Introduction

The biotechnology sector was born about thirty-five years ago when – in tandem with a landmark court decision – technology zealots, entrepreneurs, and investors alike set out to utilize novel scientific discoveries around genetic engineering to create a business that would improve healthcare and agriculture in ways that before could only be imagined. At the time, biotechnology (strictly speaking) encompassed the use of genetic engineering techniques to create unique cells that could produce novel or naturally occurring proteins in large quantities that could be used for therapeutic or agricultural benefit. The hope was that using this technology to modify the genetic material of a living cell, pest-resistant plant cells, and human cell factories producing large quantities of proteins with therapeutic potential could be created. As one looks back over this time period, the entrepreneurs and scientists were undoubtedly right; biotechnology has had a tremendous impact on healthcare around the globe. Nevertheless, this young sector has endured many hurdles along the way. This chapter focuses primarily on the therapeutic segment of the biotechnology sector. It examines the major forces as they have evolved that continue to affect and drive the sector including innovation, the pharmaceutical sector, financing, globalization, and the regulatory and policy environment in which it must operate.

The perspective of time is important in analyzing the biotechnology sector. Since the product development cycle in drug development is about fifteen years from discovery through commercialization, the sector is still in its infancy, and even its earliest entrants have just passed through two cycles. Given this framework, sector observers who remain disappointed in its output and impact may not have been realistic about what the sector could deliver in such a short period of time. During the founding of the first companies, expectations of financial return and product output were irrationally high, and many claim the sector has not met those expectations. Several years ago a Wall Street Journal article highlighted biotechnology’s $40 billion cumulative losses and compared the sector to “the ultimate roulette game.” Today, many investors continue to agree as evidenced by the closed public markets to any new biotechnology offerings. On the other hand, taking a longer term and perhaps more realistic perspective on this young sector, thousands of companies globally have initiated projects, secured government support, and obtained private financing; some have produced effective and safe drugs.