In its 30 years of life, the biotechnology industry has attracted more than $300 billion in capital. Much of this investment has been based on the belief that biotech could transform health care. The original promise was that this new science, harnessed to new forms of entrepreneurial businesses that were deeply involved in advancing basic science, would produce a revolution in drug therapy. Unencumbered by the traditional technologies and organizations of the established pharmaceutical giants, these nimble, focused, science-based businesses would break down the wall between basic and applied science and produce a trove of new drugs; the drugs would generate vast profits; and, of course, investors would be handsomely rewarded.
Can Science Be a Business?: Lessons from Biotech
Reprint: R0610H
In 1976, Genentech, the first biotechnology company, was founded by a young venture capitalist and a university professor to exploit recombinant DNA technology. Thirty years and more than $300 billion in investments later, only a handful of biotech firms have matched Genentech’s success or even shown a profit. No avalanche of new drugs has hit the market, and the long-awaited breakthrough in R&D productivity has yet to materialize.
This disappointing performance raises a question: Can organizations motivated by the need to make profits and please shareholders successfully conduct basic scientific research as a core activity? The question has largely been ignored, despite intense debate over whether business’s invasion of basic science—long the domain of universities and nonprofit research institutions—is limiting access to discoveries, thereby slowing advances in science.
Biotech has not lived up to its promise, says the author, because its anatomy, which has worked well in other high-tech sectors, can’t handle the fundamental challenges facing drug R&D: profound, persistent uncertainty and high risks rooted in the limited knowledge of human biology; the need for the diverse disciplines involved in drug discovery to work together in an integrated fashion; and barriers to learning, including tacit knowledge and murky intellectual property rights, which can slow the pace of scientific advance. A more suitable anatomy would include increased vertical integration; a smaller number of closer, longer collaborations; an emphasis by universities on sharing rather than patenting scientific discoveries; more cross-disciplinary academic research; and more federal and private funding for translational research, which bridges basic and applied science. With such modifications, science can be a business.