Advances in genetic research are setting o ff an industrial convergence

that will have profound implications for the global economy. Farmers,
computer companies, drugmakers, chemical processors, and health
care providers will all be drawn into the new life-science industry.
To make the transition successfully, th ey’ll have to change the way
they think about their businesses...
 Transforming Life,
Transforming Business:
The Life-Science
Revolution
by Juan Enriquez and
Ray A. Goldberg N 1 9 9 0 , the U.S. government launched the

I largest and most ambitious biology project

ever conceived: the mapping of the human
genome. Led by the Department of Energy and the
National Institutes of Health, the project had a
budget of $2 billion and soon came to involve more
than 350 laboratories around the world. The goal
was to complete the map by 2005.
Progress came slowly, however. At its halfway
point in 1997, the initiative had gone through 90%
of its money but had accurately sequenced only
2.68% of the genome. Then, in May 1998, one of the
project's leading scientists, Craig Venter, dropped a
bombshell. Believing the mapping could be done
much more quickly and efficiently, Venter an­
nounced that he was partnering with the Perkin-
Elmer Corporation to establish a company, Celera
Genomics, that would map the genome by the year
2000 - with no public funds whatsoever. A New
York Times Magazine cover story summed up the
audacity of Venter's plan: "It was as if private in­
dustry had announced it would land a man on the

Juan Enriquez, the former CEO of Mexico C ity’s Urban

Development Corporation, is a researcher at Harvard's
D avid Rockefeller Center for Latin American Studies
in Cambridge. M assachusetts. He can be reached at
emiquez@mediaone.net.
ARTWORK BY MARIE TABIER

Ray A. Goldberg is the George Moffett Professor of Agri­

culture and Business, Emeritus, at Harvard Business
School in Boston. He can be reached at rgoldberg@hbs.edu.
To discuss this article, join HBR's authors and readers in
the HBR Forum at www.hbr.org/forum.

96 H A R V A R D B U S IN E S S R EV IEW M a r c h - A p r il 2000
moon before NASA could get there. As if an upstart Mendel began his studies of heredity, that breeding
company intended to build the first atom bomb." was transformed from a craft into a science. By the
By shifting the mapping of the human genome early twentieth century, the laws governing heredity
from the world of science to the world of commerce, were well understood. The underlying mechanism
Venter underscored a fact that should
reverberate with everyone involved in
business today: advances in genetic engi­ A Note from the Editors
neering will not only have dramatic im­
plications for people and society, they The speed with which the Internet transformed business during
will reshape vast sectors of the world the last decade took many people by surprise. In this decade, the
economy. The boundaries between many
once-distinct businesses, from agribusi­ first o f the twenty-first century, we may see an equally dramatic
ness and chemicals to health care and transformation, driven not by computers and communications
pharmaceuticals to energy and comput­ but by genetic engineering.
ing, will blur, and out of their conver­
gence will emerge what promises to be To date, the news on genetic engineering has been dominated
the largest industry in the world: the life- by the controversy surrounding genetically modifiedfoods. Much
science industry. less attention has been given to the even more profound changes
A number of companies, from global
giants like M onsanto and DuPont to that lie ahead-forpeople, for society, and, not least, for business.
start-ups like Geron and Advanced Cell In this important article, Juan Enriquez and Ray A. Goldberg
Technology, have already bet their fu­
tures on life science. They realize that describe how the ability to manipulate the genetic codes o f living
unlocking life's code opens up virtually things will set off an unprecedented industrial convergence:
unlimited commercial possibilities. But farmers, doctors, drugmakers, chemical processors, computer
they are also finding that operating with­
in this new industry presents a raft of and communications companies, energy companies, and many
wrenchingly difficult challenges. They other commercial enterprises will be drawn into the business o f
must rethink their business, financial, life science.
and M&A strategies, often from scratch.
They must make vast R&D investments This transformation promises to be every bit as wrenching as
with distant and uncertain payoffs. They the one set o ff by the Internet. The challenges are as great as the
must enter into complex partnerships
and affiliations, sometimes with direct opportunities. We hope this article alerts people to thefar-reach­
competitors. And perhaps most difficult ing implications o f genetic engineeringfor business and starts a
of all, they must contend with a public broad and much-needed discussion o f the many issues that will
th at is uncom fortable w ith even the
thought of genetic engineering, much need to be resolved as the pace o f scientific advance quickens.
less its practice.
As scientific advances accelerate, more
and more companies will be drawn, by choice or by remained obscure, however, until the 1950s, when
necessity, into the life-science business. They, too, James Watson and Francis Crick discovered the
will confront challenges unlike any they've faced molecular structure of DNA.
before. And the way they meet those challenges Watson and Crick's breakthrough opened the door
will not just determine their commercial success; to genetic engineering. But the early efforts to deci­
it will also have a direct influence over the future pher DNA sequences were frustrated by the sheer
of life on our planet. complexity of the challenge. Through the 1980s,
researchers struggled to map the codes of individ­
ual genes-never mind the entire genome. Over the
A c c e le ra tin g B re a k th ro u g h s
past decade, however, the pace of discovery has
Man's effort to transform life is hardly new. For accelerated dramatically. A series of technological
centuries, farmers have been selectively breeding advances in disciplines as varied as spectroscopy,
plants and animals to increase their yield of food robotics, and computing has given scientists a pow­
and their resistance to disease. But it wasn't until erful new set of tools for discovering, mapping, and
the mid-i8oos, when the Austrian botanist Gregor modifying genetic information. In 1995, the first

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full genome of a living organism, the bacterium The Great Convergence

that causes meningitis, was sequenced, and a dozen
other gene maps soon followed. This year, if the To see how advances in genetics erase the bound­
current schedule holds, we will see the completion aries between industries, you need only look at
of the first map of the entire human genome. (See what's happened to the agricultural seed business
the sidebar "Mapping a Genome.") over the past decade. Seeds have gone from little-
As our knowledge of the science of life has pro­ noticed commodities to hot products, and the val­
gressed, the commercial possibilities have m ulti­ uations of companies that distribute them have
plied, attracting a large and increasingly varied set of multiplied as agricultural, chemical, and pharma­
companies. To understand just how broad life sci­ ceutical conglomerates have vied to acquire them.
ence's business impact promises to be, it's useful to Pioneer Hi-Bred, a large seed company based in
draw an analogy to information technology. The Iowa, had a market value of $544 million and a
development of binary computer code enabled all price/earnings ratio of 9.5 in 1980. In 1997, DuPont
kinds of information, from text to sound to video, to bought 20% of the company for $1.7 billion, giving
be communicated digitally. Previously disparate in­ it a market value of $7.05 billion and a P/E ratio of
dustries such as publishing, television, movies, ra­ 23.8. In 1999, DuPont acquired the remaining 80%
dio, telecommunications, and computing suddenly of Pioneer for $7.7 billion, making its market value
found themselves using a common language-the close to $1o billion and its P/E ratio 31.5.
language of zeros and ones. And once you share a Why did seeds suddenly become so valuable? Be­
common language, they soon found, you often share cause seeds are the best means for selling geneti­
a common business. In the last few years, we've cally engineered plants to farmers. A company can
seen all these industries
rapidly converge as digital ■
The code of all life forms is written in deoxyribonu­
modify a plant's genetic
m akeup, breed the new
communications have be­ plant, encapsulate the ge­
come ubiquitous. cleic acid, or DNA. DNA netic information in seeds,
A similar dynamic will takes the form of a double and then distribute huge
play out in life science. Mapping
helix that resembles a long volumes of those seeds to
Genetic code, after all, is
a type of language. Rather
a Genome
spiral staircase. The rungs
linking the two sides of the
farms. C ontrol over the
seeds, moreover, provides
than zeros and ones, it is staircase are composed of control over the intellec­
made up of four letters - pairs of nucleotides-either adenine and thymine or tual capital they contain,
A, T, C, and G - which rep­ cytosine and guanine. These base pairs contain the which is essential to re­
resent the four nucleotides instructions for the various biological processes re­ couping the enormous in­
that form DNA: adenine, quired for an organism to live and reproduce. The vestments required for ge­
th ym ine, cytosine, and complete set of instructions for an organism is netic engineering.
guanine. Just as alterations known as its genome. Of course, genetically
in computer code change Because the human genome contains more than modified seeds were of im­
the shape of information, 3 billion base pairs, mapping it is extraordinarily mediate interest to agri­
alterations in genetic code difficult. Today researchers are using two different cultural conglomerates.
change the shape of life. methods to complete the map. The publicly funded N ew ly designed crops
All industries that deal project overseen by the National Institutes of Health promised to be easier to
with living things or with is carefully dividing DNA into segments, which are grow, process, and ship.
organic compounds will then cloned and distributed to hundreds of labs for The seeds were also of
thus have a common lan­ sequencing. The results are deposited in a public keen interest to chemical
guage and, in turn, a com­ database and then gradually integrated until the com panies, w hich saw
mon business. They will whole genome is revealed. It is akin to having sev­ them as direct threats to
converge. Moreover, since eral teams laying bricks until various walls come their pesticide and herbi­
genetic code is itself a form together in a coherent structure. cide businesses. By plant­
of information and thus The private company Celera Genomics, by con­ ing crops engineered to
subject to digital manipu­ trast, is trying to complete the whole sequencing be resistant to common
lation, computer and other process within a single lab. It uses powerful comput­ pests, farmers would be
inform ation technology ers to identify overlaps in the base pairs of DNA able to reduce their depen­
companies will also play segments. In a sense, it is like using a computer to dence on costly chemicals
central roles in the life- assemble a 70-million-piece 3-D jigsaw puzzle. and mitigate the damage
science industry. their farming does to the

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environm ent. M any large

chem ical com panies read
the writing on the wall and
dove into the seed business
as part of a m ore general
shift toward biotechnology.
In one of the most remark­
able business transform a­
tions in history, Monsanto
sp u n off its co m m o d ity
chemical businesses into a
new company, Solutia, in
September 1997 and invest­
ed $8 billion in various bio­
tech and seed companies.
DuPont acquired interests
in Pioneer and other seed
companies and announced
that life science would be

A single herd of goats may

soon replace a $150 million
drug factory.

its focus for th e tw enty-

first century. Dow Chem i­
cal in v e sted in seed and
other agribusiness compa­
n ie s th ro u g h its Agro-
Sciences unit.
Pharm aceutical com pa­
nies like Novartis, Zeneca,
and Schering-Plough also
joined in the bidding war
for seed companies. They,
too, saw genetically engi­
neered seeds as a threat to
their traditional business. Just as crops can be de­ As distinctions between food and medicine fade,
signed to have higher nutritional value, they can we will see a proliferation of crop-based drugs, or
also be designed to have higher medicinal value. "agriceuticals." The blurring of agriculture and phar­
Broccoli, for instance, is known to switch on the maceuticals is not limited to seeds and plants, either.
body's defenses against cancer. Some agribusiness Animals are also being turned into drug-manufactur­
labs are trying to take the characteristics of a wild ing facilities. Genzyme Transgenics has engineered
Italian broccoli, w hich appears to be 100 tim es goats to give m ilk containing antibodies that can
more effective in building up cancer defenses, and serve as hum an medicines. Drug companies like
engineer them into com m ercial varieties. O ther BASF and Bristol-Myers Squibb and leading cancer
companies are trying to create bioengineered corn specialists like Dr. Judah Folkman are working with
that will target and poison cancer cells, fight osteo­ Genzyme to have the goats produce large volumes of
porosis, and reduce heart disease. Still others are proteins for cancer treatment. A single herd of goats
reprogramming the genes of some fruits and vegeta­ may soon replace a $ 15o million drug factory. Several
bles to turn them into vaccines against diarrhea, companies are even trying to produce antigens in
tetanus, diphtheria, hepatitis B, and cholera. To be mosquitoes' saliva, turning the insects into living
vaccinated in the future, you may not need to get a vaccines for various diseases. Someday people may
shot. You may just have to eat an apple. go out of their way to have mosquitoes bite them.

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There's another reason that pharmaceutical com­ He predicts that it could become 1 to 1 in the next
panies are encroaching on the turf of their chemical 25 years.
and agricultural counterparts. They realize that Delivery vehicles for medicines will also prolifer­
more and more discoveries with important impli­ ate. Everyday products like soaps, cosmetics, foods,
cations for human health will come out of agricul­ and beverages may dispense daily preventative
tural and chemical research labs. As organisms medical prescriptions. It would not be surprising
evolve, they usually retain many of their old genes, to see consumer goods companies like Procter &
which means most life forms share similar genetic Gamble and cosmetics companies like L'Oreal
structures. Almost every mouse gene, for example, building alliances or merging w ith genomics,
has a counterpart within the human genome, and agribusiness, and pharmaceutical firms. New dis­
humans and chimpanzees share almost 99% of all tribution channels are also likely to emerge. In ad­
the genes known to influence their biological pro­ dition to being distributed through traditional dis­
cesses. As a result of the consistency in genetic pensaries like HMOs and pharmacies, genetically
makeup, breakthroughs in the
genetic treatment of diseases for
animals often hold the keys to
Diving into the Gene Pool
treating human diseases. If you The life-science in d u stry, w h ich a lre a d y encom passes
can cure a type of cancer in a som e o f th e w o rld 's la rg e st businesses, w ill expand
mouse, you can sometimes use to in vo lve m a n y m o re typ e s o f com panies.

similar therapies to treat related Already Becoming Soon to be

cancers in humans. The big drug involved involved involved
companies have no choice but to chem icals e n v iro n m e n ta l ro b o tic s
play in this game. p h a rm a ce u tica ls
m in in g h o u se h o ld
e n e rg y a p p lia n ce s
a g ric u ltu re
cosm etics In te rn e t
Ripple Effects fo o d processing c o m m u n ic a tio n s
su p e rm a rke ts
The convergence of the agricul­ m u tu a l fu n d s in fo rm a tio n
p h a rm a cie s services
tural, chemical, and pharmaceu­ la w firm s
m ilita ry
tical industries is only the be­ m edia

ginning. As our knowledge of c o m p u te r h a rdw are

a n d s o ftw a re
genetic code and how to manipu­
late it grows, ripple effects will
be felt across many industries.
(See the exhibit "Diving into the
Gene Pool.") Take health care, for example. The engineered products could be delivered through
ability to understand what diseases individuals outlets like supermarkets and even health clubs.
might be predisposed to, how they might react to Because genetic research involves the processing
specific medicines, and what they might do to pre­ of vast amounts of data, computer hardware and
vent future illness will change the practice of medi­ software companies are increasingly being drawn
cine. Already, companies like Affymetrix are build­ into the life-science sector as well. Indeed, the fo­
ing silicon chips embedded w ith hybrid bits of cus of medical research, which during the past cen­
DNA that can test for 6,000 genetic conditions in tury shifted from the in vivo study of live organ­
any given individual. Chips the size of quarters will isms to in vitro experiments inside labs, is now
soon be able to test for as many as 400,000 condi­ shifting toward "in silico" research using computer
tions, and once the human genome is available, databases. Compaq has already built one of the
they may be able to screen for almost all known world's most powerful computers to help Celera
genetic diseases and defects. Such powerful diag­ sequence the human genome. IBM has launched
nostic tools will lead to highly personalized med­ DiscoveryLink, an attem pt to unify pharmaceu­
ical treatments and, at the same time, they will tical, biotechnology, and agriscience databases,
refocus much of medical practice on prevention and it recently announced the start of a five-year,
rather than intervention. William Haseltine, the $100 million effort to build a new supercomputer,
CEO of Human Genome Sciences, a leading phar­ dubbed "Blue Gene," that will be used for genetic
maceutical company, believes that we will see a research. In addition to the big computer compa­
huge shift in the ratio of doctor bills to pharmaceu­ nies, a slew of high-tech start-ups like Pangea, Gene
tical costs. The current ratio is approximately 9 to 1. Logic, Sequana, Incyte, and Compugen are pioneer-

100 H A R V A R D B U S IN E S S R EV IEW M a r c h - A p r il 20 00
 T r a n s f o r m in g L ife , T r a n s f o r m in g B u s in e s s : T h e L if e - S c ie n c e R e v o lu t io n
ing "bioinformatics"-the use of software to facili­
tate drug discovery.1
Genetic breakthroughs will have applications
beyond food, health, and medicine. Consider the
energy business. It's long been possible to convert
the energy stored in plants into ethanol-a substi­
tute for gasoline-but energy prices have never been
high enough to make the procedure cost-effective;
it has therefore required huge government subsi­
dies. However, if plant genomes were engineered in
a way that enabled their starches to be transformed
into alcohol at higher volumes, oil companies could
produce economically attractive gasoline substi­
tutes. The power for automobiles may in the future
come from renewable plant sources, not from
wells. Genetically modified plants could also be the
source for complex petrochemical derivatives like
man-made textiles. DuPont has already developed
a bacterium that turns sugar into polyester; other
plastics and artificial fibers are sure to follow. Even
mining and environmental service companies are
moving into life science. Radioactivity-resistant
bacteria are now being used to clean up contami­
nated soils and mine low-grade uranium.
In the not too distant future, it seems clear that
the language of genetic code will be shared by innu­
merable companies that once had little to do with
one another. We will likely see an industrial conver­
gence of even greater magnitude than the one set off
by the development of digital computer code.
A Difficult Transition
The convergence will not be easy, however. The
vast opportunities opened by life science are
matched by the vast challenges involved in capital­
izing on them. Many of the industry's early pio­
neers are struggling to create successful businesses.
Monsanto is a case in point. Its highly publicized
decision to abandon its traditional chemicals busi­
ness and remake itself as a life-science company
was met with great enthusiasm. Investors, seeing
an initial upswing in the company's profitability
and realizing that margins and market valuations
in the pharmaceuticals sector are far higher than in
chemicals or agriculture, bid up Monsanto's stock,
pushing the company's P/E ratio from an average of
io in 1990 to a whopping 114 in 1998.
But the global agricultural industry fell into a de­
pression at the end of the decade. Monsanto's big
investments in seed and other agribusiness con­
cerns began to weigh on the company, and its prof­
its eroded. In addition, as other agrichemical busi­
nesses began to consolidate, the company saw its
once-leading share of the crop-protection market
H A R V A R D B U S IN E S S R EVIEW March-April 2000
shrink to only 12%, putting it at a scale disadvan­
tage. When M onsanto's proposed merger w ith
American Home Products was called off in October
1998, it began running out of the cash required to
fund its aggressive R&D programs. Under siege, the
founder and leader of the life-science industry be­
gan to look for a friendly suitor. Last December, it
Medical research, which has shifted from
the in vivo study of live organisms to in
vitro experiments inside labs, is now shifting
toward “in silico” research using computers.
announced it would merge with the drugmaker
Pharmacia & Upjohn, and the two companies indi­
cated they would sell off part of Monsanto's agri­
chemical business in a public offering.
Dow Chemical has faced similar frustrations. A
relative latecomer to life sciences, it found itself
having to play catch-up with DuPont and Monsanto.
But that was no easy task. Many of the most attrac­
tive market niches were already occupied, and seed
and pharmaceutical companies were carrying huge
price tags. Instead of spending its cash trying to build
a broad life-science capability, Dow ultimately de­
cided to retrench. In August 1999, it bought Union
Carbide, signaling its intention to focus on tradi­
tional chemicals.
If the challenges are great for chemical companies,
they're even greater for drug companies. After all,
when drug companies expand into agriculture they
are moving into a business with lower profitability
than their traditional business. The experience of
Novartis, the Swiss drug giant, reveals the difficul­
ties in such a move. When Novartis was formed in
1996 through the merger of Sandoz and Ciba, its
then-chairman, Alex Krauer, announced his inten­
tion to maintain "a worldwide leadership position in
life sciences." Having spun off its specialty-chemicals
and construction-chemicals units, the company con­
tinued to bolster its life-science capabilities by in­
vesting in seed companies and other agribusiness
assets. In 1998, the company had the world's largest
crop-protection operation, the third largest seed
business, and a major animal-health unit.
But agribusiness has very different business char­
acteristics from pharmaceuticals. Not only are its
margins lower, but it is far more cyclical. As demand
for agricultural products softened in the late 1990s,
Novartis suffered. In the first half of 1999, the sales
of its agribusiness units dropped 10% from the
previous year,- their operating income fell 41%. At
the same time, Europe's growing public backlash
against genetically modified foods threatened to
101
T r a n s f o r m in g Life, T r a n s f o r m i n g Business: The L if e -S c ie n c e R e v o lu t io n
turn into a PR nightmare for the company. Its own
baby-food division, Gerber, stopped using foods pro­
duced with Novartis's genetically modified seeds.
In December 1999, Novartis announced that it
was getting out of agribusiness to focus its energies
on health care. It would merge its agribusiness as­
sets with those of AstraZeneca, another European
drugmaker struggling with the transition to life sci­
ences, and spin them off into a new company called
Sygenta. "After a thorough review of its business
portfolio strategy," Novartis stated in a press re-
The problems that life-science pioneers
are facing are the inevitable birthing
pains that accompany the formation
of any new industry.
lease, "the benefits of concentrating on the health
care businesses outweigh the modest synergies be­
tween the health care and agribusiness activities."
The problems that Monsanto, Dow, Novartis, and
other life-science pioneers face are daunting. But it
would be a mistake to interpret them as a sign that
an integrated life-science industry will never come
into being. Rather, they are the inevitable birthing
pains that accompany the formation of any large
new industry. The optimal structure of the life-
science industry-and of the companies that com­
pose it-is as yet unknown. We are in a period of trial
and error in which companies are experimenting
with different operating and financial structures.
The price of such experimentation is very high, par­
ticularly when many companies are bidding for the
same assets, and missteps and failures will undoubt­
edly occur. Magnifying the challenge is the confu­
sion felt by stock analysts and investors when they
see industries with very different financial charac­
teristics begin to meld. They have no rules of thumb
for gauging the value of the new entities, and they
lack patience with any experiments that weaken the
bottom line. A whole new set of financial assump­
tions needs to be developed, and that, too, takes time.
Convergence and consolidation will happen,
however. The massive costs involved in producing
life-science products make it essential for compa­
nies to develop huge scale in their R&D efforts. The
pharmaceutical industry has always spent heavily
on research. To bring a single new drug to market, a
company typically sifts through thousands of com­
pounds, tests a few hundred, and carries out very
expensive trials on as many as ten. The process can
take more than a decade and cost half a billion dol­
lars. But with gene-based drugs, the discovery pro­
cess becomes even more complex and costly. Pow­
102
erful computers can design millions of compounds
that may warrant study, and it even becomes possi­
ble to customize treatments to individual patients.
The life cycles of drugs will in some cases collapse
from decades to m onths. The traditional drug
pipeline, designed to enable companies to introduce
one or two drugs a year, will need to be replaced by
a much faster, much more flexible model. (See the
sidebar "Patenting Life.")
The required R&D expenditures are staggering.
Even in the face of soft demand in many of its mar­
kets, Monsanto raised its R&D expenditures 35%
during 1998 to more than $1.2 billion, while also
spending more than $4 billion to acquire seed com­
panies. DuPont, which spent less than 3% of its
revenues on R&D in 1980, spent 11% in 1998. The
ongoing merger discussions among Pfizer, Warner-
Lambert, American Home Products, SmithKline
Beecham, Glaxo, and other pharmaceutical giants
are all spurred by the need to build R&D scale (as
well as to gain efficiencies in marketing and distribu­
tion). One of the great challenges facing life-science
companies is plotting an M&A strategy that pro­
vides the necessary R&D scale without leaving them
financially crippled. And then, of course, they have
to integrate the companies they purchase, which is
always a complex and dangerous undertaking.
Even successful megamergers will not be suffi­
cient. Companies will also need to partner with other
players, large and small, to ensure they have access
to the latest advances in science and data process­
ing-and to spread the huge economic risks inher­
ent in drug development. Drug companies will out­
source approximately 20% of their R&D this year,
up from only 4% in 1994 -and that percentage prom­
ises to continue to rise. Managing ever more com­
plex networks of alliances will pose another great
test for the managers of life-science companies.
M a n a g in g th e Public's Fear
While the financial, organizational, and operational
challenges facing life-science companies are great,
the biggest challenge of all may be the public's
misgivings about genetic engineering. Ever since
Dr. Frankenstein created his much-misunderstood
monster, any attempt to modify life has been met
with fear and often, outright panic. People's instinct
when confronted with the possibility of genetic en­
gineering is to concentrate not on the potential ben­
efits-cures for diseases, healthier and longer lives,
more nutritious foods, less pollution-but on the po­
tential for accidents and abuse.
That instinct has been reinforced by the way the
life-science business has evolved so far. To date,
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cheaper, safer, or tastier. Since the

benefits are unclear, people n a t­
The rush to commercialize genetic information has led to a flood of patents
urally focus on th e risks. W hen
and patent applications. The U.S. Parent and Trade­
they hear about genetically m od­
mark Office awarded the first patent on a living or­
Patenting ganism to Ananda Chakrabarty and Scon Kellogg for
ified sw eet corn, they don't rush
o u t to buy it. Instead, they worry
research done in 1972.- The award created consider­
Life able controversy and was challenged in court, leading
w hether they m ight suffer long­
term health problem s by eating it
to a landmark Supreme Court ruling in 1980 that
or w hether its introduction m ight
upheld the patent on a five to four vote. In 1991, the Patent Office received
upset nature's balance. As the pub­
4,000 applications for genetic patents, and in 1996, the number hit an aston­
lic's w orries have grown, govern­
ishing 500,000. Overwhelmed, the Patent Office put restrictions on applica­
m ent agencies have launched ef­
tions in October of that year.
forts to exam ine how genetically
A single company, Human Genome Sciences, has already received patents
modified products m ight be better
on 106 complete human genes, including some that may be crucial to treating
osteoporosis and arthritis, and it has patents pending on more than 7,500 regulated and labeled, and these
genes. It is nor only genes that arc being patented; whole animals, like the
e ffo rts have m ade people even
Harvard mouse, are now under patent. Through March 1998, patents had
m ore wary. Once in m otion, the
cycle of fear becomes difficult to
been granted on 85 animals, and 90 more were under consideration.
The patent activity underscores the need for companies to act quickly - o r
counter.
P u b lic fea rs are p a rtic u la rly
face getting shut out of key areas of the life-science business. In particular,
acute in Europe, where a series of
companies need to create networks of partnerships and affiliations that will
give them access to, and some ownership of, the valuable intellectual capital
food scares, ran g in g from m ad
co w d is e a s e to c o n ta m in a te d
currently being developed. These networks should cross old industry borders.
Coke, have underm ined people's
With thousands of new compounds and procedures being discovered yearly, a
tru s t in reg u lato ry a u th o ritie s .
company in one industry may uncover-and p a te n t-a solution to a problem
that a company in a very different industry has been working on for decades.
W hile 90% of A m ericans believe
At the same time, the rush to patent genes raises profound ethical and so­
th e U.S. D epartm ent of A gricul­
ture's statem en ts on biotechnol­
cial questions. Will scientific studies and breakthroughs continue to be shared
ogy, only 12% of Europeans trust
with the broad scientific community? Will advances that could improve the
quality of life for all people be restricted to only a few? Will poor nations be
their national regulators. W ithin
able to tap into the benefits of bioengineering? The agribusiness industry is
the U nited Kingdom, the percent­
age of people w ho stro n g ly op­
already struggling with such questions. In the past, seed companies routinely
shared new technologies with public and nonprofit institutions, ensuring that
pose genetically m odified foods
developing countries had access to new and improved crops. But given the
reached nearly 40% in 1998, an
11 % jum p from tw o years earlier.
high costs of developing genetically modified crops, it is now feared that
the agribusiness and agrichemical conglomerates that dominate the seed busi­
D em o n stratio n s against genetic
ness will be less willing to share their proprietary technologies. Indeed, last
eng in eerin g have becom e c o m ­
December, five U.S. farmers and one French farmer filed an antitrust lawsuit
m on in European capitals. Rather
against Monsanto accusing the company of conspiring to control markets for
th an trying to allay the public's
corn and soybean seeds. Novartis, DuPont, and seven other companies were
fears, m any European com panies
named as coconspirators. Although some of the largest farm organizations
are playing to them . Nestle, Carre-
four, Danone, M arks & Spencer,
have criticized the suit, its existence underscores the level of mis­
trust that currently prevails.
and U nilever are all aggressively
While strong protections for intellectual property are essen­
m arketing products guaranteed to
tial for promoting continued investment, life-science companies
be free from genetic alterations.
C o m p a re d w ith E u ro p e a n s ,
cannot turn their backs on poor countries and poor consumers.
For life science to be a sustainable, thriving industry over the
Americans have been fairly placid
about genetic engineering. But, de­
long term, companies will need to share the benefits they create.
spite the wishful thinking of many
industry executives, that tranquil­
m ost of th e products of genetic engineering have ity m ay not last. As noted risk analyst Peter Sand­
taken the form of genetically m odified crops. A l­ m an has pointed out, m any of the factors that lead
though m any of th em have m ade food production to widespread outrage are present in the battle over
and distribution m ore efficient, they have not pro­ genetically modified products: high stakes, strong
vided consum ers w ith food th a t is significantly em otions, global impact, wide differences in opin-

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T r a n s f o r m in g L ife , T r a n s f o r m in g B u s in e s s : T h e L if e - S c ie n c e R e v o lu t io n

ion, and powerful antagonists, among others. In this are speaking publicly about the issues. Some are
environment, isolated events can easily snowball, as even holding conversations with fierce adversaries.
we saw on two occasions during 1999. Early in the Last October, for example, Monsanto CEO Robert
year, a study indicating that pollen from genetically Shapiro discussed biotechnology at a Greenpeace
modified com plants was killing the caterpillars of conference in London. Such conversations can be
monarch butterflies received widespread media at­ painful -emotions run high on all sides-hut they are
tention, raising the public's fears and leading to out­ necessary. Any company with an interest in life
cries for tougher regulation. And late in the year, the science that is not involved in educational and com­
death of a young man undergoing experimental gene munication efforts is putting its future at risk.2
therapy-the first such death in thousands of trials-
led many to demand that such treatments be scaled
back or halted altogether. The Road A head
Escalating public opposition poses the greatest As the impact of genetic engineering shifts from the
single threat to the successful growth of the life- farm to the home, its attractions will become much
science business. Left unchecked, it will force com­ more apparent to people. The benefits of fungus-
panies to spend ever greater amounts of time and resistant com may seem remote to the average con­
money calming the public and clearing regulatory sumer, but the benefits of gene therapies that help
hurdles. And it will undermine the demand for and children fight debilitating diseases like cystic fibro­
the prices of genetically modified foods and even sis or of agriceuticals that increase life expectancy
medicines. We are already seeing this dynamic play will be very real. Consumers' aversion to genetically
out in many commodity food markets. "All-natural" modified products and genetic therapies will give
way to a desire to purchase them, and lack of supply
Escalating public opposition poses the may become a far larger problem than lack of de­
mand. A recent survey shows that more than 60% of
greatest single threat to the successful Americans would like to be genetically profiled to
growth of the life-science business. identify their predisposition to diseases, and an equal
number would be willing to pay more for geneti­
soybeans, for example, sell for a significant pre­ cally customized drugs. Eventually, the tide of pub­
mium over soybeans that have had genetic modifi­ lic opinion seems certain to change, and the prod­
cations. If genetically altered products end up be­ ucts of genetic engineering will sell at a premium.
ing sold at a discount, companies will have little But we're still far from that point. This year-the
incentive to make the big investments required to first of a new millennium-promises to be a water­
produce them. In a telling submission to the Securi­ shed in the emergence of life science as an industry.
ties and Exchange Commission late last year, Mon­ The completion of the sequencing of the human ge­
santo warned that the growing public backlash netic code will set the stage for dramatic advances
against genetic research could do substantial harm in medicine while focusing the attention of the
to its financial results. public on biotechnology as never before. Mergers,
Life-science companies themselves bear much divestitures, and partnerships will continue to alter
of the blame for the current situation. All too often, the structure of the young industry-and put mil­
they have either ignored or derided their critics, in­ lions, even billions, of dollars at risk. The actions
sisting that the technologies they are pioneering that executives take n o w -b o th in shaping their
are perfectly safe and that concerns about them are businesses and in shaping public opinion-w ill go
baseless. They've done little to teach the public a long way toward determining the ultimate role
about genetic engineering and its benefits, and they their companies play in the world's largest and
haven't clearly explained the intensive testing reg­ most important industry.
imens and safeguards built into the process of de­
veloping genetically modified organisms. The com­ 1. Monsanto's CEO put it well when he said in an HBR interview that
"biotechnology is really a subset of information technology because it is
bination of silence and defensiveness has simply about DNA-encoded information." Sec Joan Magretta, "Growth Through
increased the general public's m istrust and in­ Global Sustainability: An Interview with Monsanto's CEO, Robert B.
Shapiro," |HBR January-February 1997)-
flamed the passions of opponents.
2. For a model of effective and forthright communication about life sci­
Fortunately, life-science companies are beginning ence, we recommend a speech given by DuPont CEO Chad Holliday
to engage in public dialogue. Monsanto, DuPont, before the Chief Executives Club of Boston on September n , 1999 . The
text of the speech can be found at www.dupont.com/corp/whats-new/
Pioneer Hi-Bred, and others are dedicating large speechcs/chad/biotech.html.
portions of their Web sites to information on ge­
netic research and its benefits, and their executives Reprint R00203 To order reprints, see the last page of this issue.

104 HARVARD BUSINESS REVIEW March-April 2000

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