tween basic research and commercial biotechnology is not hard and fast, however. Companies focusing their efforts on the commercialization of biotechnology are research intensive, carefully watching the work going on in basic research laboratories because new developments in science can become the basis for new products seemingly overnight. But bringing these products to market can take a number of years, particularly in the health care field. Erythropoietin (EPO), for example, generated $200 million in revenues for Amgen in its first full year of sales in 1990. Amgen carried out research to bring this product to the clinical trial stage for approximately 3 years, and it took another 3 years to complete clinical trials and obtain regulatory approval before going to market.7 Because of the importance of fundamental research to firms seeking to commercialize biotechnology, the working group decided to include in its analysis linkages formed between Japanese firms and research laboratories at U.S. universities, national laboratories, and biotechnology centers that are likely to have an impact on market competition.

Biotechnology is a diverse activity comprised of many scientific disciplines. Indeed, some prefer not to call it an industry because developments in biotechnology research span many fields of science and affect a wide range of industries (see Figure 1). For the purposes of this report, the working group has defined biotechnology as any activity, product, or process that involves recombinant DNA and/or cell fusion technology. These technologies are currently applied to develop products for human health care, specialty chemicals and biosensors, and human and agricultural applications and to improve the generation of energy and protection of the environment. More than 100 large chemical, pharmaceutical, and agricultural companies use biological processes. Large pharmaceutical and agricultural firms are using biotechnological techniques to complement their established in-house research efforts. These large companies should be distinguished from the dedicated biotechnology firms (many of them small firms formed by some of our nation's premier researchers and entrepreneurs) that focus almost exclusively on the use of biotechnology to develop new products through biological processes. In terms of market segments, health care (including human diagnostics, vaccines, and therapeutics) is by far the largest.8

7  

See Gary P. Pisano, "Joint Ventures and Collaboration in the Biotechnology Industry," David C. Mowery, ed., International Collaborative Ventures in U.S. Manufacturing (Washington, D.C.: American Enterprise Institute, 1988), p. 199 for an estimate that the development of a pharmaceutical product takes 5 to 10 years from the initiation of basic research to marketing of the product.

8  

There are more than 1,000 biotechnology companies in the United States, about 76 percent of them small companies with 1 to 50 employees. (See Burrill and Lee, Biotech 91, op. cit., pp. 15–16.) The Biotechnology in Japan Yearbook 1990/91 states that there are more than 800 Japanese companies involved in biotechnology commercialization and estimates the 1990



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