Commercial Biotechnology: An International Analysis January 1984 NTIS order #PB84-173608 — Recommended Citation: Commercial Biotechnology: An International Analysis (Washington, D. C.: U.S. Congress, Office of Technology Assessment, OTA-BA-218, January 1984). Library of Congress Catalog Card Number 84-601000 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 — Foreword This report assesses the competitive position of the United States with respect to Japan and four European countries believed to be the major competitors in the commercial development of “new biotechnology.” This assessment continues a series of OTA studies on the competitiveness of U.S. industries. It was requested by the House Committee on Science and Technology and the Senate Com- mittee on Commerce, Science, and Transportation. Additionally, a letter of support for this study was received from the Senate Committee on Labor and Human Resources. New biotechnology, as defined in this report, focuses on the industrial use of recombinant DNA) cell fusion, and novel bioprocessing techniques. These techniques will find applications across many industrial sectors including pharmaceuticals, plant and animal agriculture, specialty chemicals and food additives, environmental applications, commodity chemicals and energy production, and bioelec- tronics. Over 100 new firms have been started in the United States in the last several years to capitalize on the commercial potential of biotechnology. Additionally, throughout the world, many established companies in a diversity of industrial sectors have invested in this technology. A well developed life science base, the availability of financing for high-risk ventures, and an entre- preneurial spirit have led the United States to the forefront in the commercialization of biotechnol- ogy. But although the United States is currently the world leader in both basic science and commer- cial development of biotechnology, continuation of the initial preeminence of American companies in the commercialization of biotechnology is not assured. Japan is likely to be the leading competitor of the United States, followed by the Federal Republic of Germany, the United Kingdom, Switzer- land, and France. In the next decade, competitive advantage in areas related to biotechnology may depend as much on developments in bioprocess engineering as on innovations in genetics, immunology, and other areas of basic science. Thus, the United States may compete very favorably with Japan and the European countries if it can direct more attention to research problems associated with the scaling-up of bioprocesses for production. Issues and options developed for Congress include Federal funding for the basic life sciences and for generic applied research, especially in the areas of bioprocessing engineering and applied micro- biology, including the training of personnel in these areas. The United States may also need to be concerned with the continued availability of finances for new biotechnology firms until they are self- supporting. Additionally, there are changes in laws and policies that could improve the U.S. competi- tive position. These changes include clarification and modification of particular aspects of intellec- tual property law; health, safety, and environmental regulation; antitrust law; and export control laws. OTA was assisted in the preparation of this study by an advisory panel of individuals represent- ing a wide range of backgrounds, including science, economics, financial analysis, law, labor, and new and established firms commercializing biotechnology. Additionally, over 250 reviewers from universities, the private sector, and government agencies, both domestic and foreign, provided helpful comments on draft reports. OTA expresses sincere appreciation to each of these individuals. As with all OTA reports, however, the content is the responsibility of the Office and does not necessarily constitute the consensus or endorsement of the advisory panel or the Technology Assessment Board. Director ,.. Ill Commercial Biotechnology Advisory Panel Michael Hooker, Chairman Bennington College Howard Bremer Robert R, Miller Wisconsin Alumni Research Federation University of Houston Robert Fildes Dorothy Nelkin Cetus Corp. Cornell University Julian Gresser Norman Oblon Massachusetts Institute of Technology Oblon, Fisher, Spivak, McClelland, & Maier Ralph Hardy David Padwa E. I. du Pent de Nemours & Co., Inc. Agrigenetics Corp. Zsolt Harsanyi David Parkinson E. F. Hutton & Co., Inc. Falk Clinic Peter Hutt Phillip A. Sharp Covington & Burling Massachusetts Institute of Technology David Jackson William J. Whelan Genex Corp. University of Miami William Maxon John Zysman Upjohn Co. University of California, Berkeley Laura Meagher North Carolina Biotechnology Center — OTA Commercial Biotechnology Project Staff H. David Banta * and Roger Herdman, * * Assistant Director, OTA Health and Life Sciences Division Gretchen Schabtach Kolsrud, Program Manager, Biological Applications Program Project Director through August 1982 Nanette Newell, Project Director from September 1982 OTA Congressional Science Fellow through August 1982 Thomas Bugbee, Research Assistant from February 1983 Susan Clymer, Research Analyst Geoffrey M. Karny, Legal Analyst Kerry B. Kemp, Health and Life Sciences Division Editor Francis A. Packer 111, Research Analyst Kay Smith, Analyst James A. Thomas, Research Assistant from January 1983 Louise A. Williams, Senior Analyst Raymond Zilinskas, Analyst through October 1982 Special Contributor Robert M. Cook-Deegan, OTA Congressional Science Fellow Administrative Assistants Susan Clymer through April 1982 Ted Wagner from May through August 1982 Fatimah Taylor from September 1982 through August 1983 Elma Rubright from September 1983 OTA publishing Staff John C. Holmes, Publishing Officer John Bergling Kathie S. Boss Debra M. Datcher Joe Henson Glenda Lawing Linda A. Leahy Cheryl J. Manning “Until August 1983, * *From Dec. 26, 1983 Major Contractors Antonelli, Terry, & Wands Norine Noonan Washington, D.C. Georgetown University Washington, D.C. L. W. Bergman Bergman & Co. William O’Neill Princeton, N.J. Poly-Planning Services Los Ahos, Calif. Michael Borrus University of California Amelia Porges Berkeley, California Washington, D.C. Dike, Bronstein, Roberts, Cushman, & Pfund Gary Saxonhouse Boston, Mass. University of Michigan Ann Arbor, Mich. Foreman & Dyess Washington, D.C. Schwartz, Jeffery, Schwaab, Mack, Blumenthal, & Koch, P.C. Elmer Gaden Alexandria, Va. University of Virginia Charlottesville, Va. Southern Research Institute Birmingham, Ala. Genex Corp. Gaithersburg, Md. Philip Lee University of California Sheila Jasanoff San Francisco, California Cornell University Ithaca, N.Y. Madeline Vaquin Paris, France Kaye, Scholer, Fierman, Hays, & Handler Washington, D.C. Virginia Walbot Stanford University Management Analysis Center Stanford, Calif. Cambridge, Mass. Steven Zimmer James Millstein Brooklyn, N.Y. New York, N.Y. vi Contents Page Chapter 1: Executive Summary . 3 Chapter 2: Introduction . 25 Part I: The Technologies Chapter 3: The Technologies . 33 Part II: Firms Commercializing Biotechnology Firms Commercializing Biotechnology . 61 Part III: Applications of Biotechnology in Specific Industrial Sectors Chapter 5: Pharmaceuticals . 119 Chapter 6: Agriculture . 161 Chapter 7: Specialty Chemicals and Food Additives . 195 Chapter 8: Environmental Applications . 217 Chapter 9: Commodity Chemicals and Energy Production . 237 Chapter 10: Bioelectronics, . 253 Analysis ofU.S. Competitiveness in Biotechnology Chapter 11: Framework for Analysis. 263 Chapter 12: Financing and Tax Incentives for Firms. 269 Chapter 13: Government Funding of Basic and Applied Research . 307 Chapter 14: Personnel Availability and Training . 331 Chapter 15: Health, Safety, and Environmental Regulation. 355 Chapter 16: Intellectual Property Law. 383 Chapter 17: University/Industry Relationships . 411 Chapter 18: Antitrust Law . 435 Chapter 19: International Technology Transfer, Investment, and Trade . 453 Chapter 20: Targeting Policies in Biotechnology. 475 Chapter 21: Public Perception . 489 Appendixes A. Definitions of Biotechnology . 503 B. Country Summaries . 505 c. A Comparison of the U.S. Semiconductor Industry and Biotechnology. 531 D, Firms in the United States Commercializing Biotechnology . 542 E, OTA/NAS Survey of Personnnel Needs of Firms in the United States . 547 F. Recombinant DNA Research Guidelines, Environmental Laws, and Regulation of Worker Health and Safety . 55o G. Intellectual Property Laws . 564 H. Selected Aspects. of U.S. University/IndustrV“ Relationships. in Biotechnology./” 574 1, List of Acronyms and Glossary of Terms. 586 J. Currency Conversion Factors . 598 K. Other Contractors, Contributors, and Acknowledgments . 599 Index . 605 vii Chapter 1 Summary . Contents Page Introduction . 3 Definitions . 3 The Technologies . 4 Industrial Development. s Findings . 6 Industrial Applications of Biotechnology . 6 The U.S. Competitive Position . 7 Analysis of International Competitiveness in Biotechnology . 8 The Importance of Established and New Firms in the Commercialization of Biotechnology 11 Factors Potentially Important to International Competitiveness in Biotechnology . 12 Other Influences on Competitiveness in Biotechnology . 20 Conclusion . 21 Issues and Options . .. .. .. .. ... ... ...~... 22 Figures Figure No). Page l.Major Events in the Commercialization of Biotechnology . 4 2.