Biotechnology Ideas Market:

Comparison of US and UK

Biotechnology Outlooks in
Malaysia Compared

Biotechnology Industry Characteristics:

Drug Development is the best example everywhere
(including Malaysia)

Discovery

Value Chain of Drug

Development

PreClinical

Phase I

But
important
For economic
Prosperity:

Phase II

Phase III

Approval

Innovative: Starts with complex, novel

scientific ideas
Expensive: $800M US Dollars & 14 years
to take a new drug to market (DiMasi 2001)
Risky: 1 out of every 250 molecules
entering pre-clinical testing will result in a
market launch (PhRMA, 2002)
Fulfill medical needs
Brings Economical Wealth
Exploits Science-base

Launch

Biotechnology Industry
Is the UK Capturing Economic Value from its
investments in the Life Sciences?

150

With similar engines of scientific

ideas Boston is transforming
those ideas into more pronounced
economic value

$1.5 B
$1.4 B

100

Boston

UK

Data from 2001

Source: Brookings
Institute, Ernest &
Young, NIH

58
51

50

40
32,000
Boston

UK
0

Question

13
UK

Research

Public Firms

20,000

Boston

Phase III Products

Boston

UK

Employees

What are the causes for this disparity?

Biotechnology Industry
Common explanations
(Also applicable in Malaysia but much worst
situation)

Culture

Scale

The venture community in the UK is not large enough to

support biotechnology investments

Funding Gap

Conclusion

Job mobility here in the UK is very tight, we cant risk our

current positions.

Investors

The markets in the UK are just too small compared to the

US.

Failure

We just are not entrepreneurial in nature.

In the US, the government funds more applied research

A new framework is needed to better explain the

phenomenon and adjudicated the precise mechanisms
for industry growth

Marketplace for Ideas

Definition

Place where ideas, capital and people come

together to translate science into economic value
Supply of Ideas
Universities and
Researchers

Entrepreneur/Inventor
Investors

Founding Team

Demand
Pharmaceutical Companies
Capital Markets
Medical Community

Supply of Ideas
Is there a difference in the quality of life science research
produced in the UK?
Citations
Supply of Ideas
Universities and
Researchers

Mean relative
impact 19861998
United States

1.4

United
Kingdom
Germany

1.8
1.3

Even though the UK does not have the scale of

publications, they are of high quality

UK publications in the field of biotechnology have

an impact (citations) above the mean (OECD 2001)

Malaysia???

Supply of Ideas

Patents w / r eferenc es to
poly nuc le otide s ( ESTs , c D NAs , SNPs )

A key aspect of commercialization in life

sciences is the transformation of science
into patents
"Venture capitalists want to see
breakthrough science published in all
the best journals with an incredibly
broad patent behind it," -Prof.
Robert Langer, MIT

4,000

3,225

3,750

3,000
2,570

2,000

USA

1,675

USA

Source: Ernst and

Young 2000 based on
EPO patents

USA

1,000

USA

120 125
0

UK

Germ any

1995

118 120
UK

Germ any

1996

121 123
UK

Germ any

1997

240 235
UK

Germ any

1998

Demand for Ideas

Does UK have a vibrant demand for biotech
firms?
In general, demand for biotech firms in the UK is
currently exhibited by at least three sources:

Pharmaceutical Companies

Productivity continues to diminish pipelines need replenishing

Key patents expiring

Medical Community

Highly trained, leading practitioners

Rapid adoption of new medicines

IPO Market

Capital markets willing to invest in

cutting-edge bio-technology

Demand
Pharmaceutical Companies
Capital Markets
Medical Community

Marketplace Failure
Failure not based on supply & demand
problems so what are the sources of market
failure?
Difficulties can arise from two sources:
Resource Constraints

Entrepreneur/Inventor

Investors

Good ideas dont

leave the university
setting
Limited supply of
people qualified to
start a company
Insufficient capital for
funding new ideas
Founding Team

Connection Issues

Scientists with ideas

cant find educated
entrepreneurs
Founding team
members may have
insufficient ties
Investors cant locate
good ideas or the
people they need to
assess them

This forms the basis for our on-going research & educational agenda

Marketplace for Ideas

University-Biotech Firm Boundary
Can we get ideas efficiently &
effectively out of the world science
into the commercial marketplace?
Supply of Ideas
Universities and
Inventors

Entrepreneur/Inventor

Efficient TLO (Technology Licensing Office)

with clear contracts & rules
The lack of experience at the TLO really
hindered our ability to structure a license
and raise funding(Cambridge)
TLO focused on getting ideas out rather than
maximize profits or pick winners
We let the VCs decide which ideas they
think are likely to be successful
(Harvard Medical School TLO)

Marketplace for Ideas

Inventor-Biotech Firm Boundary
Clear but strict rules for inventor role can
help rather than hinder movement of science
into the marketplace
Supply of Ideas
Universities and
Inventors

Entrepreneur/Inventor

Clear rules delineating inventors role in

commercialization to prevent conflict of
interest
MIT requires inventor to choose
between equity & sponsored
research from a start-up
Subject ideas to the market pressure
early let ideas die quickly
Too many ideas seem to linger in an
inventors lab being partially
commercialized

Marketplace Interaction
Marketplace Elements Inventors/Entrepreneurs

Academic Inventors typically make poor entrepreneurs (&

worse CEOs) but excellent SAB Chairmen
Nobel Prize winner Walter Gilbert return to his lab after Biogen

Critical entrepreneurial role is played by idea carriers

individuals from the labs who move into the marketplace
Dr. Carmichael Roberts as the carrier for Prof. George
Whitesides in Surface Logix

POLICY IMPLICATIONS
Business education for motivated PhDs & post-docs more
important than for undergraduates
Recognition that mobility is typically one-way out of
science & is facilitated by a critical mass of firms

Marketplace Interaction
Marketplace Elements - $mart Money

Key US biotech clusters characterized by specialized biotech

investors who can adjudicate & manage scientific risks
In Boston of the 4 largest biotech VC investors w/ ~ 30 General
Partners & Venture Partners focused on biotech investing

16 have PhDs/MDs; 7 have MSc in science/engineering

All have star scientific advisors deeply connected network

All engage in early stage venture development e.g. Polaris with
Alnylam

POLICY IMPLICATIONS
Biology for investors?!
Better ties to the university facilitated by
repeat firm founding by inventors e.g. Prof.
Langer

Marketplace Interaction
Marketplace Elements Founding Team

Needs to incorporate individuals with diverse

experience
Experience brings key social networks
UK networks more oriented towards big
pharma
German networks focused purely on academia

US networks more diverse mix of biotech,

science and academic medicine & science
POLICY IMPLICATIONS
Need to encourage labour mobility which again requires a critical
mass of firms
Recognition of the importance of a diverse Board of Directors,
Scientific Advisory Board & sponsored research ties
Crucial role of ties to academic medical centers could be
enhanced in the UK

Policy Discussions
Key Policy Actions Supporting Interaction

University Policy (Ideas in the Marketplace)

Establish mechanisms for rapid & efficient patenting

without detracting from scientific publication
Provide clear guidelines for commercialization that
avoid conflict of interest & maximize flow of ideas into
start-ups

Education of scientists (Scientists as

Carriers)

Focus on management education for PhDs rather

than undergraduates
Increase supply of life science PhDs greater supply
for alternative careers e.g. entrepreneurs, finance

Policy Discussions
Key Policy Actions (cont.) Supporting
Interaction

Market-oriented investment in ideas (Smart

Money)

Avoid university-based venture funding or

government subsidy subject ideas to market discipline
early
Move ideas from the university into the market rapidly
avoid lengthy incubation with the university

Networks (Promoting Connections)

Encourage clinical trials/clinical research to promote

biotech ties to academic medical centers
Facilitate scientists acting in advisory roles to
promote diverse university connections to biotech