Will We Lose in the Stem Cell Race?

By Joseph Fuller and Brock Reeve
Saturday, February 3, 2007

Americans take it for granted that they are the world's leaders in the life sciences. And it's true that, today, American companies account for 60 percent of global pharmaceutical sales and 75 percent of biotech sales, and that they dominate the market for medical devices. But complacency is a powerful enemy; our leadership position is not a national birthright. We could fumble it just as we fumbled leadership in the consumer electronics and automotive sectors.

In science and technology-intensive fields, fumbling is particularly easy. Less than 30 years ago, five of the world's top 10 pharmaceutical companies, including the two largest, were European. Between 1980 and 1984, Europe invented more than half of the world's new drugs. Observers assumed that Europe would lead the anticipated revolution in biotechnology.

Today, however, American companies account for more than three-quarters of worldwide biotech revenue and have almost 4,500 products in development -- 2 1/2 times as many as European companies.

How did we turn the tables?

· Government actions and court decisions allowed the patenting of living organisms and made it possible for private researchers to commercialize discoveries funded by federal grants. Further, Stanford University, which controlled key patents, ensured their widespread and rapid adoption.

· In Europe, the countries of the European Union had independent regulators until the 1990s. The patentability of living organisms remained uncertain until 1998. And state-funded academic institutions had little incentive to encourage academics to pursue commercially oriented research.

· Between 1985 and 1995 the U.S. government invested more than $50 billion in the biological sciences. Federal spending during that period dwarfed the amount spent in Europe and encouraged private-sector investment.

· With the availability of affordable, fundamental patents and a supportive public policy environment, between 1987 and 1997 investors bet some $6 billion of risk capital on the fledging sector in the United States, roughly five times as much as their European counterparts.

Can we repeat that success in new areas of science, such as stem cell research? Many Americans assume that once the current restrictions on federal funding of embryonic stem cell research have been lifted, America will surge to the forefront. A quick glance at the field seems to bear that out. The fundamental patents underlying embryonic stem cell research were developed in the United States and are held by the Wisconsin Alumni Research Foundation (WARF). Many leading scientists are based in this country. With private philanthropy supporting institutions such as the Harvard Stem Cell Institute, and public money in states including California, New Jersey, Connecticut and Maryland supporting research, history seems poised to repeat itself.

But closer examination suggests that such confidence might be misplaced. If one analyzes the state of the industry along some of the same critical dimensions that contributed to our come-from-behind win in biotechnology, unnerving patterns emerge.

· While Stanford granted 73 nonexclusive licenses in less than a year, WARF has awarded just 13 licenses in eight years under economic terms that many believe have slowed the sector's growth.

· The ongoing political debate over the appropriate use of embryonic stem cells and the low level of government support have denied stem cell research the catalyst provided to biotechnology -- even as other countries are investing aggressively.

· The entry of individual states into the breach left by the federal government has helped drive research activity. But it has also created a patchwork of regulations and funding levels that constrains research collaboration.

· Expensive and restrictive enabling patents, political controversy and the absence of federal research money, coupled with a long time to market, have made venture capitalists reluctant to invest. In 2005, just over $100 million in venture capital went to stem cell ventures, compared with $500 million in biotech ventures at an equivalent stage.

· Constraining federal research support to a selected area -- such as certain cell types and lines -- is not a sensible research policy. Advances with stem cells from amniotic fluid and the pulp of baby teeth have been in the news recently, but as the authors of those studies point out, such cells, while promising, cannot take the place of embryonic cells. These restrictions divert valuable time and effort in a way that is not occurring in Britain or Singapore.

In short, the stem cell sector is at risk of experiencing a failure to launch at the national level. Yes, some progress is being made: WARF has just revised some of its licensing policies; venture capital activity has picked up recently; and academic research and clinical centers, disease foundations and patient-advocacy groups are adopting a more aggressive stance in breaking down existing barriers. But will this be enough? Or will foreign governments, using America's biotech success as a model, systematically encourage the development of stem cell research and, not satisfied with emulating our competitive performance, succeed in outstripping us?

Joseph Fuller is a founder of the Monitor Group. Brock Reeve is executive director of the Harvard Stem Cell Institute.

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