Embryonic Biotechnology Promises Huge Earnings Despite Regulation
Miracle cures and cheaper, healthier food are on the horizons of biotechnology, but for companies able to cope with the regulatory patchwork of the embryonic industry the future holds huge earnings.
The Industrial Biotechnology Assn. predicts that sales, now estimated at $600 million, will rise to between $25 billion and $30 billion in the year 2000 and between $75 billion and $100 billion in 2025.
“The first impact is going to clearly be on the medical side,” said James McCamant, editor of Medical Technology Stock Letter in Berkeley, Calif.
Genetically engineered products to cure AIDS and some cancers, to make pork and beef leaner and healthier and to protect crops from insects, weeds and weather are just a few of the promises held out by the industry.
“You will see biotechnology products all over the shelves in the next few years. It will creep into your life and continue to accelerate. Fifteen years from now we can’t even speculate,” McCamant said.
The United States remains the leader in all aspects of biotechnology--diagnostics, medicine, forensics and agriculture, analysts say. But Japan and Western European nations are making inroads, partly due to a strong government role in financing and, in some cases, looser regulations.
“Funding for the basic sciences has gone down in the last 10 years. We’re being hit pretty hard by the Germans, the English and the Japanese,” said Jim Gramlich, director of American Cyanamid Co.’s agriculture research center in Princeton.
California Among Leaders
California, Massachusetts, Wisconsin, North Carolina and New Jersey are the states having the most companies with biotech connections, IBA spokeswoman Sherrod Shim said. States benefit in taxes and jobs by supporting biotechnology and can be good sources of start-up funds, state biotech center officials state.
However, in the long run, the New Jersey Center for Advanced Biotechnology and Medicine hopes to attract federal support and backing from pharmaceutical companies, said Robert Namovicz, the center’s executive director.
Agencies like the National Institutes of Health and the National Science Foundation have responded to challenges from abroad in recent years with more grants to universities and industry, but not everyone sees that as an answer.
“They are good to a certain point. They’re more directed toward the research, and what we’re really about is developing a commercial product,” said Don Reed, chief financial officer of Massachusetts’ Cambridge BioScience Corp.
U.S. companies have not yet taken their business to countries with looser regulations, such as France or Italy, said Jeff Gibbs, one of three authors of “Biotechnology and the Environment: International Regulation.”
But it could happen, Gibbs said, even though the European Community is studying whether to establish uniform rules that would probably lean toward those in countries like Denmark and West Germany, where the stronger influence of environmental groups has led to tougher regulation.
What companies are doing is taking advantage of the newness of the U.S. regulatory environment. The Patent and Trademark Office, facing a backlog of more than 6,000 biotech applications, asked the industry association in early November to train more patent examiners to handle the caseload.
All over the country, companies are racing to develop new products.
AIDS Diagnosis Technique
Cetus Corp., of Emeryville, Calif., has worked to develop polymerase chain reaction which lets scientists magnify a single piece of DNA, the molecule that carries genetic information. Cetus president Robert Fildes said PCR simplifies diagnosticians’ task of finding viruses from infected cells. It can determine in hours if a cell has been infected with AIDS, for example, something that would take six weeks using tests in a culture medium, Fildes said.
Lifecodes Corp., of Tarrytown, N.Y., is offering DNA tests to determine the guilt or innocence of criminal suspects from body fluids. Company spokeswoman Karen Wexler said Lifecodes will soon offer a kit that tests DNA samples of suspects’ blood or semen to match them to samples taken from the crime.
Turf battles between federal agencies trying to decide jurisdiction for each new biotechnology product and the constantly changing science complicate the task of companies seeking a piece of the market, said Jan Kurtz, with the science advisory board for the federal Environmental Protection Agency.
“We’re trying to make a patchwork quilt,” Kurtz said. “It’s not easy to promulgate new legislation. The questions are all new.”
Faye Peterson, a Food and Drug Administration spokeswoman, said the regulatory process does not differ greatly from that for other products submitted to the agency. Regulation levels are appropriate and do not require further expansion, an assessment shared by most company officials, she said.
Warnings of Dangers
However, Mike Cannell of the Wisconsin Family Farm Defense Fund Inc., a group opposed to biotechnology in agriculture for economic and safety reasons, said, “It doesn’t take a black heart to imagine the worst when the chemical companies are supplying most of the regulatory data.”
Groups like Cannell’s and the Washington-based Foundation on Economic Trends contend that the dangers of biotechnology have not been sufficiently examined. Critics point to herbicides and pesticides that were once considered harmless and have been proven to pollute ground water as reason to doubt the motives of any industry that is being regulated.
The industry says fears of genetically engineered bacteria running wild mislead the public and legislators into seeking to toughen the regulatory road.
“The risks are sometimes greatly exaggerated of nature gone wild. We all grew up on the same movies of giant spiders that escaped laboratories and ate Chicago,” said Hugh A. D’Andrade, executive vice president of Schering-Plough Corp. in Madison and vice chairman of the industry association.
More plausible dangers involve weed-control experiments that could backfire with the wrong gene implanted, letting the weed reproduce, and even that would be highly improbable because researchers start experiments with some idea of which genes accomplish what ends, D’Andrade said.
Smaller Firms’ Troubles
The specialized knowledge and costly equipment required will keep the technology out of the wrong hands, and regulation coupled with companies’ wish not to damage their credibility will keep products from being rushed onto the market without proper safeguards, he said.
Lisa Drake, a spokeswoman for Monsanto Co. in St. Louis, said that the company is used to regulatory mazes but that it is harder for smaller firms. “We’re used to working within those kinds of boundaries. But a lot of smaller companies are bothered by regulations because it’s so expensive and takes so much time.”
Smaller companies living off initial investment capital all feel pressure in an uncertain market to put products on the shelves, American Cyanamid’s Gramlich said. “They can only survive so long in savings and research contracts. I don’t think any company can put 50 to 60% into research as some of these have and survive long.”
Smaller companies like Epitope Inc. of Beaverton, Ore., can no longer ask investors to wait, as in the early days of biotechnology, said Michael Hubbard, president. “They’re not satisfied with companies any more that say, ‘We’re going to lose money for six or seven years.’
‘Very Applicable Things’
“We’ve geared our work to very applicable things rather than heading into long-term things like cancer treatment.”
The competition could also reduce the number of companies. Executives predict that one-third of the industry will be acquired within five years and nearly half within 10 years, according to “Biotech 89: Commercialization,” a report by Arthur Young Co.
