25 Apr Biotech industry reaches midpoint in 50-year maturation cycle
If we assume that the biotech industry started in the late 1970s with the first IPOs taking place in 1980 (Amgen and Cetus), then biotech is already an industry more than 25 years old.
An interesting article in Genetic Engineering News (GEN) on March 1 states unequivocally that most industry cycles run about 50 years until they mature. If this is true, biotech is at the middle of its 50-year cycle. A new industry of significance usually produces an industrial revolution, so in our case, we can refer to this 50-year cycle as the biotech revolution.
Using this analogy, the pharmaceutical industry is already at the end of its 50-year cycle. Modern-day pharmaceuticals really began during World War II when the U.S. government asked the pharmaceutical leaders of the day to produce penicillin, which was the first major antibiotic and was used extensively during the war to treat soldiers.
As a result of this gearing up of large-scale manufacturing and R&D, the pharmaceutical industry emerged after the war as an industry poised for internationalization.
In my early days with Pfizer in the 1970s, I can remember hearing about the company setting up operations all over Latin America along with companies like Sterling-Winthrop (now Sanofi-Aventis), Squibb, Upjohn (now Pfizer) and others. So what characterizes this 50-year cycle and are there stages within the 50-year spread?
According to the GEN article, there are five distinctive stages each marked by a decade. As we extrapolate this idea to the biotech industry, this is what we see for the biotech industrial revolution:
- First Decade (late 1970s/early 1980s to late 1980s): Laying down the foundation research methodologies and how we study and view recombinant DNA and hybridoma technologies.
Monoclonal antibodies were initially developed at this point but as diagnostic reagents. Hybritech in San Diego was a company developing these products. It was acquired by Eli Lilly in 1986 for more than $400 million.
The success of the founders spawned all kinds of new companies in San Diego. However, it took another 20 years before monoclonal antibodies took off as a technology. - Second Decade (late 1980s to late 1990s): A few new discoveries became products using the above methodologies. Good examples of this include Amgen growth factors Epogen and Neupogen as well as Genentech?s recombinant insulin and human growth hormone.
- Third Decade (late 1990s to 2010): A flood of innovative products derived from the initial methodologies come to the marketplace. The original methodologies are further refined and broadened with the development of offshoot methodologies.
We are currently at the midpoint of this decade!
While the genomic and proteomic revolution sprang forth in this period, it wasn?t clear how these technologies could be commercialized. As a result of investor frustration with this lack of commercialization, there has been a shift in research focus.
Where molecular biology and biochemistry were the focal point, the new emphasis is cell, developmental and system biology with greater interest in both stem cell therapy and cell-based therapies.
This new emphasis will be combined with genomics, proteomics and nanotechnology with the results being seen in the following decade. - Fourth Decade (2010 to 2020): Products will become incorporated into daily life and mainstream companies adopt the above methods as standards for the industry.
- Fifth Decade (2020 to 2030): In this final decade, according to GEN, the biotech companies will become an integral part of society. The revolution that created the industry begins to fade both in the minds of scientists and laypeople.
At this point, biotech methods and products will be so pervasive that they will be fully integrated not just in medicine and life science research but in agriculture, general industry and retail commerce as well.
During this period, the average life span of humans could reach 125 years. This would mean that tomorrow?s 70-year-old adult will be today?s equivalent of a 35-year-old today.
So is this science fiction, future shock or the coming reality? A look at the pharmaceutical industry and its impact on society ? an industry that?s clearly in its fifth decade ? might be revealing.
When you have drugs like Viagra for erectile dysfunction used by people all over the world and promoted on TV and in publications, it appears that pharmaceutical drugs have become an integral part of society.
The average American is taking multiple drugs as part of his or her normal life. These range from OTC aspirin, anti-histamines, dermatological creams and oral contraceptives to stronger prescription drugs such as arthritis drugs, anti-hypertensive drugs, anti-cholesterol drugs, anti-anxiety agents and anti-depressive drugs.
The impact of the approval and commercialization of new drugs over the last 50 years has increased average life span. The life span of the average American 50 years ago (in the mid-1950s) was probably in the mid- to late-60s.
Remember that this was the time when social security was fully implemented in our society with retirement at age 65. Back then, this meant to the U.S. government that a person would not be surviving too much longer after retirement and hence would be pulling out only a short amount of money from social security.
Our current crisis with social security is due to the fact that the pharmaceutical industry and its products and improvements in overall health-care have enabled the average age of death in the U.S. to increase from about 67 years old to more than 80 years old.
This prolongation of life means that social security is now making payouts for 10 to 15 years more than anticipated when the program was originally designed.
In another 10 years, the average age of death in the U.S. may well jump to 95 years or more. This means that social security will be paying out monies to retirees for a period approximating the overall time of work life (30 years) unless the social security retirement age is pushed back further.
Big Pharma has come mainstream into our society. The impact of pharmaceutical drugs is often taken for granted by the general population.
AIDS and HIV infection, for example, have been converted from a deadly acute disease into a chronic one that can be managed by proper medication. Inroads on several types of cancer have been made in the last few years where survival has not only increased but a number of different types of cancer have been put into remission.
In fact, drugs are taken so much for granted that there is massive public acclaim to withdraw a drug when unforeseen side effects are observed.
The continued M&A and downsizing of the pharmaceutical industry in recent years is an indication that this industry is in its fifth decade. Additionally, when you see a company such as Amgen with a market valuation larger than Abbott Labs yet with half the sales, this is another indicator of the rising biotech star and declining pharmaceutical star.
On the other hand, Big Pharma?s first decade was marked by an ability to identify products from natural organisms found on land and chemically synthesize these products. Chemistry was a founding research methodology for Big Pharma. This research methodology yielded whole classes of new antibiotics (such as the tetracyclines) during the late 1950s and early 1960s.
By the way, the founding research methodology of chemistry has also impacted not only the pharmaceutical industry but the chemical and agro-chemical industries as well. These industries have used the chemical synthesis route to create all kinds of products ranging from plastics to herbicides and pesticides to various polymers and fibers.
Now that they are fully mature industries, what will happen to the pharmaceutical and chemical industries?
The consolidation of the chemical industry has happened at a much quicker pace than the pharmaceutical industry as many once-innovative products have become commodities. In the pharmaceutical industry, we call this generics. The growth of the worldwide generic drug business demonstrates the commoditizing of this industry.
For both the chemical and pharmaceutical industries to survive, they will need to incorporate the revolutionary technologies found in the biotechnology industry or they will quickly fade away. See you next week!
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