Alicia Löffler Northwestern University · The biotechnology industry emerged in the late 1970s and 1980s with the confluence of technological, policy, and institutional disruptions

The Globalization of Biotechnology

Alicia LöfflerNorthwestern University

2

The US has a historic opportunity to establish a long-term position as a global “hub” in biotechnology.

Specifically, the US has the opportunity to become a “magnet” for the emerging clusters dispersed around the world. A magnet for knowledge, innovation and commercialization.

The centrality of the US as a biotech hub (particularly as a finance center) might offer a point of entry to influence the industry in a significant way

However, progressive policies are needed to size this opportunity


Specifically, the US has the opportunity to become a “magnet” for the emerging clusters dispersed around the world. A magnet for knowledge, innovation and commercialization.



Let me start with the conclusion…

3

The biotechnology industry emerged in the late 1970s and 1980s with the confluence of technological, policy, and institutional disruptions

The sector gave us a unique opportunity to have a “living experiment” on the evolution of an industry. It is then not surprising that it has been the source of social,

academic, policy and economic development interest.

The sector gave us a unique opportunity to have a “living experiment” on the evolution of an industry. It is then not surprising that it has been the source of social,

academic, policy and economic development interest.

Technology social

Policy/legal

Biotech

4

In fact, for many regions around the globe, biotech has become part of a key economic development strategy

Hermans, Löffler, Stern. NAS (2008)

5

Globalization of biotech is different than traditional industry sectors

While the globalization of most industries offer low-cost locations to conduct activities that previously had been done in the United States -- the globalization of biotech reflects an attempt to compete “head-to-head” with the United States in the creation of new knowledge

While the globalization of most industries offer low-cost locations to conduct activities that previously had been done in the United States -- the globalization of biotech reflects an attempt to compete “head-to-head” with the United States in the creation of new knowledge

Hermans, Löffler, Stern . NAS (2008)

From cloning to stem cells more and more medical breakthroughs are coming from places other than the US

6

In order to determine the globalization landscape we need to ask the following questions:

What is unique about Biotech Innovations?

What are the globalization metrics and trends in biotechnology?

What are the opportunities and policy needs?

7© Kellogg School of Management

Stokes Pasteur Quadrant (1997) Commercial application

AcademicKnowledge

low high

high

Pure (Fundamental)

ResearchUse-inspired

Research

low Applied Research

One of the most distinctive and pervasive characteristic of biotech innovation is its duality

Today biotech defines a new space where scientific contributions make simultaneous advances in both academic science and commercialization

8© Kellogg School of Management

The impact of duality is extensive, and undermines some of the implications of the traditional linear framework for innovation

Government Academia Industry Innovations

GovernmentA

cademia

IndustryInnovations

Innovation occurs at the intersection of disciplines and institutions – it is no longer a “clean and orderly” process

Innovation occurs at the intersection of disciplines and institutions – it is no longer a “clean and orderly” process

9

In fact, life science innovation today is so interwoven that it is difficult to delineate government, academic from commercial activities

NIH

Map of Interactions in life sciences. Walter W. PowellAJS Volume 110 Number 4 (January 2005): 1132–205

10

In order to determine how to best compete in this new global landscape, it is important to address three key questions:


What are the globalization metrics/trends in biotechnology?


11

The United States still supports, by far, the single largest bioindustry in terms of employees

172391

73189

24131

22405

12138

11863

8922

881

4261

3892

3716

2940

2394

1789

1532

1020

970

969

946

918

153

100 1000 10000 100000 1000000

United States (1)

EU (4)

Germany (2,3)

United Kingdom (1)

Korea (2004) (3)

Canada (2,3)

France (1)

Switzerland (2004) (1)

Belgium (2,3)

Israel (2002) (3)

Sweden (1)

Ireland

Finland (1)

Austria (1)

Italy (1)

South Africa (2002) (2,3)

Norway (1)

Iceland (3)

Poland (2004) (2,3)

New Zealand (2005) (3)

Portugal (1)

Persons

International Labor Distributions. OECD biotechnology Statistics (Van Beuzekom and Arundel, 2006).

Hermans, Löffler, Stern (2008)

International Labor Distributions. OECD biotechnology Statistics (Van Beuzekom and Arundel, 2006).


overall employment in the EU is less than 50% of the United States.

EU employment is clustered (2/3 in Germany and UK)

Employment intensity of many countries exceed the US

LOG SCALE

12

The United States carries the highest investment expenditures

14232

1347

1342

1194

727

699

469

251

236

205

201

199

95

88

84

67

29

5

1 10 100 1000 10000 100000

United States

Germany (2004)

France

Canada

Denmark (1)

Korea (2004)

Switzerland (2004)

Israel (2002)

Italy (2004)

China (Shanghai)

Australia

Spain (2004)

New Zealand (2004)

Finland

South Africa (2002)

Iceland

Norway

Poland (2004)

Million PPP$, 2003

the United States investment pace is an order of magnitude higher than any other individual country.

Total expenditures for biotechnology R&D by biotechnology-active firms, OECD biotechnology statistics (Van Beuzekom and Arundel 2006).-

Hermans, Löfler, Stern (2008)

Total expenditures for biotechnology R&D by biotechnology-active firms, OECD biotechnology statistics (Van Beuzekom and Arundel 2006).-


LOG SCALE

13

The United States has the highest total VC investments in biotech

9 526

769

721

502

323

303

159

127

124

98

74

29

23

14

6

3

2

1

1 10 100 1 000 10 000

USA

Germany (2004)

Canada

UK

Sweden

France

Denmark

Netherlands

Belgium

Switzerrland

Norway

Finland

Italy

Spain

Austria

Ireland

Iceland

Portugal

Venture Capital ($million) 2001-2003

Total venture capital investments in biotechnology, 2001 to 2003 combined, OECD biotechnology statistics (Van Beuzekom and Arundel 2006).


Total venture capital investments in biotechnology, 2001 to 2003 combined, OECD biotechnology statistics (Van Beuzekom and Arundel 2006).

Hermans, Löfler, Stern (2008)LOG SCALE

VC investments are more than 12 times as large in the United States than in the second-largest country target, Germany)

Suggests that the US might continue to extend its dominance as a hub in biotech

14

There has been increased activity outside the EU --For the first time in 2001 the US lost to the EU in number of biomed

companies

Number of biotechnology companies in distinct geographic areas (Van Beuzekom and Arundel 2006; OECD biotechnology statistics).


3154

2196

804

755

640

607

490

455

304

278

267

216

172

158

157

148

123

119

116

106

73

41

39

32

23

17

13

10 100 1000 10000

European Union

United States

Japan (3,4)

France

Korea(2004)

Germany

Canada

United Kingdom

Australia

Spain (2004)

Denmark

Sweden

Italy (2004)

China

Switzerland

Israel (2002)

Finland (4)

Netherlands (5)

New Zealand

South Africa

Belgium (4)

Ireland (5)

Austria (5)

Norway (5)

Iceland

Portugal (5)

Poland (2004)

LOG SCALE

15

However, while the average US Biotech has 33 employees/company, the EU has on average 10 employees/company

16

We have also seen a “globalization” of academic science, reflected in an increasing share of academic publications by non-US authors

17

Moreover, while US S&E doctoral production has stagnated while there have been sharp increases in production by east Asian countries

18

Although The US continues to be the dominant country of origin for total number of IP in biomedicine, the gap has slightly narrowed in the last decade

USPTO Patents by inventor and country of origin

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year

Num

ber o

f Pat

ents

USAEUJapan

EPO patents by inventor and country of origin

0

500

1 000

1 500

2 000

2 500

3 000

3 500

1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

Num

ber o

f Pat

ents

USA

EU

Japan

Triadic patent families (est.)

0

200

400

600

800

1000

1200

1400

1600

1800

1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

Num

ber o

f Pat

ents

USAEUJapan


19

Patents activity is clustered in a few countries

20

The gap between biotech R&D expenditures, patents and sales in the EU persists

Relative Intensity of activity. Per capita R&D activity, patenting and sales of the biotechnology industry. OECD biotechnology patents and authors’ calculations (OECD, 2006, author’s calculations, indexed to the US level (US = 1.0).

Both R&D investment and patenting in the EU are approximately 40% of the US level yet sales per capita are nearly at 28% of the US level, reflecting the earlier stage of development of many European firms. In contrast, though Japan exhibit a slightly higher level of patent/capita than Europe and similar sales per capita

Both R&D investment and patenting in the EU are approximately 40% of the US level yet sales per capita are nearly at 28% of the US level, reflecting the earlier stage of development of many European firms. In contrast, though Japan exhibit a slightly higher level of patent/capita than Europe and similar sales per capita

21

These country-specific empirics reinforced several of the themes

Increasing global activity in biotech• Global activity seems to be clustered rather than being a simple

dispersion of activity, opening the opportunity for one of the more subtle dynamics of industry clusters: hubbing

• Reflects an attempt to compete “head-to-head” in the creation of knowledge

• Each region is relatively small and early stage

The US still maintains a dominant position in Biotech at all levels• The skewed distribution of financial investment suggests that the

United States may be extending its historical dominance in the creation and evolution of global biotech.

22

In order to determine how to best compete in this new global landscape, it is important to address three key questions:


What are the globalization trends in biotechnology?


23


Specifically, the US has the opportunity to become a “magnet” for the emerging clusters dispersed in the world. A magnet for knowledge, innovation and commercialization.




Specifically, the US has the opportunity to become a “magnet” for the emerging clusters dispersed in the world. A magnet for knowledge, innovation and commercialization.



To reinstate … the opportunity

24

Policymakers can facilitate a process by:

Encouraging international research and collaborations

Support the interactive exchanges of international students and researchers

Support and international mobility of risk capital and investments

In contrast to traditional debates about outsourcing, increased global activity complements rather than substitute US investment, employment and innovation

The centrality of the US as a biotech hub (and as a finance center) might offer an easy(ier) point of entry to influence the industry’s demographics in a significant wayThe centrality of the US as a biotech hub (and as a finance center) might offer an easy(ier) point of entry to influence the industry’s demographics in a significant way

Documents

Alicia Löffler Northwestern University · The biotechnology industry emerged in the late 1970s and 1980s with the confluence of technological, policy, and institutional disruptions