more money, perhaps raise another round or two of financing, and begin to investigate the commercial application. How is the product going to be made? How is it going to be put into a clinical development program, and what toxicology will support it? Finally, and fairly important for the ability to partner up this technology, can the product be efficiently manufactured in commercial quantities?

Then the discussion with the larger corporate partners begins. For businesses like ours in the biotechnology industry, without the opportunity to establish partnerships with larger companies, we could not raise the money required to bring the technology to the point of availability to a patient as an approved product. The biotechnology companies are conspicuously and unquestionably dependent on larger corporate partners to take products forward through the clinic and into a commercial setting. The 1995 rate of partnering between pharmaceutical companies and biotechnology companies was double the rate in the year before.

At the end of the day, venture capitalists' goal is to realize a profit. Typically, it is through an initial public offering (IPO), which is a marker of the success of a business. The venture capital system is both self-pruning and self-regenerating. It is estimated that there are upwards of 2,000 biotechnology companies in the United States; they represent a market capitalization of more than $60 billion, of which $6–7 billion a year is spent on research. Thus, it is an essential and very successful national experiment that has so far yielded about 30 biotechnology products that have reached the market. To be sure, there are failures along the way. But if we were the kind of nation or if venture capitalists were the kind of people that would not take on a risk for fear of failure, we would not have any of those products. It is more risk and reward that drive this system, rather than a frank fear of failure. The system has provided an incredible benefit to the medical community in the United States.

Issues in Partnering Biotechnology and Pharmaceutical Firms

There are only so many ways that a company at an early stage of development like ours can fund itself. We either raise more money privately, develop our business to the point of the IPO, or find a corporate partner to fund development of the technology. Mergers and acquisitions are another source of funds. Two companies might come together and form a stronger business than either one was before. Alternatively, one company might be acquired by another, in what could be a camouflage for a partial failure (there is no way of knowing without knowledge of specific details about the companies). Mergers or acquisitions themselves can be a source of funding.

From our discussions with several companies, some things have become apparent and predictable about corporate partnering. First is the demand for high-quality science that is going to form the basis for the business. A second is



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