STEEP Discussion Paper No 28

The Science of Nations: European Multinationals and American Biotechnology

Margaret Sharp

February 1996

Science Policy Research UnitMantell BuildingUniversity of SussexBrightonEast Sussex BN1 9RF

Tel: +44 (0)1273 686758Fax: +44 (0)1273 685865http://www.sussex.ac.uk/spru

© Margaret Sharp 1996

ACKNOWLEDGEMENTS

This study was undertaken as part of the STEEP (Science, Technology, Energy and Environment Policy) Research Programme funded by the ESRC at the Science Policy Research Unit. The author would also like to thank three of her research students, Ilaria Galimberti, Paul Martin and Alina Rizzoni, who have all contributed in different ways to its production.

This paper was presented at a meeting of the Foundation for Manufacturing and Industry at the Institute of Civil Engineers, 8 November 1995. It draws upon a longer paper submitted to the International Journal of Technology Management which will be published late in 1996.

Contents

Page

Summary

1 Introduction 1

2 The Emergence and Impact of Biotechnology 22.1 The emergence of biotechnology 22.2 The small dedicated biotechnology firm 32.3 The European chemical/pharmaceutical industry 7

3 Large Firm Strategy in the Assimilation of Biotechnology 103.1 The first decade - establishing a window on the technology 103.2 The Mid-1980s - major investments 123.3 The early 1990s - towards commercialisation 13

4 Alliances, Linkages and Technology Transfer 174.1 Corporate alliances 184.2 Mergers, acquisitions and overseas laboratories in the US 214.3 Academic links 22

5 Conclusions - Who's Gaining What? 24

References

Annex AAnnex B

Figures1: The Founding of American DBFs 1971-91 62: Industrial Focus of American DBFs 6

Tables1: The World's Largest Chemical/Pharmaceutical Companies Ranked

by Sales 82: Top Ten Biotechnology Drugs on the Market 163: Alliances and Joint Ventures Between US DBFs and Leading

European Multinationals 184: Alliances Concluded by 72 of America's Leading DBFs up to

end 1993 205a: US DBFs Involved in Biotechnology Alliances 1982-91 205b: Biotechnology Alliances 1992-94 206: Linkages Between US-based Facilities of European and Japanese

Companies Involved in Biotechnology Research 237: Collaboration Through Publication - Company Profiles 24

Summary

This paper examines how Europe's large chemical/pharmaceutical multinationals have developed their interests and capabilities in biotechnology and in particular the degree to which, in the process, they have become increasingly linked into the US science base. It looks at both direct linkages via subsidiary laboratories located on US soil and at indirect linkages via the small, dedicated biotechnology companies. It concludes that, although the picture is mixed, many of these major European firms are now deeply embedded by these two routes into the American science base. However, far from this being 'exploitation', the US in most respects is the gainer, for these linkages are creating high value added jobs for Americans on American soil. For Europe, the key issue is how far these firms are internally transferring the technology back to home-based laboratories. Unless this is happening, Europe risks the cumulative loss of leading edge capabilities.

1

1 INTRODUCTION

In his book The Work of Nations (1991) Robert Reich suggests that the United States should

worry less about who owned the companies operating in America and concentrate instead on

the creation of the high value added jobs. This paper documents precisely such a situation -

it describes how European multinationals are penetrating and exploiting American

capabilities in biotechnology, creating high value-added jobs both directly by the

establishment of satellite laboratories and indirectly through the web of strategic alliances

and research contracting they have woven for themselves. There are those who worry that in

this process foreign (and especially Japanese) multinationals are taking an unfair free ride on

American scientific expertise. This paper suggests that it is European rather than Japanese

companies who are the main beneficiaries of any such 'free ride'. The technology transfer

implications are not as clear-cut as might at first sight appear to be the case. As Reich

suggested, to assess the benefit, it is important to focus on the potential for wealth creation.

Let us look at this issue in more detail. The large European-based multinationals in

chemicals and pharmaceuticals, in pursuit of the necessary knowledge and skills in

biotechnology, have through arrangements of one sort or another widely penetrated the

American knowledge base. On the face of it this wide penetration would seem to imply a

massive 'technology transfer' from the US to Europe. In practice, since most of the

European-based firms have used the small US biotechnology firms and/or their satellite

laboratories in the US to effect the transfer (and frequently also to develop their further R&D

and production interests in biotechnology), the transfer is not from the US in a geographical

sense, and frequently not in an ownership sense, since the intellectual property remains in the

US. Nevertheless, the European-owned company will reap much of the profit for its

willingness to exploit it.

The key policy issue for Europe is not therefore the traditional one of a technology gap

which adversely affects the competitiveness of indigenous companies - the companies

2

themselves have found a means of short circuiting that gap - but of the long run erosion of

skills, capabilities and income potential in Europe itself. The view taken in this paper is that

this loss of skills and capabilities in an area as important as biotechnology could pose a

serious threat to Europe's ability in the longer run to attract the high value added jobs on

which living standards will depend. The issue hinges on how far there is internal technology

transfer within the multinationals, a subject about which for the present we know too little.

The paper is arranged as follows. The next section (I) discusses the emergence of

biotechnology and its context within the chemical/pharmaceutical industry; section II

discusses firms' strategies and tactics towards this new technology; section III looks in detail

at the technology transfer issues and section IV explores the policy conclusions.

2 THE EMERGENCE AND IMPACT OF BIOTECHNOLOGY

2.1 The emergence of biotechnology

Biotechnology by its broadest definition is 'the application of biological organisms, systems

and processes to manufacturing or service industries' (ACARD 1980). In this sense

biotechnology has been around since the New Stone Age when humankind first learnt the art

of cross-breeding plants and animals and of using yeast to leaven bread and ferment alcohol.

For many centuries broad empiricism sufficed as technology, but by the beginning of the

twentieth century this was replaced by a more systematic attempt to screen and categorise the

role and variety of micro-organisms existing in the natural environment and to exploit those

that had useful application - penicillin being a prime example. This was the so-called 'second

generation of biotechnology' and great hopes were pinned on what might be achieved in areas

such as enzyme chemistry, hopes which proved illusory.

The new or 'third generation' biotechnology dates from the early 1970s when two

breakthroughs in molecular biology - the discovery of a mechanism by which part of a

3

foreign gene could be inserted into another and thereby change its characteristics

(recombinant DNA) and techniques for fusing and multiplying cells (hybridomas) - heralded

the coming of genetic engineering. The applications of these radical new techniques were

rapidly appreciated. They have led to the emergence of a whole new generation of protein

drugs based on naturally occurring proteins in the body's immune system which are currently

being launched on world markets. In the pipeline are further 'generations' of new products

and beyond this developments in gene therapy and genome mapping open the way a

wholesale revolution in medical technology.

Applications for biotechnology outside the pharmaceutical industry also rapidly became

apparent. In agriculture, genetic engineering had application to both animal husbandry and

plants but it has also raised difficult ethical issues. In plants it has led to the rapid

development of hybrid plant species incorporating such desirable characteristics as resistance

to frost or drought, fungi, pests - even resistance to particular types of herbicide. But there

has also been concern that such products could lead to dangerous mutant species of plants

and authorities have moved slowly in allowing experiments. Only in the last year or so have

experiments really been allowed to proceed. As a result few new products have yet been

launched in this area.

2.2 The small dedicated biotechnology firm

The small dedicated biotechnology firm (DBF) has been a particular phenomenon of the

United States, where the combination of a ready venture capital market, more lenient stock

exchange rules and, above all, leading edge research in the life-sciences generously funded

from the federal purse,1 led to the serendipitous burgeoning of a large number of small

1 Spending on the life sciences in the US in 1987 amounted to 48 per cent of all publicly funded expenditures on academic and academically related research. This compares with proportions ranging from 30 to 35 per cent in Europe and Japan. See Irvine, Martin and Isard. (1991). This reflected the war against cancer launched originally by President Nixon in the 1970s. When private charitable funds are added, the total weight of funding going towards the life sciences in the US is generally perceived to have been one of the main reasons why that country has maintained an intellectual lead in biotechnology.

4

entrepreneurial firms to exploit that research. Companies such as Genentech, Cetus and

Biogen were established in the 1970s but were followed by many others at the turn of the

decade with the total population of small dedicated biotechnology firms (DBFs) growing

from 50 in 1978 to approximately 500 by 1984 and 700 by 1987 after which the population

has remained relatively stable.2 Many were spin-offs from academic laboratories, offering

researchers both first class facilities in which to pursue their scientific interests and a chance,

through stock options, to make themselves considerable wealth when the firm went public

and launched its shares on the stock exchange.

The DBFs were, however, more than just a convenient route to research. If they were to

flourish they needed markets for their research and it was the large companies which

provided the market. Companies such as Dow, Du Pont, Shell, Eli Lilley and Hoffman

LaRoche were amongst the earliest to place contracts with these small firms, many for as

little as $1m or $2m which was but a small amount for the large companies but vital for the

finances and credibility of the small. In this essentially contract research role the DBFs

performed two very useful functions. Firstly, they acted as intermediaries between the large

companies and the academic base. Because of close academic links they were able quickly to

put together the cross-disciplinary teams required to develop new products in this new

technology, whereas the big firms, with their traditional contacts in chemistry not biology

departments, found it difficult to find the right people (Kenney, 1986). Secondly, they

enabled the large companies to hedge their bets. Research contracts for $1m, $2m even $5m

were limited commitments which might yield substantial prizes but, at a minimum, would

provide the contractor (ie, the large company) with useful research results and avoid long

term and expensive employment commitments at a time when it was still uncertain where

biotechnology was going.

2Dibner (1991) lists 742 DBFs as existing in 1991. Within this stable population there are many births and deaths. What is interesting is that, for the population to remain stable, there have to be as many births as deaths. The earlier figures in the text are derived from OTA (1988).

5

Many, including the present author (Sharp, 1985a; Orsenigo, 1989), predicted that once the

major companies began to make big investments in biotechnology and establish in-house

competence the small companies would disappear, either as a result of takeover by one of the

big companies or through attrition. The regulated nature of biotechnology markets meant

long and expensive trials and tests before products could be launched on the market. Add to

this patent uncertainties and the possibility of major litigation to defend patents and the

balance of advantage was with the big, well established companies. As biotechnology

matured so, it was argued, the small company would be squeezed out by the big.

Contrary to these predictions, the small biotechnology firm has survived and flourished.

There have been many buy-outs and takeovers, but as Figure 1 illustrates, as firms have died,

so others have been born and the total population of DBFs in the United States has remained

remarkably stable since the mid-1980s (OTA, 1991, Chapter 4). The areas of primary focus

of these firms are described in Figure 2. As might be expected, human healthcare takes the

lead, followed by agriculture, plant biotechnology and chemicals. Differences with 1988

indicate if anything increasing focus on therapeutics (Dibner, 1991).

In Europe the DBF has not flourished in the same way, partly because the institutional

framework (high funding/leading edge research in the life sciences, active venture capital

market) did not exist, partly because the academic entrepreneur was alien to much of the

European academic tradition. Earlier studies (Coleman 1987; Clark and Walton 1992)

suggest that the total population of small firms in Europe was small and grew only slowly.

However, recent research suggests that the early 1990s was a period of rapid change for this

sector in Europe and there is now a core of some [250] DBFs (Rizzoni 1995 unpublished

research). Nevertheless, many are still much smaller than their US counterparts and it seems

that few are working at the frontiers of research.

6

Figure 1 The Founding of American DBFs 1971-91

Source: Ernst & Young (1994)

Figure 2 Industrial Focus of American DBFs

Source: Dibner, 1991

7

There are two explanations as to why, contrary to prediction, the DBF sector has remained so

buoyant. One is that the science base underpinning this technology continues to move fast

(witness, for example, the explosion of research in the last few years that has resulted from

progress in genome mapping). The DBF, with its privileged links into the science base,

continues to perform a vital intermediary function of technology transfer between academia

and industry. But this suggests also that, once the pace of scientific advance slows, the small

firm will gradually disappear. The other explanation is that the DBF typifies the new type of

networked organisation, already familiar to information technology, but now emerging in the

chemical and pharmaceutical industries. Its advocates argue that the small firm retains a

flexibility and innovativeness which larger firms find difficult to emulate (Piore & Sabel

(1985); Bressand (1981)). While the large conglomerate chemical/pharmaceutical firm

certainly retains some advantages (Sharp and Galimberti 1993), the increasing number of

linkages between large firms and DBFs suggests relationships may be changing.

2.3 The European chemical/pharmaceutical industry

The modern chemical industry is a large, heterogeneous industry whose boundaries, at their

broadest, are set by technology - the understanding and manipulation of molecules. It

comprises, at one extreme, the low value added, bulk chemicals and, at the other, speciality

products such as dyes and paints, food additives and photographic supplies, and the

production of highly sophisticated chemicals used as ingredients for pharmaceuticals,

requiring many manufacturing steps and selling for thousands of dollars a gramme.

The industry is marked by a strong innovative tradition in which the in-house R&D

department has provided a strong dynamic force within the organisation, acting in effect as a

nucleus which, via its external links into the research base, has provided a constant source of

regeneration and renewal. This innovative tradition helps to explain both the presence and

the longevity of the large conglomerate chemical company (conglomerate in the sense of

spanning many sectors within the industry). Table 3 lists the leading firms in the industry.

8

Two factors are worth noting from this table. First the dominance of European names.

Secondly, that many of these are names that dominated the industry in the 1920s and 1930s.

Equally, it is also interesting to that the new entrants to the 'big league' are companies such as

Sandoz, Roche and Merck whose strength lies in pharmaceuticals and fine chemicals. Those

who have lost position during the 1980s are companies whose fortunes were based on

processing bulk chemicals and especially petro-chemicals.

Table 1 The World's Largest Chemical/Pharmaceutical Companies Ranked by Sales

1985 1993

Rank Company Sales** Company Sales

($bn) ($bn) 1 BASF (E) 18.15 Hoechst (E) 27.84 2 Bayer (E) 17.79 BASF (E) 26.14 3 Hoechst (E) 16.55 Bayer (E) 24.85 4 ICI (E) 15.50 ICI *(E) 22.63 5 Du Pont (US[) 15.04 Du Pont** (US) 15.60 6 Dow Chemical (US)** 11.54 Ciba-Geigy (E) 15.32 7 Shell (E)** 9.18 Rhône-Poulenc (E) 14.23 8 Union Carbide (US) 9.00 Dow Chemical US) 12.52 9 Ciba-Geigy (E) 8.85 Bristol Myers US) 11.4110 DSM (E) 8.76 Merck (US) 10.5011 Montedison (E) 8.49 Sandoz (E) 10.2112 Rhone-Poulenc (E) 7.48 Exxon** (US) 10.0213 Monsanto (US) 6.75 Mitsubishi Chem (J) 9.9814 Exxon (US) 6.67 Roche (E) 9.6815 Akzo (E) 6.54 Shell** (E) 9.30

* Figures include Zeneca's sales ** Chemical sales onlyE = European-based; US = US-based; J = Japanese-based

Source: Bio/Technology, July 1993, p801 for 1985; Fortune 500 (27.7:94) for 1993.

Under severe competitive pressure, the industry has moved in two directions. First, there has

been major restructuring and rationalisation, achieved by a mixture of closure, merger and

acquisition, which has led to a substantial 'reshuffling' of assets amongst firms and increasing

concentration of activities. The low value added upstream bulk chemical activities in particular

9

have become more concentrated, often in the hands of the oil and gas company entrants, while

the older chemical companies have tended to concentrate on the higher value added research-

intensive activities.

Amongst such activities, pharmaceuticals and agro-chemicals sectors offered obvious

attractions. Companies such as Bayer, Ciba Geigy and ICI had long had a presence in these

markets and it was for them a matter of switching emphasis. Both markets are highly

oligopolistic with intense competition within each market segment. R&D is the crux of this

competition as companies vie with each other to introduce new products. But R&D also

underpins a firm's ability to move rapidly into a competitor's market and to meet health and

safety regulations and since the 1960s, when health and safety regulations were first

introduced, R&D as a proportion of turnover had steadily increased.. In pharmaceuticals, for

example, by 1992 R&D averaged 16 per cent of net output, with, typically, it taking 12 years

to bring a new drug to market at a cost of up to $240m.3 At the same time, the rising cost of

drugs to the public expenditure budgets (and also agricultural support) led to substantial

cutbacks in spending with knock on effects to prices and profitability in both the

pharmaceutical and agro-chemical sectors.

The large conglomerate chemical/pharmaceutical firms of Europe have therefore found

themselves in a double bind. Profitability was being squeezed at both ends - in their

traditional bulk products markets and in the higher value added sectors where R&D

requirements were growing out of proportion to revenues. Yet to hold their own in this latter

market they desperately need to innovate and introduce new products. In this context,

biotechnology had obvious attractions. It offers a whole new range of products and a

potentially rich 'vein' of exploration for the discovery of new products and processes. The

industry could not afford to ignore it.

3Only one in every 10,000 new chemical entities (NCE) screened for therapeutic properties makes it to the market. This $240 million is the average cost of each new NCE which makes it to market, including failures, and using present value accounting to allow for the time profile of costs incurred over the 10 year period of R&D, clinical trials etc. (Di Masi et al, 1991).

10

3 LARGE FIRM STRATEGY IN THE ASSIMILATION OF BIOTECHNOLOGY

For these large traditional conglomerates of the chemical /pharmaceutical industry, there

have been three main phases of development in the new biotechnology.

3.1 The first decade - establishing a window on the technology4

None of the large traditional chemical/pharmaceutical companies played much part in the

first decade of 'the new biotechnology'. Most of the companies were uncertain what to make

of the new technology and especially of the hype surrounding its development that grew with

the small firm sector in the US. Some had experience of fermentation technology through

the production of biological pharmaceuticals such as penicillin, or with the use of enzymes

and the techniques associated with immobilisation of enzymes that had been developed

during the 1960s. The latter, however, had tended to be the preserve of medium-sized

specialist companies such as Gist Brocades (Netherlands now owned by Shell) or Novo

(Denmark) rather than the large firms. A number of the larger companies had also dabbled

in single cell protein, including Shell, BP, Hoechst and ICI, but only ICI had pursued its

interests through to the market place with its ill-fated animal feed supplement, Pruteen.

While the experience had been valuable in giving ICI hands-on experience of large scale

continuous fermentation technology, its main legacy was in fact to make the company

extremely cautious about further commitments to biotechnology.

This combination of uncertainty, scepticism and inexperience led to what might be called a

minimalist strategy on the part of most large firms. While avoiding large investments most

of the companies built up teams of researchers large enough to keep abreast of the science

4The information in this section is culled from an earlier study by one of the authors on the development of biotechnology in Europe up to 1985. See Sharp (1985a). It is supplemented by case studies of how five of Europe's large integrated chemical/pharmaceutical - ICI, Bayer, Ciba Geigy, Montedison - have accommodated to the emergence of biotechnology in the last 15 years. See Sharp and Galimberti (1993).

11

and to monitor developments and competitors.5 Thus Bayer, ICI and Ciba Geigy all

established small research teams in their corporate R&D laboratories with a fairly free rein to

explore ideas as they wished.(Sharp and Galimberti 1993) Other companies, for example

BASF, left even these moves until the early 1980s, having only minor interest in

pharmaceuticals and being very uncertain whether biotechnology would have any relevance

to their main interests in areas such as plastics and fibres. (Sharp 1985a)

One consequence of this strategy of 'watching and waiting' (Sharp 1985b). Was that it

conceded leadership in the development of the new technology to the small companies which

were so closely linked into the academic base. In this phase of development relatively few of

the major European chemical firms were to be found as partners to the DBFs, although some,

such as Ciba Geigy and Hoffman LaRoche, acknowledging that the US science base in this

area was much stronger than that available in Germany or Switzerland, threw tradition to the

winds and placed research contracts with a number of DBFs.6 Hoechst, in placing a $67m,

10 year contract in 1981 with the Massachusetts General Hospital (MGH), also linked itself

directly to the US academic base and made arrangements for its researchers to be trained at

the MGH, thereby implicitly acknowledging the limitations of its indigenous science base.

Other companies, among them Glaxo, Wellcome and Bayer, chose instead to expand their

own research base into the US, setting up laboratories which were able to link directly into

the US research base.7

3.2 The mid-1980s - major investments

5The exception was the US company Monsanto which in 1978 had appointed a biochemist as research director who championed early and major investments in biotechnology. (See Joly, 1992.)6American and Japanese chemical and pharmaceutical companies were more prominent as partners in the early part of the 1980s. See OTA (1984) which (wrongly) predicted that the main competitive challenge to the US in biotechnology would come from Japan.7Burroughs Wellcome had established a research laboratory in Research Triangle Park, North Carolina in the late 1970s and used this as a launch pad for its links with the US academic base. Glaxo followed suit in 1983, establishing new research laboratories which were opened in 1986 at Research Triangle Park. Bayer expanded its operations on the site of the Miles Laboratories at West Haven, Conn, having taken over Miles in 1979. (Sharp 1985 a.)

12

By the mid-1980s the period of watching and waiting was over. Most of these large

companies recognised that, whatever their original reservations, biotechnology had

established itself as an important enabling technology (ie, a route to new product

development) and would be essential for future product innovation.

The strategies chosen by the large companies varied from company to company. All were

concerned to build up in-house competence. Some chose to do this internally, using existing

and new linkages into academic science; others bought in competence through the acquisition

of new biotechnology firms or through merger (and a subsequent reshuffling of assets) with

American counterparts; yet others chose to retain external linkages with American and/or

European DBFs. (See below, Section III, for more discussion of this phenomenon.) All

involved investments of $100m or more a year, building up internal teams of up to 700

researchers.8 Initially many of these researchers were grouped together in special

Biotechnology Divisions but as time went by these were disbanded and the biologists and

biotechnologists within them disbursed among project based multi-disciplinary teams.9 The

investments in new plant and capacity brought the regulatory issues to the forefront for the

first time. Most companies were prepared to accept the strict containment principles laid

down by OECD guidelines of best (laboratory) practice (OECD, 1987) but the problems

encountered by the Hoechst in trying to bring their genetically engineered insulin plant on

stream in Frankfurt in 1987 and the discussion of a five year moratorium on genetic research

in West Germany raised fears about the future.10

Given the need to build up in-house competencies, the pressure from companies on

government at this time centred on improving the indigenous science base and on issues of

linkage into the science base. Companies were anxious to see governments put increased

8This was the number of researchers reckoned by Bayer to be engaged in biotechnology at the peak of its activities. See Sharp and Galimberti (1993).9The timing of these moves and the way in which it was handled varied from company to company. Ciba Geigy, for example, made such moves fairly early; by contrast the Italian firm Carlo Erba/Farmitalia left the moves until much later and remarked on the difficulty of penetrating the 'chemical' traditions of the pharmacologists until this had happened. See Galimberti (1993).10For a full discussion of the regulatory problems encountered in West Germany, see Shackley (1993).

13

funding into the life sciences, to see the old discipline-based (botany, zoology, etc)

departments replaced by broader departments focusing more broadly on the biological

sciences, and to see syllabuses within departments brought up to date to reflect modern

developments in molecular biology and molecular genetics. These concerns reflected

difficulties the companies faced in recruiting staff for new biotechnology laboratories.

Sanofi, for example, when it opened its Labège laboratory in Toulouse, recruited half its staff

from overseas (Sharp, 1985a) and even Ciba Geigy had difficulty recruiting for its Basel

laboratory (Galimberti, 1993).

Governments, for their part, were anxious, insofar as funding was increased, to see it linked

to technology transfer schemes which would ensure that companies used academic research,

and that the research was 'relevant' to industrial needs. Hence the various Science &

Engineering Research Council (SERC) schemes in Britain, the CRITT (Regional centres for

Innovation and Technology Transfer) in France and the German Governments Biotechnology

Centres, all aimed at establishing university/industry linkage.

3.3 The early 1990s - towards commercialisation

The third (and present) phase of the development of the new biotechnology sees products

beginning to appear on the market and companies, both large and small, becoming more

selective and targeting activities. Given the increasing emphasis on bringing products to

market, the issues of regulation and intellectual property rights suddenly become very much

more pressing and from the company point of view take precedence over all other issues of

public policy. Within Europe, the focus of policy on these issues now rests at EU level

where differences of view between Commission, Council and Parliament have held up

14

implementation of proposed directives.11 For the present, stalemate leaves companies

dependent still on the variable patchwork of regulations implemented by member states.

The early 1990s has seen a steady trickle of new biopharmaceuticals on to the market.

Nevertheless, even today (1995) the number of new products actually launched remains

fewer than 30. But there are many in the pipeline, many incorporating novel features.

Jurgen Drews, head of R&D at Hoffman LaRoche, commented in 1993:

While there are some redundancies among the 150 or so novel proteins in development, about 100 represent truly novel substances that have no precedent in medical therapy. Not all of these proteins will reach the market, but it is fair to assume that their attrition rate will be lower than that for small chemical entities because they should cause few unmanageable toxicological problems. A conservative estimate would expect 30-40 of the recombinant proteins now under development to become successfully marketed products over the next 5-6 years. This means that an average of 5-8 novel proteins should become available each year. ... If we assume an average sales volume for the forthcoming recombinant proteins equal to the average revenues generated by today's recombinant drugs, the portfolio of recombinant proteins now in clinical trials should amount to $10-20 billion in today's currency.

(Drews, 1993)

Looking beyond the 10 year horizon, Drews foresaw the arrival first of the cytokine based

drugs which will treat various kinds of cancer, many based on novel combinations of proteins

and other chemical entities. Diseases such as Parkinson's and Alzheimer's and neural

disorders are high on the list of targets. The most far reaching of current developments,

however, come from another source - from work involved with understanding the human

genome (and, concomitantly, unravelling genes' physiological function and roles in disease

processes). Current initiatives in genome mapping will help identify many new proteins with

therapeutic potential and also illuminate an even greater number of possible targets. Gene

11 The differences of view broadly reflect the differences between the industrial lobby, which is influential in shaping both Commission and Council views, and consumer/Green worries about the longer term implications of developments in biotechnology. Under the new (Maastricht Treaty) procedures attempts have been made to reconcile differences and to resubmit proposals to the Parliament, but these were thrown out for a second time in March 1995. See Financial Times March 1 1995.

15

therapy itself - direct intervention to alter the genetic make-up of cells - will have far

reaching effect on both pharmaceutical and health care industries.

The implications of these developments are interesting . Although they show a maturing of

biotechnology, it is still an area of active, indeed dynamic, development by both large and

small firms in the industry. In the small firm sector, the early 1990s saw setbacks for some

of the leading players of the 1980s. Genentech, the largest and in many ways the most

successful of the new biotechnology companies, managed to launch its tissue plasminogen

activator (tPA) in 1989 after 10 years of development, but ran into difficulties in the process

and was therefore in no position to fight the effective take-over bid from Hoffman LaRoche

the following year.12 Centacor took its product Centatoxin (for treating septic shock) all the

way but fell at the last hurdle of FDA (Food and Drug Administration) approval which

entailed another year of testing which has had a crippling effect on the company.13 Cetus, one

of the first DBFs to emerge in the 1970s and one of the strongest during the 1980s has also

hit difficulties in developing its products14 and amalgamated with another DBF, Chiron, for

survival.

In their place a new generation of leading players have emerged. Amgen, for example, , has

succeeded in launching first its erythropietin (Epogen) and then its colony stimulating factor,

Neupogen. It now has sales of over $1 billion per annum. (See Table 1) Chiron too has

gone from strength to strength, as has Calgene, the leading DBF in plant biotechnology. But

although most DBFs still aim to become fully integrated pharmaceutical or chemical

12One of the problems Genentech faced was that in order to recoup its heavy R&D spend it priced its tPA at the top end of the price spectrum. This led to Medicare and many insurance companies in the US refusing to pay for its use and insisting on cheaper alternatives, especially after a damming report which suggested it was no more efficacious than these alternatives. As a result sales were lower than anticipated, share prices fell and help had to be sought. See "An Appetite for Technology: Hoffman LaRoche", Bio/Technology, August 1992.13See "FDA flattens Centacor" and "What went wrong with Centoxin", Bio/Technology, Vol 10, June 1002, pp616 and 617.14Cetus only survived because it sold its best innovation (its PCR patents) to Hoffman LaRoche for $300m in 1991. It could neither afford to develop them in-house nor to sit on them. They also funded a collaboration with instrument manufacturer Perkin Elmer to develop machines for PCR techniques. See op cit footnote 14 above. Se also "Hope and Hype in Biotechnology", Bio/Technology, Vol 10, September 1992, pp946-947.

16

companies, with the exception of Amgen, none have so far made it.15 Most DBFs continue to

exist because they have established a synergistical relationship with the larger companies.

Increasingly, as Table 2 shows, they are the source of new product ideas, but for their part

the small companies depend on the larger firms not only to market these products but to carry

them through the expensive development stages (which means taking them through Phase II

and III trials). The large firms also remain a key source of finance. The two sectors of the

industry remain therefore mutually dependent upon each other. Hence, while the DBF sector

is as active as ever, the larger firms are also increasing commitments.

Table 2 Top Ten Biotechnology Drugs on the Market ($m)

Product Developer Marketer 1993 Net

Sales ($m) Neupogen Amgen Amgen 719Epogen Amgen Amgen 587Intron A Biogen Schering-Plough 572Humulin Genentech Eli Lilly 560Procrit Amgen Ortho Biotech 500Engerix-B Genentech SmithKline Beecham 480RecombiNAK HB Chiron Merck 245Activase Genentech Genentech 236Protropin Genentech Genentech 217Roferon-A Genentech Hoffman LaRoche 172

Total sales of top ten $4,288

Total industry sales $7,700 Source: Med Ad News, quoted in Ernst & Young, 1994

While large firm investment has been growing, it has also become increasingly targeted. The

last few years have seen a marked shift away from the broad learning strategies of the mid-

1980s towards a more focused approach. Ciba Geigy, for example, in 1989, cut back on its

portfolio of interests in biopharmaceuticals in order to concentrate more narrowly on the

15This is well illustrated in Barry Werth's The Billion Dollar Molecule (New York. Knopf 1994) which describes the frantic early years of the Vertex company in Boston.

17

development of a few products with market potential. Since then, it has both increased in-

house activity in those areas and concluded a number of research and licensing deals which

strengthen its position yet further (see next section). For Bayer targeting involved pulling

out of biotechnology research in agro-chemicals and concentrating on pharmaceuticals.

Hoffman LaRoche has likewise pulled out of agro-biotechnology to concentrate its interests

in the pharmaceuticals area. Rhône Poulenc, a relatively late entrant into mainstream

biotechnology, has made up for lost time by an aggressive policy of acquisition and alliance.

Like Ciba Geigy and ICI, it has maintained interests in both pharmaceutical and agricultural

aspects of biotechnology and has bought itself into the seed industry.

For most of the large companies, however, the most notable feature of the 1990s has been the

explosion of collaborations with American DBFs. This development is explored in more

detail in the next section.

4 ALLIANCES, LINKAGES AND TECHNOLOGY TRANSFER

This section seeks to explore the degree to which the European chemical/pharmaceutical

industry is linked into the US biotechnology base, comprehending both the DBFs and the US

university system. The main evidence is presented in Annex A which presents in tabular

form the linkages of each of the European companies appearing in Table 1. While not

necessarily accurate in every detail, the weight of evidence points firmly to relatively deep

penetration of the US biotechnology base by European companies. The only exceptions

among those quoted in Annex A are Shell and ICI. Shell is a company which entered the

chemical industry via petro-chemicals, its main interests and capabilities being in products

derived from bulk petro-chemical feedstocks. It makes no claim to be a pharmaceutical

company and its interest in biotechnology is slight. ICI is more interesting and its position

will be looked at in more detail below.

4.1 Corporate alliances

18

The outstanding feature of Annex A is the very large number of corporate alliances with

American DBFs undertaken by these European multinationals. Table 3 summarises the data.

Ciba Geigy, the company which in the early 1980s broke with tradition in contracting out

key research on biotechnology, leads the list with 29 known alliances, but Hoffmann

LaRoche on 27 and Hoechst on 24 are close runners up. By contrast, the British companies

ICI and Zeneca (de-merged in 1993) between them have only two listings.

Table 3 Alliances and Joint Ventures Between US DBFs and Leading European Multinationals in the Chemical Pharmaceutical Industry

Company Total Number of Alliances Number concluded

listed in Annex A since 1990

Ciba Geigy 29 17Hoffman LaRoche 27 10Hoechst 24 10Rhône Poulenc 19 12Sandoz 18 14Bayer 12 7Akzo 11 6BASF 4 0ICI/Zeneca 2 1 Source: Data presented in Annex A

Even more interesting is the second column in Table 3, the number of agreements concluded

since 1990. This reinforces what has been said earlier about the continuing dynamism of the

DBF sector - indeed if anything it suggests an increase in the number of alliances between

these two sets of players in the last five years at a time when, as indicated in the previous

section, these companies have themselves been investing heavily in biotechnology.

Examining the detail in Annex A shows that there has been a shift over the course of the last

ten years from R&D agreements, which dominated in the early years, towards marketing and

19

licensing agreements. In other words, whereas ten years ago the alliances were to

supplement internal research work, today they fulfil a more important role, namely as a key

supplier of potential new products. This suggests that in spite of their substantial investments

in in-house biotechnology since the mid-1980s, these companies are still short of key

biotechnology products for their new product portfolios. It also illustrates the

complementary nature of the investments. In order to be able to exploit the new product

ideas coming from the DBFs, the large companies also need in-house capabilities. Without

such capabilities, they would not be in a position to license and market the new generation of

biopharmaceuticals.

While Annex A illustrates how deeply some of these European companies are networked into

the US biotechnology system, it gives little perspective of the relative position of European

firms vis a vis those from other parts of the world. In particular, given fears in the early

1980s of the growing challenge from Japan it is interesting to compare European

collaborations with those of Japan. Annex B derived from Bioscan, 1994, lists a sample of

72 leading DBFs in the US, noting the total number of alliances concluded by the firm, and

the number of those concluded by European and Japanese firms. Table 4 summarises the

data. It suggests that European firms are considerably more active than Japanese firms in

linking up with US DBFs. It also, however, shows that a majority of alliances are forged not

with foreign companies but with US companies. This is the conclusion reached by two other

studies of the geographical spread of DBF alliances; one by Dibner and Bulluck (1992) using

Dibner's North Carolina database on biotechnology collaborations, the other from the latest

(1994) Ernst and Young Biotechnology Review. This data is presented in Tables 5A and 5B.

Both tables suggest that approximately 25 per cent of alliances are concluded with European

20

Table 4 Alliances Concluded by 72 of America's Leading DBFs up to end 1993

Number Per Cent

Number of DBFs on sample 72Total number of alliances 718 100Number of alliances with foreign firms 259 36Number with European firms 141 20Number with Japanese firms 90 12.5 Source: Annex B

Table 5A US-DBFs Involved in Biotechnology Alliances 1982-91

% Total number of alliances noted 2079

of which detailed data on 1303 100

of which involving a Japanese partner 183 14of which involving a European partner 346 27

of which UK 76 6Swiss 71 5.5Germany 45 3.5France 36 3.0Italy 3.6 3.0Sweden 27 2.0Netherlands 9 1.0

Source: Dibner and Bulluck, 1992

Table 5B Biotechnology Alliances 1992-1994 (June to June)

% Geography of deal partner 1992-3 1993-4

N America 63 65Europe 24 24Japan 11 8Other 2 3

Source: Ernst & Young (1994), Table 13

21

firms compared to a 10-12 per cent share with the Japanese and a 60 plus per cent share to

North America (including Canada). It is notable that on the issue of technology transfer,

Dibner and Bulluck comment:

"Of the 346 alliances we were able to code the direction of technology or product flow in all but 36. Of the coded alliances, 71 per cent had the technology or product flowing to Europe, 25 per cent had the technology or product flowing to the United States, and the remainder (14 alliances) were bilateral. ... However, it should be noted that many of the alliances are licensing or marketing agreements ... Since the majority of these alliances involve smaller US firms not likely to have sufficient resources to market globally, they may provide these firms with opportunities not otherwise available." (Dibner and Bulluck, 1992, p632.)

It is perhaps worth adding that in saying that the alliance "had the technology or product

flowing to Europe", Dibner and Bulluck meant, of course, to European-owned firms. Most

of these firms are major multinational companies and have a substantial presence in the US.

4.2 Mergers, acquisitions and overseas laboratories in the US

The size of this presence is given some dimension by columns 2 and 3 in the individual

company tables in Annex A. Column 2 lists overseas laboratories in the US; Column 3 lists

acquisitions and mergers. Often the two are related. Bayer, for example, acquired two

medium-sized US pharmaceutical firms, Miles and Cutter, in the late 1970s and their

laboratories in West Haven, Connecticut and California have formed the basis of Bayer's

research presence in the US. Molecular Diagnostics, a DBF in New Haven established with

help from Bayer, was absorbed within the Miles Laboratories in 1992. Ciba Geigy's animal

health laboratory in the US is based on its acquisition from Bristol Myers Squibb in 1990.

On the other hand its plant breeding laboratories in North Carolina and its Pharmaceutical

Division in New Jersey derive from earlier decisions to develop these facilities in the US.

Both are located close to university campuses. Indeed, Research Triangle Park in North

Carolina where Ciba Geigy's plant breeding laboratory is located has proved a popular

22

location for European multinationals. Glaxo, Wellcome, Ciba Geigy and Roche all have

research laboratories in the area. Rhône Poulenc is the company amongst those listed which

has pursued the most aggressive policy of growth by acquisition. Together with its

subsidiary Institut Mérieux it bought Connaught Biosciences, Canada's largest biotechnology

firm, in 1989 to make the combined operation (Mérieux plus Connaught) the world's largest

producer of vaccines. Then in 1990, it bought Rorer, a fairly substantial US pharmaceutical

company which already had a fair track record in research and the company's work in

pharmaceuticals is now led by Rorer. It was the Rorer laboratories which in 1994

spearheaded the company's 'network collaboration' of 14 companies in genome sequencing

area. Rhône Poulenc, like ICI, has also been actively acquiring seed companies.

The detail of Annex A also demonstrates the extent to which these European multinationals

have put down roots into the US science base. Table 6, derived from a study which analysed

European and Japanese company research laboratories in the US (Dibner, Stock and Greis,

1992) located 76 sites where the companies concerned were engaged in biotechnology R&D;

of these, 60 belonged to European parent firms and only 16 to Japanese parents. Even more

revealing is the data contained in the second half of the Table which shows the average

number of collaborations for the two different types of site - in particular the degree to which

the European sites are linked into the American university system with (on average) over six

linkages per site compared to the Japanese 2.4 average.

4.3 Academic links

Table 7 highlights not only the large number of US laboratories run by European

multinationals, but the extensive linkages which these laboratories have with US universities.

The picture that emerges from this data for most companies is of extensive linkage through

the DBFs and their overseas research laboratories into the US science base.

23

An exception to this general picture is ICI/Zeneca, which, although it has substantial

laboratories at Wilmington, PA, has few linkages with DBFs. Other UK firms (Glaxo,

Table 6 Linkages Between US-based Facilities of European and Japanese Companies Involved in Biotechnology Research

European-Owned Japanese-OwnedSites Sites

Number of Sites 60 16

Linkages withUniversities (av) 6.04 2.42Biotechnology firms (av) 0.93 0.17Other corporations (av) 1.00 0.58Total collaborations (av) 7.42 3.17

Source: Dibner, Stock and Greis, 1992.

SmithKline Beecham, Wellcome) have also been slow to develop such linkages, although

Glaxo and SmithKline Beecham have recently been actively developing DBF links. By

contrast ICI has been very deeply networked into the UK science base. An evaluation of the

UK science and Engineering Research Council's (SERC) Biotechnology Directorate (Senker

and Sharp, 1988) found ICI the most active participant in the Directorate's programmes

promoting university/industry links and the company itself had established and supported

laboratories at the Universities of Leicester and Cambridge. Several of the products the

company currently has under development derive directly from such linkages. This view of

ICI as a company linked into its home (UK) academic base rather than into the US is

reinforced by recent work undertaken at SPRU on collaboration as revealed by jointly

authored publications. Table 7 looks at the performance looks at the performance of the

individual firms in 1989. ICI tops the league with 363 papers. Of these 238 (66%) were

collaborative and 203 of these (85%) were collaborative with universities most of these (190)

being within the UK. As a whole the data show that most of the collaborations were within

24

Europe (94% for ICI - the lowest being Ciba Geigy with 78%). These figures suggest

however that there is very little co-authoring of work between European researchers and their

US counterparts in corporate laboratories.

Table 7 Collaboration Through Publication - Company Profiles

ICI BASF Bayer Hoechst Ciba Geigy Total

Total No of publications 363 91 119 210 311 1094

Collaborative publications (a) 238 (66%) 38 (42%) 55 (46%) 133 (63%) 159 (51%) 623 (57%)

of which- with universities (b) 203 (85%) 23 (60%) 40 (46%) 99 (63%) 120 (51%) 485 (78%)- domestic (b) 190 (80%) 27 (71%) 39 (73%) 91 (75%) 58 (76%) 409 (65%)- with Europe (b) 223 (94%) 34 (89%) 51 (93%) 112 (84%) 124 (78%) 544 (87%)

(a) Collaborative publications shown as a percentage of total publications(b) Publications shown as percentage of collaborative publications. Note: a small

number of publications have been classified as both a domestic collaboration and a foreign collaboration where more than two authors are cited.

Source: Unpublished data from Hicks, Isard and Martin (93)

5 CONCLUSIONS - WHO'S GAINING WHAT?

The argument presented in this paper can be summed up as follows:

(i) Developments in biotechnology are having a substantial impact on product areas

which have traditionally been of central interest to Europe's large chemical/pharmaceutical

firms and are of particular interest today given the restructuring of the industry during the

1980s towards higher value added activities. It is now clear that failure to develop

competence in biotechnology is likely to have serious adverse effects on a company's ability

in future to hold its own, particularly in the key pharmaceuticals and agro-chemicals sectors.

25

(ii) The challenge for any company wishing to retain its broad-base in chemicals and

pharmaceuticals has been to acquire competence and knowledge in using and applying the

techniques of biotechnology to new product development alongside restructuring existing

activities. The problem this poses is that these companies' traditional knowledge base and

skills derive from chemistry not biology and for this reason both their internal technological

cultures and their external linkages have been based on chemistry. The change demanded

requires grafting a new culture onto well established internal traditions and establishing new

links and roots into the biological sciences.

(iii) This process is additionally complicated by the fact that the leading edge of research

in biotechnology has been dominated by the United States. Companies, such as the major

German and Swiss companies which have traditionally relied upon the excellence of their

own research base, have had to find means of accessing this new science base while

simultaneously holding their own in fast moving market segments.

(iv) The route by which European multinationals have chosen to do this varies from

company to company. Generally speaking all companies have extended their linkage into

their domestic academic base but, in particular in the early 1980s, this often proved

insufficient to meet needs. Companies chose two routes to overcome this limitation. First,

they used existing R&D bases (eg of subsidiaries) in North America as 'staging posts' from

which to link into the US academic base, often using such linkages explicitly as a means of

teaching home-based researchers. Secondly, they used research contracts with the US DBFs

as an indirect route by which to access American research. The latter also provided the

companies with a way of hedging research bets in biotechnology - of testing the robustness

of the new technology before it had fully established itself. Where successful, the linkages

were often later consummated in acquisition. But practice has varied. Some companies,

such as Ciba Geigy, found this new form of external linkage manageable and rewarding and

have continued to develop and extend relationships. Others, such as Bayer, preferred to

bring new found competencies in-house. The continuing fast movement of the underlying

26

science base and the privileged access to that base enjoyed by many DBFs helps to explain

the continuing demand for these small companies to perform this intermediary function.

(v) The DBFs are also increasingly the source of new product ideas for the major

chemical 'conglomerates'. As the products derived from this new technology begin to

emerge into the market place it has become apparent that, the older companies are, as yet,

followers not leaders, in the innovation process. In stark contrast to the hydro-carbon

revolution of the 1930s, the new ideas are emerging not from the big corporate laboratories

but from academic laboratories and the small firms. The major companies are therefore

surprisingly bereft, in their own research portfolios, of new product ideas and look to the

DBFs to licence-in new products. For their part, the small firms, much though they aspire to

being major players in the industry, lack the financial or marketing resources to bring their

new product ideas to market. This 'marriage of convenience' has thus created what is now a

well established market feature in biotechnology with the small firm contributing the

research and the large firm the development and marketing skills for the new products. Once

again, the pattern varies from company to company with some large companies more

dependent than others on (or more prepared to experiment with) linkages with the DBFs.

(vi) Whatever the pattern of linkage one feature stands out from the evidence presented -

namely that (other than American companies) it is European multinationals, not Japanese

firms, that are pre-eminently 'exploiting' the US science base. All the evidence presented -

the number of linkages with DBFs, acquisition of DBFs, the number and location of overseas

laboratories, the number of agreements with US universities either directly or via overseas

laboratories - shows European chemical and pharmaceutical companies to be more active

players than their Japanese counterparts.

The question that remains to be answered is "Does it matter?" Does it matter if the

Europeans are in effect getting a free ride on the American science base? The traditional

answer is that basic science is by its nature inappropriable, codified, open and international

27

and gains from being so because it benefits from as wide as possible an exchange of ideas as

possible. It is a matter of swings and roundabouts. America has in the past gained

enormously from European science, why worry if on this occasion the roles are reversed?

The Reichian answer (see Introduction) is that far from losing from such 'exploitation', the

United States benefits from the high value added jobs it brings with it. Indeed, as catalogued

in the previous section of this paper, the activities of the European multinationals are creating

jobs not only in US universities but also in the many DBFs which have sprung up in

association with the universities and in the increasing number of subsidiary laboratories and

production centres being set up in the US, all of which predominantly employ American-

trained scientists, albeit working for European -based chemical/pharmaceutical companies.

In other words, the technology transfer is, geographically, within the US and largely between

American nationals. Since much of the profit from such enterprise is likely to be reinvested

in extending facilities, America is in all respects the gainer.

Are there then no losers? The question hangs on how far, over the course of time, there is

technology transfer from the overseas activities back to the European operations of the

multinationals. The (essentially mercantilist) Reichian approach to these issues stems from

the fact that much basic science, far from being, as the traditional view suggests, wholly

codified and therefore easily and costlessly transferred via publication, remains tacit and

passed on by word of mouth and learning by doing. Being close to the leading edge of

science in American universities and in touch with the DBFs who are pushing the technology

forward therefore matters. Failure to keep in touch can result in a cumulative loss of

capabilities. Unless, therefore, there are effective means of actively transferring the tacit

knowledge from the American subsidiaries/partners back to the 'home' laboratories of the

European multinationals, it is the European science base that loses and suffers a cumulative

falling behind the frontiers of scientific practice. This in turn could affect Europe's ability to

create the high value-added jobs in this sector over the longer run.

28

The irony of the present situation is that the linkages forged between these European

multinationals and the American science base in biotechnology actively help to promote the

competitiveness of the multinationals. It is not a question of the European based companies

losing out. They have no difficulty in holding their own amongst its global competitors. For

the present, however, we do not know enough about the internal organisational processes of

these companies to know how far knowledge, as well as profit, is being transferred back to

the home base. The degree to which some of these enterprises are seeking to transfer

responsibilities both for research and subsequent development and production to a North

American base suggests there may in fact be relatively little knowledge transfer with

consequent knock-on effects on European capabilities and this is the cause for concern for it

affects Europe's long run ability to support a modern biotechnology industry. Before

jumping to conclusions, however, we need to know more about the internal technology

transfer procedures within these multinationals and how far they are developing capabilities

within their home-based laboratories.

29

REFERENCES

ACARD (1980): Biotechnology: Report of the Joint Working Party of the Advisory Council on Applied Research and Development (ACARD), the Advisory Board of the Research Councils (ABRC) and the Royal Society. London, HMSO. (Also known as the Spinks Report.)

Achilladelis, B G et al (1987): 'A study of innovation in the pesticide industry', Research Policy 16 (2), pp175-212.

Achilladelis, B G et al (1990): 'The dynamics of technological innovation: the case of the chemical industry', Research Policy 19 (1), pp1-35.

Bioscan (1994): Oryx Press.

Bressand, A (1991): Network Order Scenarios, Project Promethée, Paris.

Brock, M V (1989): Biotechnology in Japan, Nissan Institute/Routledge Japanese Studies Series, Routledge, London.

Brock, W H (1992): The Fontana History of the Chemical Industry, Chapter 16, Fontana, London.

Clark, C and Walton, F (1992): 'Europe's Emerging Biopharmaceutical Companies'. Bio/Technology, Vol 10, October, pp1108-1110.

Coleman, R F (1988): 'National Policies and Programmes in biotechnology', in Biotechnology: The Changing Role of Government, OECD, Paris.

Dibner, M (1991): 'Tracking trends in US biotechnology'. Bio/Technology, Vol 9, December, pp1334-1337.

Dibner, M and Bulluck, J A (1992): 'US/European Strategic Alliances in Biotechnology'. Biotechnology Forum Europe, Vol 9, October, pp628-635.

Dibner, M; Stock, G and Greis, N (1992): 'Away from Home: US sites of European and Japanese Biotech R&D'. Bio/Technology, Vol 10, December, pp1535-1538.

30

DiMasi, J A; Hansen, R W, Grabowski, H G and Lasajna, L (1991): 'The Cost of Innovation in the Pharmaceutical Industry: New Drug R&D Cost Estimates', Journal of Health Economics, June.

Drews, J (1993): "Into the 21st Century. Biotechnology and the Pharmaceutical Industry in the next 10 years", Bio/Technology, 11 March 1993.

Ernst and Young (1994): Reform, Restructure and Renewal, 9th Annual Report on the Biotechnology Industry.

Galimberti, I (1993): Large Firms in Biotechnology: Case Studies on Learning Radically New Technologies, DPhil Thesis, SPRU.

Hicks, D; Isard, P and Martin, B (1993): University-Industry Alliances as revealed by joint publications, Mimeo, SPRU.

Hounsell, D A and Smith, J K (1988): Science and Corporate Strategy, Cambridge UP, Cambridge, UK.

Irvine, J; Martin, B R and Isard, P (1990): Investing in the Future: An International Comparison of Government Funding of Academic and Related Research, Edward Elgar.

Jewkes, J; Sawers, D and Stillerman, J (1958): The Sources of Invention, London MacMillan.

Joly, P-B (1992): Organisational Learning, Diversity and Interactions in a Sectoral Innovation System. Paper presented at workshop on "Systems of Innovation", Bolgna, October 1992. Mimeo. Obtainable from INRA/SERD BP47 38040, Grenoble, Cedex.

Kenney, M (1986): Biotechnology: The University-Industry Complex, Yale University Press, New Haven.

Magnien, E and Nettancourt, D (1993): 'What Drives European Biotechnology Research?', International Journal of Technology Management, pp47-58.

OECD (1984): Science & Technology Policy: Review and Outlook. Part III. Chapter 2. Biotechnology in the 1990s: Science Trends and Policy Concerns, pp259-236

31

OECD (1987): Recombinant DNA Safety Considerations: For Industrial, Agricultural and Environmental Applications of Organisms Derived by Recombinant DNA Techniques, Paris, OECD.

Office of Technology Assessment (OTA) (1984): Commercial Biotechnology. OTA/US Government Printing Office.

Office of Technology Assessment (OTA) (1988): New Developments in Biotechnology: US Investment in Biotechnology, OTA/US Government Printing Office, Washington DC.

Office of Technology Assessment (OTA) (1991): Biotechnology in a Global Economy, Office of Technology Assessment, Congress of the United States, Washington DC.

Orsenigo, L (1989): The Emergence of Biotechnology, Pinter Publishers, London.

Piore, M and Sabel, C (1985): The Second Industrial Divide: Possibilities of Prosperity, New York, Basic Books.

Raugel, P-J (1992): 'European Biotechnology Investments in North America and Japan', Biotechnology Forum Europe, No 11/12 December, pp738-755.

Reich, R (1991): The Work of Nations, Knopf, New York.

Rothwell, R (1985): 'Project SAPPHO: a comparative study of success and failure in industrial innovation', Information Age, 7 (4), pp215-19.

Rothwell, R et al (1974): 'SAPPHO updated', Research Policy (3), pp257-91.

Senker, J and Faulkner, W (1992): 'Industrial Use of Public Research in Advanced Technologies'. R&D Management, 22, pp157-175.

Senker, J and Sharp, M (1988): The Biotechnology Directorate of the SERC: Report and Evaluation of its Achievements, mimeo, SPRU.

Shackley, S (1993): The Regulation of Biotechnology in Europe, DPhil thesis submitted to University of Sussex, UK.

32

Sharp, M (1985a): The New Biotechnology: European Governments in Search of a Strategy. Sussex European Paper No 15. Available from SPRU, University of Sussex.

Sharp, M (1985b): "Biotechnology: Watching and Waiting". Chapter 6 in Sharp, M (ed): Europe and the New Technologies, Pinter Publishers, London.

Sharp, M (1989): Biotechnology in the UK. Paper prepared for US Office of Technology Assessment conference on Biotechnology in a Global Environment, July 1989, mimeo obtainable from SPRU, University of Sussex, UK.

Sharp, M and Galimberti, I (1993): Coherence and Diversity: Europe's Chemical Giants and the Assimilation of Biotechnology. Case study undertaken for EC FAST Project: Coherence and Diversity in Europe's Industrial System. Mimeo, SPRU, University of Sussex.

Sharp, M; Thomas, S and Martin, P (1993): 'Technology Transfers and Innovation Policy: Chemicals and Biotechnology', STEEP Discussion Paper No 6, SPRU.

Werth, B (1994): The Billion Dollar Molecule, New York, Knopf.