The Globalization of Biotechnology. Alicia Löffler Northwestern University

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1 The Globalization of Biotechnology Alicia Löffler Northwestern University

2 Let me start with the conclusion The US has a historic opportunity to establish a long-term position as a global hub in biotechnology. Specifically, the US has the opportunity to become a magnet for the emerging clusters dispersed around the world. A magnet for knowledge, innovation and commercialization. The centrality of the US as a biotech hub (particularly as a finance center) might offer a point of entry to influence the industry in a significant way However, progressive policies are needed to size this opportunity 2

The biotechnology industry emerged in the late 1970s and 1980s

disruptions Policy/legal Biotech social Technology The sector gave

3 The biotechnology industry emerged in the late 1970s and 1980s with the confluence of technological, policy, and institutional disruptions Policy/legal Biotech social Technology The sector gave us a unique opportunity to have a living experiment on the evolution of an industry. It is then not surprising that it has been the source of social, academic, policy and economic development interest. 3

4 In fact, for many regions around the globe, biotech has become part of a key economic development strategy Hermans, Löffler, Stern. NAS (2008) 4

locations to conduct activities that previously had been done in the United States -- the globalization of biotech

5 Globalization of biotech is different than traditional industry sectors From cloning to stem cells more and more medical breakthroughs are coming from places other than the US While the globalization of most industries offer low-cost locations to conduct activities that previously had been done in the United States -- the globalization of biotech reflects an attempt to compete head-to-head with the United States in the creation of new knowledge Hermans, Löffler, Stern. NAS (2008) 5

6 In order to determine the globalization landscape we need to ask the following questions: What is unique about Biotech Innovations? What are the globalization metrics and trends in biotechnology? What are the opportunities and policy needs? 6

7 One of the most distinctive and pervasive characteristic of biotech innovation is its duality Stokes Pasteur Quadrant (1997) Commercial application Academic Knowledge high low Pure (Fundamental) Research high Use-inspired Research low Applied Research Today biotech defines a new space where scientific contributions make simultaneous advances in both academic science and commercialization Kellogg School of Management 7

The impact of duality is extensive, and undermines some of the implications of the traditional linear framework for innovation Government Academia Industry Innovations

8 The impact of duality is extensive, and undermines some of the implications of the traditional linear framework for innovation Government Academia Industry Innovations Government Academia Innovations Industry Innovation occurs at the intersection of disciplines and institutions it is no longer a clean and orderly process Kellogg School of Management 8

9 In fact, life science innovation today is so interwoven that it is difficult to delineate government, academic from commercial activities NIH Map of Interactions in life sciences. Walter W. Powell AJS Volume 110 Number 4 (January 2005):

10 In order to determine how to best compete in this new global landscape, it is important to address three key questions: What is unique about Biotech Innovations? What are the globalization metrics/trends in biotechnology? What are the opportunities and policy needs? 10

The United States still supports, by far, the single largest bio industry in terms of employees United States (1) EU (4) Germany (2,3) United Kingdom (1) 172391 73189 24131 22405 overall employment

11 The United States still supports, by far, the single largest bio industry in terms of employees United States (1) EU (4) Germany (2,3) United Kingdom (1) overall employment in the EU is less than 50% of the United States. Korea (2004) (3) Canada (2,3) France (1) EU employment is clustered (2/3 in Germany and UK) Switzerland (2004) (1) 881 Belgium (2,3) Israel (2002) (3) Sweden (1) Employment intensity of many countries exceed the US Ireland 2940 Finland (1) 2394 Austria (1) 1789 Italy (1) 1532 South Africa (2002) (2,3) 1020 Norway (1) 970 Iceland (3) Poland (2004) (2,3) New Zealand (2005) (3) Portugal (1) International Labor Distributions. OECD biotechnology Statistics (Van Beuzekom and Arundel, 2006) Persons Hermans, Löffler, Stern (2008) LOG SCALE 11

The United States carries the highest investment expenditures United States Germany (2004) France Canada 1347 1342 1194 14232 the United States investment pace is an order of magnitude higher than

12 The United States carries the highest investment expenditures United States Germany (2004) France Canada the United States investment pace is an order of magnitude higher than any other individual country. Denmark (1) 727 Korea (2004) 699 Switzerland (2004) 469 Israel (2002) 251 Italy (2004) 236 China (Shanghai) 205 Australia 201 Spain (2004) New Zealand (2004) Finland South Africa (2002) Iceland Total expenditures for biotechnology R&D by biotechnology-active firms, OECD biotechnology statistics (Van Beuzekom and Arundel 2006).- Norway 29 Poland (2004) 5 Hermans, Löfler, Stern (2008) Million PPP$, 2003 LOG SCALE 12

13 The United States has the highest total VC investments in biotech USA Germany (2004) Canada UK VC investments are more than 12 times as large in the United States than in the second-largest country target, Germany) Sweden France Denmark Netherlands Belgium Switzerrland Suggests that the US might continue to extend its dominance as a hub in biotech Norway 74 Finland 29 Italy Spain Austria Ireland Iceland Venture Capital ($million) Total venture capital investments in biotechnology, 2001 to 2003 combined, OECD biotechnology statistics (Van Beuzekom and Arundel 2006). Portugal LOG SCALE Hermans, Löfler, Stern (2008) 13

14 There has been increased activity outside the EU -- For the first time in 2001 the US lost to the EU in number of biomed companies European Union 3154 United States 2196 Japan (3,4) 804 France 755 Korea(2004) 640 Germany 607 Canada 490 United Kingdom 455 Australia 304 Spain (2004) 278 Denmark 267 Sweden 216 Italy (2004) 172 China 158 Switzerland 157 Israel (2002) 148 Finland (4) 123 Netherlands (5) 119 New Zealand 116 South Africa 106 Belgium (4) 73 Ireland (5) 41 Austria (5) 39 Norway (5) 32 Iceland 23 Portugal (5) 17 Poland (2004) LOG SCALE Number of biotechnology companies in distinct geographic areas (Van Beuzekom and Arundel 2006; OECD biotechnology statistics). Hermans, Löffler, Stern (2008) 14

15 However, while the average US Biotech has 33 employees/company, the EU has on average 10 employees/company 15

16 We have also seen a globalization of academic science, reflected in an increasing share of academic publications by non-us authors 16

17 Moreover, while US S&E doctoral production has stagnated while there have been sharp increases in production by east Asian countries 17

18 Although The US continues to be the dominant country of origin for total number of IP in biomedicine, the gap has slightly narrowed in the last decade Number of Patents USPTO Patents by inventor and country of origin USA EU Japan Number of Patents EPO patents by inventor and country of origin USA EU Japan Year Year Number of Patents USA EU Japan Triadic patent families (est.) Hermans, Löffler, Stern (2008) Year 18

19 Patents activity is clustered in a few countries 19

20 The gap between biotech R&D expenditures, patents and sales in the EU persists Relative Intensity of activity. Per capita R&D activity, patenting and sales of the biotechnology industry. OECD biotechnology patents and authors calculations (OECD, 2006, author s calculations, indexed to the US level (US = 1.0). Both R&D investment and patenting in the EU are approximately 40% of the US level yet sales per capita are nearly at 28% of the US level, reflecting the earlier stage of development of many European firms. In contrast, though Japan exhibit a slightly higher level of patent/capita than Europe and similar sales per capita 20

21 These country-specific empirics reinforced several of the themes Increasing global activity in biotech Global activity seems to be clustered rather than being a simple dispersion of activity, opening the opportunity for one of the more subtle dynamics of industry clusters: hubbing Reflects an attempt to compete head-to-head in the creation of knowledge Each region is relatively small and early stage The US still maintains a dominant position in Biotech at all levels The skewed distribution of financial investment suggests that the United States may be extending its historical dominance in the creation and evolution of global biotech. 21

22 In order to determine how to best compete in this new global landscape, it is important to address three key questions: What is unique about Biotech Innovations? What are the globalization trends in biotechnology? What are the opportunities and policy needs? 22

23 To reinstate the opportunity The US has a historic opportunity to establish a long-term position as a global hub in biotechnology. Specifically, the US has the opportunity to become a magnet for the emerging clusters dispersed in the world. A magnet for knowledge, innovation and commercialization. The centrality of the US as a biotech hub (particularly as a finance center) might offer a point of entry to influence the industry in a significant way However, progressive policies are needed to size this opportunity 23

24 In contrast to traditional debates about outsourcing, increased global activity complements rather than substitute US investment, employment and innovation Policymakers can facilitate a process by: Encouraging international research and collaborations Support the interactive exchanges of international students and researchers Support and international mobility of risk capital and investments The centrality of the US as a biotech hub (and as a finance center) might offer an easy(ier) point of entry to influence the industry s demographics in a significant way 24

Detailed Data from the 2010 OECD Survey on Public Procurement

ANNEX G Detailed Data from the 2010 OECD Survey on Public Procurement This annex provides data for each responding country on the transparency of the public procurement cycle, as well as the online availability