Biotech Investment Busy Going Nowhere

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> 13 Jul 2004 13:48:46 -0000

 

> Biotech Investment Busy Going Nowhere

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> ISIS Press Release 13/07/04

> Biotech Investment Busy Going Nowhere

> *************************************

>

> Claire Robinson exposes the financial woes of the

> biotech

> industry

>

> The sources for this article

> http://www.i-sis.org.uk/full/BIBGNFull.php are

> posted on ISIS Members'

> website. Details here

> http://www.i-sis.org.uk/membership.php.

>

> Biotechnology is the answer to problems ranging from

> hunger

> in Africa and Asia to obesity in the West. This was

> the

> upbeat message from the industry's promotional

> showcase, the

> BIO 2004 conference, which took place in San

> Francisco in

> June. In launching the conference, BIO (the

> Biotechnology

> Industry Organisation) trumpeted, " the biotechnology

>

> industry is performing well across a variety of

> financial

> and product development measures. "

>

> But not everyone was persuaded. This year's media

> coverage

> of the annual event was decidedly cynical. A report

> in the

> Asia Times commented, " For many in the scientific

> community,

> the smorgasbord of marketing claims merely adds to

> the

> credibility problems that are piling up against

> genetic

> engineering, especially as its base claims of

> boosting food

> output have not been realized. "

>

> Another jaded reporter, David Ewing, wrote in the

> San

> Francisco Chronicle, " As of yet, most of what I'm

> looking

> for here is in the 'promise' category - and has been

> each

> year I have come to this ever-larger industry fete. "

>

>

> Falling investment

>

> Disappointment at the biotech industry's unfulfilled

>

> promises is reflected in its falling bottom line. As

> the New

> Zealand Herald said, " Investment in genetically

> modified

> food is drying up in the world's biggest GM market,

> the

> United States, because consumers in the rest of the

> world

> are not willing to buy its products. "

>

> Roger Wyse of Burrill and Company, the biggest

> investment

> firm focused on life sciences, said the consumer

> backlash

> against GMOs had forced a lull in projects aimed at

> modifying food. " We are probably looking at three,

> four or

> five years before the GMO issue subsides

> sufficiently that

> we will feel comfortable investing in it, " he said.

>

> Lack of investment has led to massive losses. Back

> to Ewing:

> " Last year, this industry lost $5.4 billion, and has

> lost a

> staggering $57.7 billion since BIO last held its

> annual

> conference in San Francisco in 1994, according to an

> Ernst

> and Young study. Only a few companies have been

> consistently

> profitable in the 30 years since biotech was born -

> a few,

> such as Amgen and Genentech, fantastically so.

> Remove them,

> and the losses and numbers are far worse for the

> rest of the

> industry. "

>

> An article in the usually biotech-bullish Wall

> Street

> Journal drove home the point. Entitled " Biotech's

> dismal

> bottom line: More than $40 billion in losses " , the

> article

> said, " Biotechnology. may yet turn into an engine of

>

> economic growth and cure deadly diseases. But it's

> hard to

> argue that it's a good investment. Not only has the

> biotech

> industry yielded negative financial returns for

> decades, it

> generally digs its hole deeper every year. "

>

> The Journal points out that this truth becomes lost

> in the

> periodic bursts of enthusiasm for biotech stocks,

> one of

> which is under way right now. After a three-year

> slump,

> biotech companies raised $1.5 billion from new stock

>

> offerings in the first quarter of 2004, almost three

> times

> the level of a year earlier. Thus BIO was able to

> boast that

> while major stock indexes have slipped this year,

> the Nasdaq

> Biotech Index had edged up about 6 percent at close

> of

> markets on 2 June.

>

> In the absence of consumer take-up of its products,

> selling

> stocks has become a biotech industry lifeline. In

> 2003, US

> biotech firms raised almost $4 billion by selling

> new stock

> to investors, according to Burrill & Co. The same

> year, US

> biotechs as a group posted almost that much in

> losses. Only

> 12 of the 50 largest biotechs turned a profit in

> 2003.

>

> Meltdown continues

>

> In the UK, the biotech meltdown continues apace.

> Earlier

> this year, it emerged that two biotech firms linked

> to

> science minister and donor to the Labour Party, Lord

>

> Sainsbury, are facing serious financial

> difficulties.

> Diatech Ltd, which holds several patents for

> techniques

> designed for use in GM foods, has gone into

> liquidation,

> while biotechnology investment firm Innotech is

> making huge

> losses.

>

> At the end of June, the British GM science lobby

> despaired

> at news that Anglo-Swiss biotech giant Syngenta was

> withdrawing from the UK and transferring to North

> Carolina

> in the US. Syngenta was the last biotech company to

> retain a

> significant GM research presence in the UK after

> decisions

> by Monsanto, Dupont and Bayer Cropscience to

> withdraw.

>

> Whether Syngenta will face a more sustainable future

> in the

> US is open to question. Almost one-sixth of the more

> than

> 350 US biotechs that went public over the past two

> decades

> were bought out for pennies on the dollar, dissolved

>

> themselves or had filed for bankruptcy protection by

> the end

> of 2003. Examples include Escagenetics, Advanced

> Tissue

> Sciences, ImmuLogic and Gliatech.

>

> In May, San Diego-based Epicyte Pharmaceutical, one

> of the

> last vestiges of the city's attempt to become an

> agricultural biotech stronghold, closed. The demise

> of

> Epicyte was lamented as " the latest casualty for the

>

> region's fledgling agricultural biotechnology

> industry,

> which just five years ago appeared to hold

> considerable

> commercial promise. " In 1999, Stephen Briggs, the

> head of

> San Diego's Novartis Agricultural Discovery

> Institute, which

> was building a major research campus, predicted San

> Diego

> could become the " Silicon Valley of agricultural

> biotech. "

>

> Yet the industry didn't retain a stronghold there: a

>

> consumer backlash against GM food, along with

> high-profile

> industry blunders such as the StarLink contamination

>

> incident, nipped investor enthusiasm in the bud. In

> 2000,

> the Novartis Agricultural Discovery Institute was

> folded

> into Syngenta. Then in 2002, Syngenta closed the La

> Jolla,

> San Diego unit. Other San Diego agricultural

> biotechs also

> disappeared. Mycogen was purchased by Dow Chemical,

> and

> Akkadix Corp. faded from the scene. Dow retains a

> research

> unit in San Diego, but moved a second agbiotech unit

> out of

> the state.

>

> Biotech medicines a refuge of hope

>

> Biotech drugs have long provided a refuge of hope

> for

> investors wary about the prospects for agricultural

> biotech.

> The promise of lucrative magic bullets against

> intractable

> diseases attracted those who kept faith in the

> genetic

> determinist model of illness. Biotech pioneers

> stoked

> investor enthusiasm by arguing that since biotech

> drugs are

> often versions of human proteins, genetic

> engineering could

> cut short the long safety trials that traditional

> drugs go

> through. But that didn't turn out to be the case,

> and most

> genetically engineered medications take 10 to 15

> years to

> win approval, much the same as other drugs.

>

> At the turn of the millennium, hopes rose with the

> hype when

> the deciphering of the human genome appeared to

> herald a new

> age of treatments tailored for individual genetic

> differences. This sparked an incredible 170% rise in

> biotech

> stock prices in just four months - followed by a

> steep crash

> over the next year. By 2002, disillusionment had set

> in.

> Canadian magazine Maclean's reported, in an article

> called

> " Biotech hope and hype: The genetics revolution has

> failed

> to deliver " , " Federal and provincial governments

> have long

> had a love affair with genetics, pumping billions

> into the

> biotech biz. 20 years later and how many

> breakthrough

> products has biotech produced? Gene therapy may

> actually

> have harmed more people than it's helped. . The few

> drugs

> derived from GE such as insulin simply replace

> existing

> products while creating new risks. "

>

> Bad-idea virus

>

> We've seen how one lifeline for a largely

> unprofitable

> industry is selling stocks. Another is public money.

> The BIO

> conference, reported Associated Press, was packed

> with

> mayors and governors from across the US desperate to

> lure

> biotech companies to their area with promises of tax

> breaks,

> government grants, even help with parking. Yet

> biotech,

> wrote the AP, " remains a money-losing, niche

> industry firmly

> rooted in three small regions of the country: 'This

> notion

> that you lure biotech to your community to save its

> economy

> is laughable,' said Joseph Cortright, a Portland,

> Ore.

> economist who co-wrote a report on the subject.

> 'This is a

> bad-idea virus that has swept through governors,

> mayors and

> economic development officials.' "

>

> A case in point is Florida governor Jeb Bush,

> brother of

> president George W. Bush. Jeb Bush spearheaded an

> initiative

> to hand over $510 million of Florida and Palm Beach

> County

> taxpayers' money to build a new biotech centre for

> the

> Scripps Research Institute, based in San Diego.

> Land,

> buildings, labs, offices, equipment, even employees'

>

> salaries for seven years: Scripps got it all for

> free,

> putting in no money of its own. The company will

> eventually

> repay Florida up to $155 million, half of the

> state's

> investment. But the payback provision will not kick

> in until

> 2011. Bush and other Florida officials hope that

> Scripps

> will make Florida a biotech hub - like San Diego.

>

> The wisdom of using San Diego as a model is

> questionable,

> given the industry's record of failure there. But

> Bush seems

> blind to the risks. " It's always good to have

> sceptics, but

> I like to be on the dreaming side, " he told the

> press. " It's

> a lot more fun on the dreaming side of the road. "

>

> According to a report prepared for BIO and released

> at its

> annual convention in San Francisco, at least 29

> states have

> formal plans to woo the biotech industry. Many, like

>

> Pennsylvania, are using money gained from the global

> tobacco

> settlement to fund biotech development projects.

>

> How does this " bad-idea virus " gain such a hold over

> so

> many? In an article in Nature Biotechnology, medical

>

> bioethicist Leigh Turner of McGill University,

> Quebec,

> suggests that biotech fulfils many of the same needs

> as

> religious fanaticism: " Biotech, in a similar manner

> to many

> religious movements, has its charismatic prophets,

> enthusiastic evangelists and enrapt audiences. Like

> religions, it offers a comforting message of

> salvation.

> Instead of imagining a day of rapture when the dead

> rise

> from their graves to begin eternal life, biotech

> enthusiasts

> imagine the era when medical technologies provide a

> renewable, largely imperishable body. . Biotech is

> not just

> an assemblage of research programs and techniques.

> In a

> scientific and technological era, biotech also

> offers a

> surrogate religious framework for many individuals. "

>

> Within this framework, it is a small step to the

> type of

> language found in the Nuffield Council report and

> repeated

> by biotech 'evangelists' such as Derek Burke, which

> insists

> on the " moral imperative for investment into GM crop

>

> research in developing countries " . And once that

> article of

> faith is swallowed, it is but another small step to

> appropriating public money to promote and export

> biotech to

> the third world under the guise of aid and

> development

> programmes.

>

> As private finance for biotech dries up, the

> industry is

> increasingly turning to government to provide

> investment to

> force the crops the West doesn't want into Africa

> and Asia.

> The British government has already quietly sunk over

> £13m of

> public money into such projects via the Department

> for

> International Development during a period of intense

>

> domestic disquiet over GM. It has also sunk further

> money,

> along with USAID, into the Nairobi-based African

> Agricultural Technology Foundation (AATF) project to

> push GM

> crops into Africa.

>

> What is so insidious about this, as Dr Tewolde

> Berhan Gebre

> Egziabher, the head of Ethiopia's Environmental

> Protection

> Authority, has noted, is that " the moral imperative

> is in

> fact the opposite. The policy of drawing funds away

> from

> low-cost sustainable agriculture research, towards

> hi-tech,

> exclusive, expensive and unsafe technology is itself

>

> ethically questionable. There is a strong moral

> argument

> that the funding of GM technology in agriculture is

> harming

> the long-term sustainability of agriculture in the

> developing world. "

>

> Nobody should be in any doubt that the GM lobby's

> real aim

> has little to do with feeding the hungry. It is to

> shore up

> GM research in the UK in the face of industry's

> current

> retreat, to associate the technology in the official

> mind

> with the public interest, and to give GM's public

> relations

> campaigns a charitable face.

>

>

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