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The Biotechnology Paradigm. Challenges and Opportunities in Latin American Countries Graciela E. Gutman CEUR-CONICET

The Biotechnology Paradigm. Challenges and Opportunities in Latin American Countries Graciela E. Gutman CEUR-CONICET. Summer School ”The Role of Social Science in the Construction of Knowledge-based societies: Latin American and European perspectives” FLACSO-MEXICO, EULAKS August 17 to 30 2009.

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The Biotechnology Paradigm. Challenges and Opportunities in Latin American Countries Graciela E. Gutman CEUR-CONICET

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  1. The Biotechnology Paradigm. Challenges and Opportunities in Latin American CountriesGraciela E. GutmanCEUR-CONICET Summer School ”The Role of Social Science in the Construction of Knowledge-based societies: Latin American and European perspectives” FLACSO-MEXICO, EULAKS August 17 to 30 2009

  2. Agenda • The New Biotech Paradigm • Market Structure, Competitive Strategies. • Innovative Trajectories in Health and in Agri-Food Systems (AFS) • Main countries and firms. MNF strategies FLACSO-México, EULAKS , August 17-30 2009

  3. The New Biotech Paradigm: a new Science based Regime • Strong interplay between basic science and technology; • Convergence and synergies with other key technologies (information technology, nanotechnology); • Generic and transversal character, reaching different productive sectors and services (diversification strategies of large incumbents, the “life science industries) • Various degrees of complementary aspects and ruptures with existing sectoral technologies (i.e., bioprocesses, conventional breeding) • MB plays different roles: core technology, key functions, support technology • Until now, human health has been the most important sector of application, followed by agriculture and food industries • Private investments in R&D explains the disparities observed in the different sectors of application • Strategic alliances, networks FLACSO-México, EULAKS , August 17-30 2009

  4. FLACSO-México, EULAKS , August 17-30 2009

  5. FLACSO-México, EULAKS , August 17-30 2009

  6. Costs and time for biotech commercial developments • Different, complex and highly expensive stages: • From Science to Technology • From Technology to Innovation • From innovation to production and commercialization • Times and costs: • In the health sector (institutional markets): 10 to 12 years for the different phases (identification and validation of the objective, preclinical developments, human clinical trails – 3 phases- and regulatory approval); 400 to 800 million dollars; only five in 5000 compounds tested in the preclinical development, arrive to the clinical phases and only one is finally approved) • for a GM crop development, 8 to 10 years for the development, and 100 million dollars; regulatory cost represent almost 30% of total costs FLACSO-México, EULAKS , August 17-30 2009

  7. Cost and time for GM Crop Developments $ 20-40 M (90%) On average • Regulatory $ 15-30 M 8-10 years for commercialization proposal (75%) Total Investment: + o - $ 100 M • Crop strengthening • Trait integration • Pre - marketing • Filed Test • Regulatory $ 10-15 M information Cost (% of succes) (50%) $ 5-10 M $ 2-5 M • Trait developments (25%) • Pre-regulatory data (5%) •Large-scale transformation • Genetic Optimization • Crop transformations • Exploration of high yield • Models test Years 0 1 2 3 4 5 6 7 8 9 10 Discovery Phase I Phase II Phase III Phase IV Conceptual Early Genetic Late Regulatory Development identification test Development Proposal / Traits Notes: in Million US$ and percentages Surce Europe Bio, 2005 FLACSO-México, EULAKS , August 17-30 2009

  8. Biotechnology in the Health Sector

  9. Public Research Organizations (Universities, laboratories, institutes) (Knowledge base) Pharmacy Multinationals (incumbents) Institutional Context: IPRs Regulations Venture capitals, public investors Government Financing Complementary Assets (Productive, commercial, financial) Dedicated Biotechnological Firms DBFs Innovative trajectories in the US biopharmaceutical industry The Know-How Market. The monetization of intellectual property FLACSO-México, EULAKS , August 17-30 2009

  10. Main actors in the US know how markets • Public Research Organizations (PROs), such as universities and public technology centers, blurring the distinction between basic and applied science • Dedicated Biotechnological Firms (DBFs), universitiy spin-off, which explore new scientific opportunities for drug discovery, translate basic knowledge into technological knowledge (and sometimes if they are successful into commercial knowledge), and offer specialized technological services to large firms (incumbents). • Venture capitals specializing in providing financial and managerial support to DBFs in their early stages, and other financial resources such as the National Health Institute (NHI). • Incumbents, large companies specializing totally or partially in MB, with complementary manufacturing and regulatory capabilities, R&D investments in biotechnology and associated technologies, but with limited capabilities in faced with the growing complexity of the new paradigm. FLACSO-México, EULAKS , August 17-30 2009

  11. Main Institutional changes in the US • The Diamond vs. Chakrabarty court ruling (1980), which extended intellectual property rights (IPR) to areas that were previously excluded (life forms) to uphold a patent on a GM bacteria • The Bayh-Dole Act (1980) permitting universities to file patents with the results of publicly funded research, and to transfer these patents to firms (priority US firms) in the form of exclusive licenses, or the creation of joint ventures with these firms; (lead to an explosion of biotech patenting, and the creation of DBF, limiting the scope of “open science”) • The Stevenson-Wylder Technology Innovation Act (1980) making technology transfer a priority at the federal laboratories (permitting R&D arrangements with industry) • the complementary creation of new financial markets specializing in the commoditization of IPR, with the change in NASDAQ regulations that authorizes the market entry and listing of firms operating at deficit on the condition that they have considerable intangible capital (patents), which lead to the monetization of IPR and the creation of secondary markets of S and T (Orsi and Coriat, 2006, Arundel et al., 2006, Malerba and Orsenigo, 2002; Orsenigo, 1999; Pisano, 2006, Cimoli and Primi, 2007. FLACSO-México, EULAKS , August 17-30 2009

  12. Trends in the health sector • New drugs associated with the high speed of scientific developments (pharma-genomics, IVD, gene therapies) • Strengthening of the regulatory contexts • Big pharma-s patents expiration • Personalized medicine (shift from eficacy to eficiency; scale economies less important) • Globalization FLACSO-México, EULAKS , August 17-30 2009

  13. Biotechnology in Agri-food Systems

  14. Biotechnology in Agro-Food Systems Source: Gutman, Lavarello, Cajal Grossi (2006) in Bisang et al. (2006). FLACSO-México, EULAKS , August 17-30 2009

  15. Innovative trajectories in Agri-Food Systems • Greatly based on previous researches in the pharma-chemical industry (enabling technologies) • High Importance of complementary assets • Industrial Organization • In agriculture • DBF, large pharma-chemical firms (life-science firms), seed industries; • Concentration and centralization in the input markets: diffusion of a “technological package” ; • Coexistence of different Intellectual Property Right Systems (patents, breeder’s rights, trade secrets, others) • In food industries • High barriers to entry for DBFs; important presence of large food MNF; • Strategic role of food ingredient firms for MB diffusion • Development of new products and enabling technologies since late 90’s FLACSO-México, EULAKS , August 17-30 2009

  16. FLACSO-México, EULAKS , August 17-30 2009

  17. Modern Biotechnology Techniques for plant breeding • Actual • molecular markers; • GM crops: input traits, first and second generation; stacked genes; output traits); • plant micro-propagation • seed inoculants • Future developments (depending on regulatory frameworks, societal acceptance; evolution of commodity prices; MNF strategies) • new generation of GM crops, nutraceuticals; (second and third generation of GMO) • biomass for industrial uses FLACSO-México, EULAKS , August 17-30 2009

  18. Market Structure, Competitive Strategies • Developments driven by a small number of mega firms (MNF), in few countries, with strong public support and specific regulatory and institutional contexts; • Firms of different size and technological bases: Large agrochemical and pharma firms, DBF, seed industries. • Importance of previous technological capacities • Expansion through M&A, globalization; asymmetric alliances with other firms, public and private institutions • Strong barriers to entry: high R&D investments; strategic complementary assets; management of IPR; regulatory costs and times FLACSO-México, EULAKS , August 17-30 2009

  19. The importance of Complementary Assets in Agri-food Systems • Upstream: problem definition and solution • Scientific and Technology Base • Knowledge Market • R&D financing • Downstream: production and marketing • Traditional fermentation or breeding capabilities • Distribution networks • Regulatory capability and lobbying FLACSO-México, EULAKS , August 17-30 2009

  20. MNF strategies. Different phases Two phases with important restructuring processes: • From the mid-1980s to the mid-1990s: strategic alliances between agrochemical firms, DBFs, and pharma-chemical multinationalsto develop GM seeds • From the mid-1990s to the present: consolidation; absorption of complementary assets, search for complementarities between seeds industries and agrochemicals; R&D planning for the construction of new biotech platforms Three main strategies: • High number of Acquisitions (Monsanto, Dupont/Pioneer) • Investment in the new technologies (Zeneca, Novartis) • Based in the agrochemical business (Basf, Bayer) (Chateway et al 2003) FLACSO-México, EULAKS , August 17-30 2009

  21. Global Area of Biotech Crops in 2008, by Main Countries (Million hectares) Area (million Area Countries Main Biotech Crops hectares) (percentage) USA 62.5 50% soybean, maize, cotton, canola Argentina 21.0 17% soybean, maize, cotton Brazil 15.8 13% soybean, maize, cotton Canada 7.6 6% canola, maize, soybean, sugarbeet India 7.6 6% cotton China 3.8 3% cotton, tomato, poplar Paraguay 2.7 2% soybean South Africa 1.8 1,4% maize, soybean, cotton Uruguay 0.7 0,6% soybean, maize Bolivia 0.6 0,5% soybean Total Area (15 developed countries and 10 125.2 100,0% industrial countries) Source: CliveJames, 2008 Total Area in 1996: 2.8 million hectares; in 2000: 44 million; in 2003: 68 million FLACSO-México, EULAKS , August 17-30 2009

  22. FLACSO-México, EULAKS , August 17-30 2009

  23. Sales of Selected Multinational Firms (MNF) in the Global Seed Industry (miillons US$) MNF 2008 2007 2006 2005 2004 2003 Syngenta (Pharma) 11624 9240 8046 8104 7269 6525 Bayer CropScience 9398 7988 7161 7340 7396 6917 (Chemical) Dupont/Pioneer 7952 6842 6008 6090 6247 5470 (Chemical) Monsanto 7636 8563 7344 6294 5423 4924 (Chemical) Dow Agroscience 4535 3779 3399 3364 3368 3008 (Chemical) Total 41145 36412 31958 31192 29703 26844 2008 2007 2003 (percentages) Syngenta 28% 25% 25% Bayer CropScience 23% 22% 25% Dupont/Pioneer 19% 19% 21% Monsanto 19% 24% 19% Dow Agroscience 11% 10% 11% Total 100% 100% 100% Source: Own estimate, based on firm data FLACSO-México, EULAKS , August 17-30 2009

  24. Seed Sales on Total Sales. Selected MNF (percentages) MNF Main Seeds 2008 2003 Syngenta 27% 20% corn, soybean Bayer CropScience 8% 10% cotton, soybean, canola Dupont/Pioneer 60% 50% corn, soybean Monsanto 50% 35% soybean, corn Dow Agroscience n.a. n.a. corn, cotton, soybean R&D Expense as % of Sales Selected MNF 2008 MNF Syngenta 8% Bayer CropScience 10% Dupont/Pioneer 9% Monsanto 13% n.a. Dow Agroscience Average selected 10% firms Source: Own estimate, based on firm data FLACSO-México, EULAKS , August 17-30 2009

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