The US is far and away the leader in the bioscience industry for now, but under-investment by government and hesitation by Venture Capital industry may allow other countries to take the lead over the long term.
In terms of statistics, America stands heads and shoulders above the competition:
- Receives one-third of new technology patents, 39% biotech patents
- Spends 40% of global R&D
- Has 70% of Nobel Laureates
- 49% of all literature citations
- 66% of most cited individuals
- 75% world’s top 20 universities
- Attract gifted scientists from around the world
These bode well since knowledge is a key driver in US economy- innovation accounting for up to 80% of economic growth. But in recent years, the US appears to be slowly losing its grip on its status as a science and technology superpower.
Beginning in 1990s, scientific publications by the 200 top R&D firms have declined; this has been accompanied by a slowdown in publications by the nations public universities. NIH funding, which provides the bulk of basic research grants, has decreased in real terms since 2004. Beginning in 2007, US biotechnology patent applications began to slow.
These problems have been compounded by recent strategic shifts in the private sector. It has been well established that pharmaceutical companies have long relinquished basic and early stage research to academic and biotech labs. But one of the key attributes of our bioscience ecosystem is the Venture Capital industry. Also considered risk capital, VC funds allocate the greatest proportion of investments in series A and series B financings, with small amounts dedicated to seed stage companies.
As the economic climate has deteriorated and returns have turned negative, VC funds have pulled back from early stage investing and almost completely abandoned seed stage funding. This dearth of financing for early stage companies has made it increasingly difficult for bioscience entrepreneurs to develop projects from concept to reality.
In the near term, our combination of rich educational resources, strong entrepreneurship, world-leading capital markets for biotechs (NASDAQ in particular), and history of VC participation in growing startups, will continue to favor the US. No single country or region is likely to usurp the US anytime soon. But with continued decline in funding for basic research and decline in VC appetite for funding early state startups, a trend of US leadership diffusing across Europe and Asia is has already begun.
With their bureaucracy and cautious governments, neither Europe nor Japan is likely to contend for heir to US supremacy. If there is a single country with even the remote capability to challenge America, it is China.
As the world’s second largest economy and with the largest population, it has plenty of weight to throw around. Increasing incomes and government planning have Improved access to medications and fueled the growth of country’s drug market to about $90 billion, just behind Japan for third place, and continues to grow at a rapid clip of between 20 to 25% per annum.
China is aiming to be a major player in biosciences. Its large pharmaceutical market and growth potential has attracted billions of dollars in investment from top pharma companies. Large pharmas are not only setting up manufacturing facilities, they are also designing state-of-the-art research centers to tap into China’s reservoir of scientific talent.
Only a decade ago, China barely registered as a place of scientific innovation. Now, as reported in the journal Nature, the country has become the second most prolific publisher of scientific papers and registered fifth in number of patents filed. True, quantity is not a measure of quality, and the impact factor of its papers and the low percentage of patents actually granted bears that out. Yet it shows China is certainly moving in the right direction, and quickly.
In areas such as genome sequencing and proteomics, two Chinese organizations, BGI and HUPO, have each taken respective leadership positions. Once a place for makers of active drug ingredients (APIs) and low quality generics, China is now home to full service contract research organizations (CROs) and hundreds of modern biotechs.
In a sign of the Chinese bioscience industry’s growth potential, VC investment in the biosciences in 2009 was greater than any other field, including for the first time, IT- according to GBI Source. The industry is still highly fragmented, with experienced executives difficult to find. But with nudging from the government, businesses are consolidating, creating more efficient and competitive companies.
The quality of China’s science and industrial output are continuing to improve. A combination of government support, foreign and domestic investments, and entrepreneurial spirit are helping to propel China into a major center for bioscience research and development. The brain drain the once sent the nation’s top talent overseas appears to have stopped, and perhaps even reversed, as scientists seek greater opportunity in a return to their homeland.
Just a final word; China’s rise as a scientific power should not be seen as a threat to the US, but a challenge. While a vast majority of Americans believe science and technology leadership is important for our country, the country’s general understanding of the sciences is outright pathetic. If we are to retain our status as the leader in bioscience innovation, we need to act now.
My appreciation to Mr. Reza Firouzbakht of Accenture for his thoughtful input.
Disclosure: No Positions