value of research alliances with pharmaceutical firms. Incidentally 92% of the most active biotech venture capital firms were located in or around these nine centres.
The reason for such an agglomeration of activities around these leading centres is the critical mass of firms and researchers around these centres and also due to the connection these centres have with research Universities like MIT in the East Coast and University of California in the West among others. The centres are not however “organised” clusters like Biovalley but have sprung up over many years due to the formation of research organisations and firms that have spun out of research Universities.
Understandably Malaysia cannot wait 50 years for the mere possibility that this may happen; in fact it is almost a certainty that we will never have a successful biotech industry without Government intervention. If ever we want to create a successful industry a critical mass of firms centred around a cluster like Biovalley is probably the way to go.
However, a cluster alone is not enough for success. The Brookings study also clearly shows that some centres are more successful than others because of the availability of venture capital funding for biotechnology. There are many specialist biotech VC firms in America but how many are there in Malaysia, one, two? We also don’t have another pre-requisite for success, a critical mass of highly educated biotechnology science graduates and by this I mean those who have degrees that are world class. We probably have a small number of them but we need a critical mass of possible a few hundred a year at least.
On the economic side, we also need to appreciate the fact that the Biotech industry is not a major economic contributor. According to a US Department of Commerce biotechnology survey in 2003, biotech business amounts to a mere 0.33% of the US GDP and almost 60 % of the firms have less than 50 employees and 90 % have less than 500 employees. The entire biotechnology industry in the US (excluding the multinational pharmaceutical firms) employs only a measly 200,000 people according to the Brookings Institution. By any standards these are all very, very small numbers.
The number of biotech start-ups formed in the US in the last 12 years since 1990 is around 300 or an average of only 25 new firms a year. For a nation the size of the US this is quite an insignificant number.
Another interesting statistic about the biotech industry is that all the biotech firms listed on the New York Stock Exchange collectively did not return a single profitable year in the last 10 years! This is astounding considering the amount of hype that permeates the biotech industry in the media and around the world.
Most discoveries are also ultimately never manufactured or marketed by these research firms, they are instead licensed to the large pharmaceutical firms who take over the manufacturing, marketing and sales of these discoveries and make the real big bucks from the hard work of the few. This is why many firms never obtain real profitability and remain “research firms” not standout biotech or pharmaceutical firms. It is a known fact that the large pharmaceutical companies control the sales and distribution channels which makes it extremely difficult for a newcomer, even one with a significant discovery to market its own product.
I do not wish to dampen the enthusiasm that the Government has for biotech, but these statistics clearly show that the biotech industry is hardly what everyone makes it out to be. If these firms have a tough time surviving in the most entrepreneurial of countries – the USA - what chance do Malaysian firms have?
Furthermore, it may take a decade for biotech firms to show some semblance of success or marketable discovery so our enthusiasm for this industry must be tempered with realism. Should we ignore this industry? No, certainly not, but it is important that we keep it within the right perspective. There is no fast track to success in biotechnology so the Government must look at this as a very long-term developmental project and not one that will bring any sort of immediate returns. In fact it may never bring any economic or financial returns at all, yet the learning and scientific aspects of biotechnology are invaluable.
If the goal of the Government in adopting biotechnology as a national project is to find a new contributor to economic growth or a new industry to take over from manufacturing, then we are in for a painful and dramatic fall. Even in the US decades of biotech research has contributed virtually nothing to its GDP, so I am absolutely sure it will be no different in Malaysia or anywhere else for that matter. It will also not create many jobs for Malaysians.
What it will do for Malaysia is to foster greater interest in science and technology, create the potential for research and development in the life sciences and provide an avenue to generate scientific discoveries from our vast flora and fauna. The possibility that these discoveries will lead to million Ringgit businesses is slim to nothing, but who knows we may get lucky. We must not ignore the industry as it has other benefits but we must be very careful about promoting it as the next big thing, because it isn’t.
21 June 2004
posted by Dr. Siva at 10:51 PM
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