These organizations approach funding and management much the way traditional for-profit venture capitalists do, with a couple of big differences: They have long time horizons, and their goal is to make a therapeutic difference, not to return a profit. The central issue is the extent to which universities make available the knowledge embedded in their patents. Murky IP creates two problems: It makes its owners think twice about sharing it in the first place, and it provides fertile ground for contract disputes over what will be shared. But the question of whether science can be a profitable business has largely been ignored. The process does an excellent job of ensuring that decisions are based on scientific merit, but reviewers tend to award grants to projects within their own disciplines. For instance, it would probably make sense to incubate a highly novel technique such as tissue engineering inside a new firm that could build the essential capabilities from scratch.
Although it is hard to know conclusively, indications are that investors are becoming more cautious. A closer examination, however, suggests that hidden flaws in the system have impeded the overall business performance of the sector. The science business was born in 1976, when the first biotech company, Genentech, was created to exploit recombinant DNA technology, a technique for engineering cells to produce human proteins. So even though biotechnological advances may eventually reduce the technical risks in R D, they have to date had the opposite effect. But while industry spending on R D continues to increase substantially, the attrition rate of biotech drugs in development has also grown over time. It is often not clear what is patentable and what is not. When, as in the case of drug R D, failure is far more common than success, the ability to learn from failure is critical to making progress. They argued that small, specialized biotech companies had a comparative advantage in research over bureaucratic, vertically integrated pharmaceutical giants; Big Pharma should therefore focus on marketing and leave innovative R D to nimble biotech firms that were closer to the science.
For projects that are scientifically or technologically novel, forging fewer, deeper relationships makes sense. Biotech firms rely on public equity and strategic alliances to close the gap. For example, the way the industry manages and rewards riskshow businesses are fundedconflicts with the long R D timetable needed to create new drugs. Data from experiments are subject to a wide range of interpretation and opinion. Such relationships would potentially result in much more sharing of proprietary information, greater joint learning, and larger, more productive investments. Why is an eBook better than a PDF? The sequencing of the human genome and the invention of so-called industrialized R D techniques further bolstered predictions that biotech would generate breakthrough therapies and tremendous gains in R D productivity. Much of the debate about university activity in the business of science has focused on the impact of patents and has asked the wrong question: Should universities patent their discoveries? Profound, persistent uncertainty translates into high, long-term risks.
In addition, because they need to spread their risks, not even the largest funds can afford to sink a vast sum into any one start-up. Far from being dead, vertical integration has an important role to play in the future drug industry. Rather than forming so-called molecule-to-market companies, whose first product revenues might be more than a decade away, entrepreneurs and investors have begun to look for lower-risk, faster-payback models, such as licensing existing projects and products from other companies and then refining them. The initial success of a few genetically engineered replacement hormonesinsulin, human growth hormone, and clotting factor viii to treat hemophilia among themseemed to validate this view. Genentech, which is majority-owned by Roche, is one of the few existing examples. My research suggests otherwise.
The other challenge for investors is interpreting the publicly announced results of clinical trials. How do they interact? Guest speakers James. Advances in basic science may eventually improve these odds. Given these impediments, its hardly surprising that biotech suffers from productivity problems. Such knowledge can be much more difficult to patent. In addition, the relationship is often centered on reaching specific, short-term milestones; if one is missed, the alliance may be terminated. And venture capitalists have had the wherewithal to manage early-stage risks and to diversify them by building portfolios of firms. Companies can and do interpret these results in different ways. Pharmaceutical companies often make alliances in precisely those areas where they lack expertise.
A piece of software code, for instance, is a fairly distinct entity that can be protected by legal mechanisms, and its theft can be detected quite easily. The reasoning was that the massive amount of biological data produced would help enormously in identifying the precise causes of diseases, and that techniques such as combinatorial chemistry (for creating new compounds high-throughput screening (for testing the compounds medicinal potential and computational. Since 2001, when the genomics bubble burst, the strategies of start-ups and the preferences of venture capitalists have undergone a marked change. Much of this investment has been based on the belief that biotech could transform health care. With such organizational forms and institutional arrangements, science can be a business. The rapid formation of new firms has given rise to a plethora of experiments. Since the mid-1990s, a combination of genomics, combinatorial chemistry, high-throughput screening, and IT has been used to create new drugs and to identify possible targets in the body for attacking diseases. There are indications, however, that this market cant facilitate the flow of information and the collective problem solving needed to develop new drugs. And biotechs market for intellectual property, which allows individual firms to lock up the rights to basic scientific knowledge, limits the number of scientists who can advance that knowledge by learning through trial and error.
Their value hinges almost exclusively on their ongoing R D projects. Biotechs champions in the scientific and investment-banking communities believed that its technologies would create an avalanche of profitable new drugs. The S2BN Virtual Career Caf is an interactive,.5 hour-long virtual conference call where highly qualified personnel across Canada will have the chance to engage with industry professionals. Throughout the past century, the modern corporation has continued to evolve. The other is with market-reliant networks, in which independent specialists integrate their work through alliances, licensing arrangements, and collaboration. Alliances will continue to be a critical complement to internal.