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U.S.-Japan Technology Linkages in Biotechnology: Challenges for the 1990s
are linking up with larger U.S. companies and U.S. universities. This triad arrangement holds the promise of strengthening the foundation for the industry through faster commercialization.
Estimates of the biotechnology market in the United States, Japan, and Europe in the year 2000 vary considerably. According to an analysis by the North Carolina Biotechnology Center, the Japanese market will see sales of $30 billion in the year 2000, exceeding sales in the United States or Europe. Other estimates by CEOs project sales in the United States of $50 billion by the end of the decade.70 Other indications of the importance of the industry are that (1) sales of biotechnology products by U.S. industry are nearing $3 billion, (2) the equity value of public companies in the biotechnology sector grew by nearly 40 percent in 1990, (3) the biotechnology sector was the number-one performer for 1990 according to Dow Jones.71 (See Figure 3.)
Looking to the future, U.S. biotechnology firms will continue to proliferate. While consolidation among companies (and acquisition of some) will continue, the rate of start-ups in the United States will exceed the rate of consolidation; thus, net industry growth will continue. However, industry growth (by numbers of companies) may slow. For example, during the 1980s, there were 50 to 75 start-ups each year; during the first half of the 1990s the rate is likely to decrease.
Small biotechnology firms will probably form strategic alliances with large foreign and domestic companies at earlier and earlier stages in their growth/existence. During the 1980s, many biotechnology firms formed strategic alliances with corporate partners in periods when capital was expensive and becoming increasingly difficult to obtain. This trend caused most partnering to be done by the larger biotechnology firms whose principal purpose was to obtain capital. As we move through the 1990s, the general purposes of these alliances will change, as will their character and purpose:
Alliances will be formed earlier and earlier in a biotechnology firm's existence. Today we see biotechnology firms forming alliances shortly after formation, even sometimes as a precursor to obtaining venture capital. These alliances are a de facto validation of the new biotechnology firms (thereby encouraging venture and other investment) and also bring specific technical resources to both sized companies. For the bigger players, the technology is increasingly unavailable to them in other forms. (A Nobelprize-caliber scientist with cutting-edge technology for further development may be willing to create his or her own company and partner the technology for further development with a large corporate partner but may be unwilling to become an employee of a large company.) Thus, a new paradigm for
See Burrill and Lee, Biotech 91, op. cit., p. 30.
See the newsletter Washington FAX, January 14, 1991.