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Continued from previous page
One Certainty
Despite all the uncertainties about
the progress of the science and applications, there is one certainty:
bio-sciences will have a very significant
impact on business and society. By all
accounts, these sciences are already
the basis of a huge business, and
becoming even bigger. Biotechnology
generated more than $34 billion in
revenues in biotechnology in 2001.
By April 2003, there were more than 1,400 biotech companies with a market cap of more than $200 billion.
It has been only 50 years since
James Watson and Francis Crick made
their pioneering discovery of the double helix structure of DNA. Already,
more than 325 million people have
been helped by more than 155
biotechnology drugs and vaccines
approved by the U.S. FDA. These technologies have shown up in
applications including drugs and diagnostic
tests, criminal investigations, agriculture, microbes for cleaning up
hazardous waste and everyday products
such enzymes for laundry detergents
and home pregnancy tests.
"I would characterize this as physics
in the beginning of the nuclear physics
age," Fadem said. "Physics was just
beginning to expand in all different
directions, and that age gave rise to a
huge number of engineering opportunities.
We'll have things that never
existed before as a result of all this."
The impact will be even more far
reaching. While much early attention
has focused on pharmaceutical and
other human health applications, managers in almost any
industry need to pay
attention to these developments. Think
about fabrics programmed to destroy
bacteria and odors or
DNA molecules on silicon
chips taking the place of traditional microprocessors. "These
advances in biosciences will impact any business whose value function
involves organic matter," Schoemaker
said. "That is almost everyone."
Ebbs and Flows
Funding is one of the big uncertainties.
In a field with great hype and long
development cycles, some investors
rush in and then lose patience.
Biotech firms lost more than $100 million in collective market capitalization
between 2000 and 2002. "The flow of
capital has not been reliable and the
industry has had ebbs and flows," said
Steve Sammut, WG'84, Venture
Partner at life sciences venture firm
Burrill & Company and Senior Fellow
in Wharton Entrepreneurial Programs. "Whenever we are on the brink of
significant downsizing and consolidation,
something unexpected happens and
the market rushes back in. "There is
intense interest from large pharma
companies, anxious to strengthen
their pipelines as billions of dollars of
drugs go off patent. Another potential
source of additional funds for the
industry today is the government's
renewed focus on bioterrorism. The
recently announced U.S. government
Bioshield project promises to invest
$6 billion in the area, three times the
public dollars devoted to the human
genome project. "It is one of the
largest allocations for biotech that
we've seen the government undertake," Sammut said.
Given the high uncertainty and the
time it takes to get products to market,
there is still a shortage of investment
in early-stage projects. "This life cycle
development has forced
investors into much later
stage opportunities," Sammut said. "This leaves
a huge gap earlier in the
development cycle."
The industry's diffused
and organic growth in academic labs and small firms in
the U.S. and around the world makes
it even harder to see where the next
important developments will come
from. For investors, it also makes the
process of determining a company's
clear grip on intellectual property difficult and expensive. "There are
thousands of companies and they all have
patents and proprietary interests in
areas that are of interest to them,"
Sammut said. "The good news is that
humanity is enormously productive.
The bad news is that it creates a level
of uncertainty that is probably unprecedented."
Second Decade Success
One of the lessons Fadem has learned
over his years of taking products
from lab to market is that it takes a
surprisingly long time to move from
scientific discovery to viable business.
At DuPont, they estimated it took an
average of 17 years to go from a
research discovery to a viable business, a phenomenon Fadem has
dubbed the "second decade success."
While research in the lab moves quickly, it takes a much longer time for
businesses to develop, society to accept
new things and the infrastructure to
be built to support these innovations. "The
Wright Brothers flew their airplane in 1903, but how long did it take
before the public was willing to trust
airplanes and build airports and infrastructure?" Fadem said. Given these
lags, timing is critical and the risks are
high. It is very easy for companies to
arrive with too little too early, or too
much too late.
"Even moving at light speed—and
we are willing to pay the price and push technology faster
for things that are critical to our health—it is still going to
take close to a decade not just to get it out to the market
but to make it a success," Fadem said. "If a scientist had
a true invention this morning, it would still go through
years of processing to get out to the market."
The long gestation periods for the science and commercialization add to the complexity and risk. "This is indeed
a more difficult domain in some respects largely because
of the testing regime and long, long development cycles,"
Day said. "It is a high risk area and it is very tough to do
this. Even bounding the domain in time and scope is difficult. Uncertainty is what makes emerging technologies so
much harder to handle, and we are pushing the envelope
on uncertainty with the biosciences."
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