Has the Biotech Bubble Really Burst?
by C.G. Masi, Technology Journalist
Bill Haseltine, CEO of Human Genome Sciences, in his keynote address
to the World Genomics Symposium in Atlantic City, N.J. on 19 September
2002 pointed out: "The general perception is that the promises
of genomics have largely been much greater than reality."
In line with that perception, we have seen a rash of biotech company
failures, project cancellations, and other signs that biotechnology
is no longer the greatest thing since sliced bread. For example,
on the same day Haseltine was delivering his speech, Syngenta decided
to abandon their four-year-old research partnership with the John
Innes Centre, which was intended to jointly develop new tools and
techniques for crop research. Syngenta was part of AstraZeneca,
which merged with Novartis in 2000. The research partnership was
characterized by a Centre spokesperson as "a new and innovative
way to try to encourage the takeup of scientific discoveries coming
out of the public sector by commercial organizations." The
public sector in this case being the John Innes Centre and the commercial
organization being Syngenta. The reason given for the pullout was
to "eliminate the overlap of expertise and resources."
A few days later six-year-old biotech startup Xanthon turned out
the lights and shut their doors forever. They had spent that six
years trying to roll out their nucleic-acid-identification technology.
It worked well enough in the lab, but they were never able to scale
it up to mass production. As one of their initial investors said:
"When you tweak one end of the product, it hits everything
else, and you have to tweak everything else. They could never get
it to work out."
For the past few months, the news wires have been buzzing with
these sorts of sad tidings. It's not the kind of news one expects
about a technology that has been the darling of the venture capital
community. Financial analyst Charles Duncan told of an incident
not many years ago, when he heard an investor bark into his cellphone:
"I don't care what they do. If they're genomics and they're
in production, buy them."
But, is this dark mood a reasonable assessment of the facts? At
the same time Xanthon was shuttering its facility, other companies
were announcing research successes and new venture capital investments.
The same day reports appeared saying "... young biotech companies
in India are finding it exceedingly difficult to secure enough venture
capital ...," a leading US-India venture capital firm, WestBridge
Capital Partners, put up $4.6 million in first-round financing for
Bangalore-based life sciences informatics company Strand Genomics.
While Hazeltine was describing the general sentiment of disappointment
with biotech results, biopharmaceutical developer CombinatoRx raised
$40 million in second-round financing; and genetic-analysis tool
developer Illumina signed a collaborative agreement with pharmaceutical
There seems to be a cognitive disconnect going on: a mood of disappointment
appears amidst encouraging news.
Several factors have come together to create this cognitive disconnect.
Perhaps one of the most significant is overblown expectations. Hazeltine,
who does not share the disappointed sentiment he reported, lays
part of the blame at the feet of the leaders of the Human Genome
Project. The fanfare surrounding the human genome map was so intense
that nobody seemed to notice how little it meant by itself. "It
would be like saying that we had gotten to the moon," he analogizes,
"when we were only 20% of the way there."
Another factor is the result of faltering economies throughout
the world. The so-called biotech "bubble" expanded during
an extended period of economic expansion. In fact, the expansion
of most high-tech endeavors (e.g., telecommunications, dot-coms)
made biotech look almost dowdy by comparison. Just as all the other
excesses that crept in during the boom time came back to bite us,
it's no surprise that overblown biotech enthusiasm turned to ennui
and even angst.
When investors all over the world are sitting on their cash, it's
no wonder that biotech companies have a harder time getting funds.
It's amazing that they attract any investment at all!
When giddiness fades, suddenly clear-eyed investors start thinking
about cutting their losses. Firms that show no results tend to become
history really fast.
Despite the words of gloom, biotech development has been anything
but a bust. As Haseltine, pointed out later in his keynote address,
genomics has already started to deliver exactly what was promised-new
drugs. To those of us who understood what a hill biotech had undertaken
to climb, the results so far aren't disappointing. They, in fact,
have been phenomenal!
We have seen this scene play out many times in the past. In the
early 1980s, for example, machine vision technology was supposed
to revolutionize the way we did so many things. Wizened human inspectors
with magnifying headgear were supposed to give way to sharp-eyed
computers who never got tired. Robots would wander around unassisted
without ever getting lost. Visually precocious vehicles would navigate
around moving obstacles, making crashes a thing of the past. Instead,
what we got was a sour taste when none of these miracles seemed
to make it out of the lab.
Yet, machine vision has not failed its promise. It turned out to
be one of those impossible things that the Seabees said would "take
a little longer."
Machine vision was a whole lot harder to master than anyone in
1980 expected. Twenty years later-instead of the two or three that
we imagined-machine vision systems are starting to fulfill their
promise of giving eyes to all sorts of automatic systems.
Similarly, the journey from a human-genome map to the wonderful
world of designer pharmaceuticals is longer than we were told. We
were told that the map was the whole thousand-mile journey, whereas
it was really only the first single step.
Those who believed the hype have been disappointed. Those who knew
better have not.
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