Biotechnology - Current State

>> Biotechnology Final Paper (PDF)

The biotechnology industry is expanding worldwide, with significant research and development
investment in the United States, Asia, and Europe.   For example, the governments of South
Korea, India, Taiwan, and Singapore have all begun to invest in biotechnology.   However the
U.S. accounted for more than 70% of revenues and research and development spending for
public biotechnology companies globally in 2002.

With increased global interest in biotechnology, increased competition and off-shoring could
become an issue in the future, but U.S. job losses have not yet become a major concern.
The Research Triangle area of North Carolina has attracted a large cluster of biotechnology
firms, including foreign investors, such as Bayer, BASF, Syngenta, Esai, and Novo Nordisk.
Many of these firms are based in the Research Triangle Park.





State Efforts
North Carolina creates about $3 billion dollars in annual biotechnology revenue.   Revenues in the
industry overall are expected to grow as research continues to advance and new applications
are found.



State leadership has assisted in the growth of North Carolina’s industry, most recently in the form
of training initiatives:
• The North Carolina Biotechnology Center, in partnership with the Golden Leaf Foundation, is
     developing a massive training initiative for the biotechnology industry, BioWork.
• The state has set up two new incubators near universities to provide hands-on training experience.


Market Trends and Industrial Outlook
• Investment in agricultural biotechnology is expected to increase — Global population growth,
declines in land productivity, declines in land area available for food production, and the potential
for profit have caused the rapid adoption of biotechnology around the world.
• Bio-pharmaceutical industry is also expected to grow — The ageing population has increased
demand for healthcare and, thus, expanded market opportunities for drugs and treatments
developed through biotechnology.


Sources: Ernst & Young LLP, annual biotechnology industry reports, 1993–2004.



The Value Chain

Research
New research often begins in the university and is later developed by private industry.  North
Carolina is well positioned to continue research through the presence of:

• Duke Medical Center and Duke’s Institute for Genome Science and Policy
• UNC Hospitals, UNC Comprehensive Cancer Center, and the Department of Cell and
    Developmental Biology
• NC State’s Department of Agricultural and Life Sciences and Centennial Campus, a leader in
    public/private research partnerships.
• Each major Triangle university has an Office of Technology Transfer responsible for assisting
    university researchers in applying for patents and finding commercial partners.   These offices
    negotiate protection of intellectual property, act as liaisons with the private sector, and assist
    in the marketing of new products/technology.


Testing
All pharmaceutical drugs approved for sale by the FDA need to undergo extensive safety tests.

This testing process includes:
• “Proof of Principle” — Demonstrate that, in a limited test, the desired biological effect was achieved.
• Preclinical trials — Results are submitted when applying for an Investigational New Drug Application
     (INDA), which is a formal request to begin human testing.
• Clinical trials — Three phases of FDA approval include administration to healthy individuals,
     individuals with the infliction intended for treatment, and a wide group of individuals in a
     randomized, double blind study. Only 5-10% of drugs complete clinical trial testing.

Bio-agricultural products are approved by the USDA and undergo a separate approval process.

Manufacturing
• Complexity — Bio-manufacturing is a very process specific, capital intensive procedure which
    does not allow for quick recalibration or a wide variety of generic product to be produced.
    Production runs are carefully orchestrated and require special technical equipment which
    may or may not be applicable for other procedures.
• Regulatory concerns — The FDA applies rigorous testing procedure before any facility can be
   approved for manufacturing.   Should one prospective treatment fail to achieve commercial
   approval, there are many more in the pipeline which are awaiting manufacturing capacity.

Due to the time and capital intensive nature of beginning a bio-manufacturing process, there is
generally a backlog of production.   Many more products are manufactured than those that
make it through all the hurdles of production.

• Importance of Lead Firms—Lead Firms dominate bio-manufacturing because they possess
   the best equipment and funding, although some contract manufacturers have been
   appearing more recently.

Sales
• Demand assessment — Once a product is approved for commercial use, there must be demand
    for it in order for it to sell. Often, demand for products is frequently assumed when, in fact,
    there is none.
• Marketing capability — Large, well-endowed, and branded firms have marketing advantages.
    Established lead firms often have extensive marketing networks with established contacts in
    the medical community which can obtain commercial success for a product fairly quickly.

Startup companies often choose to partner with a larger company in order to perform well in sales.

Lead Firms
Firms that tend to be larger in size and product array have more success and presence throughout
the biotechnology value chain. Lead firms also serve as partners to smaller firms because the larger
firms can bring a new product to market more easily.   

Increasing the number of lead firms in the state (currently 7) would enhance the likelihood of job
creation in North Carolina.   North Carolina has the highest concentration of Contract Research
Organizations (CROs) in the country.   CROs may be contracted to perform any number of tasks,
including lab testing, trial design, and data analysis.