What happened to the biotechnology revolution?

Abstract

There is no doubt that biotechnology has given us remarkable new treatments and diagnostic tools. The techniques of recombinant DNA have made it possible to produce protein drugs such as insulin and factor VIII. Combinatorial chemistry, rational drug design, and high-throughput screening have accelerated the discovery and design of drugs. And the science of genomics is helping to unravel the genetic origins of complex diseases and develop new therapeutic strategies. But despite such advances, drug discovery remains slow and increasingly expensive; the number of new drugs coming onto market has remained flat or declined; and the development pipelines of many drug companies are far from full. What happened to the biotechnology revolution? One answer is simple: the science has proved to be much more difficult than many thought 30 years ago when the industry began. But in Science Business: the Promise, the Reality, and the Future of Biotech Harvard Business School Professor Gary P Pisano lays much of the blame not with the science but with the business model of the biotechnology industry. Pisano proposes that this model is incompatible with the type of science that must be done in the industry. Much has been written about the threat business investment can pose to science. Pisano turns that around and shows how investing in science can pose a threat to business. His analysis suggests that for biotechnology companies to succeed and for the biotechnology revolution to occur, the industry may need to adopt some of the basic values of science, particularly, openness, sharing, and collaboration. By and large, biotechnology has adopted a business model that has worked for other science-based industries: one that is built around small start-up companies that focus narrowly on a specific technology or idea. Biotechnology companies are so specialised, Pisano notes, that every new idea gets its own company. This model has proven successful in other science-based industries because in most cases the basic science has been worked out and the companies use it to develop a profitable product. By contrast, biotechnology companies working in such areas as genomics, proteomics, stem cells, and systems biology all are launched long before the basic science is understood. “Over the past century, of course, science has played a critical role in a number of industries (eg, semiconductors, computers, advanced materials)”, Pisano writes. “But it remained outside the boundaries of the business system. Science was a tool, an input, or a foundation for creating new products or services; it was not the business. From its conception, biotechnology was different. In biotechnology, the science is the business.” The failure of the industry to realise this difference means not only that investors have poured billions of dollars into the industry for little or no return, but also that many discoveries that seem to hold so much promise have failed to move from bench to bedside. How badly has the industry performed? Well, in monetary terms, if you had invested US$1 in biotechnology shares in 1981, your investment would have been worth US$8 at the end of 2003, Pisano points out. The same investment in much more secure long-term US Treasury bonds would have yielded US$12. True, if you had been lucky enough to pick Amgen, you would have earned US$165. But even with outliers like Amgen, the profitability of the biotechnology industry has hovered around zero. Without Amgen and Genentech, the industry would have been in the red throughout its history. Only one in five biotechnology companies even has a product, Pisano notes. Pisano believes biotechnology's failure to deliver on its promise results from a “fundamental and deep struggle between the conflicting objectives and requirements of the science of biotechnology and the business of biotechnology”. There is a culture clash between science and business, Pisano contends: science holds methodology sacred, whereas business wants results; science values openness and sharing, business demands secrecy; science demands validity, business, utility. Biotechnology companies must, says Pisano, meet three key challenges to succeed as businesses. They must be able to manage risk that is inherent in the kind of research they must do. They must be able to integrate expertise across a range of disciplines. And they must find a way to acquire and retain the know-how that teams of scientists acquire from long experience. Consider risk. For the maker of a new computer chip, the science has been worked out, and fairly early in the process the development team can ascertain whether it can make a chip to meet the specification required for the project. Indeed, because the specifications are known, a small group of engineers and scientists can work alone with minimal interaction with makers of other components and the know-how they need is easily obtained and shared. Scientists working on a new biotechnology drug face quite a different set of challenges. In terms of risk, they face a great deal more uncertainty. The biology is so complex that they cannot be sure that their product will succeed, even after years of development and testing. Nor can the work be done effectively by a small team of scientists. The smallest change in a compound could radically alter the product's absorption, its pharmacokinetics, its effectiveness, and its spectrum of side-effects. Experts from a broad range of disciplines must be consulted even for small changes. And whether successful or not, the specialised knowledge and experience accumulated by the members of the team during development is often hard to share. Small, highly specialised biotechnology companies are ill suited to tackle these challenges, Pisano writes. They cannot carry the risk. Failure of their one product often means the death of the firm. Their teams typically do not have the breadth and depth of knowledge to handle all aspects of the product's development. Partnerships with larger pharmaceutical firms that may have broader expertise tend to be short-term and do not overcome those limitations. Pisano argues that the biotechnology industry needs to be reorganised in order to better manage the risk, achieve integration, and facilitate learning required to do the requisite science. What Pisano recommends is that the industry takes a step into the world of the “scientific commons” where ideas and results are shared and common problems are tackled through collaborations. To help make that possible, he calls for more government and philanthropic support for translational research so that companies will not have to assume as much risk. He also calls for the formation of quasi-public corporations that would provide the long-term funding these companies need to move an idea from bench to bedside. And he calls for more information exchange between companies, even including their early clinical trial data, so they can learn from each other what works and what doesn't. In the end, sharing such information, even with competitors, will save companies time and money by allowing them to avoid pursuing dead ends.