Chee Yoke Heong is a researcher with Third World Network which is based in Malaysia.

This article was published in the Chee Yoke Heong is a researcher with Third World Network.

Third World Resurgence No. 167-168 July/Aug 2004 edition of Third World Resurgence.
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Biotechnology: Continuing hype?
by Chee Yoke Heong
Third World Resurgence No. 167-168
http://www.choike.org/nuevo_eng/informes/2248.html

Publicly traded biotechnology companies in the US have been estimated to have suffered cumulative losses of over US$ 40 billion from 1990 to 2003, according to Ernst & Young in a report released in May 1.

Yet the promise of biotechnology continues to capture the imagination of scientists as well as governments and local authorities. Many have bought into the belief that the biotechnology industry holds the key to the development of their communities and economies. As the recent annual biotech industry conference held in San Francisco has shown, government officials from all over the US and as far away as Malaysia were clamouring among themselves to attract investors to put their money in their region.

They might have been taken in by the sales pitch of proponents of biotechnology who often trumpet the benefits of the technology and the wonders that genetic engineering techniques can bring to our lives, but often downplay or even deny the negative side of these new technologies.

The profits of a handful of companies have driven market sentiment up again on biotech stocks despite it being a highly volatile and risky industry. A Wall Street Journal report states that Amgen, the largest and perhaps the most successful biotech firm to date, earned US$2.3 billion in net profit in 2003. Its rival, Genentech Inc, earned US$563 million. After a three-year slump, biotech companies raised US$1.5 billion from new stock offerings in the first quarter of 2004, almost three times the level from a year ago. Contrast that to the cumulative losses of US$40 billion over 13 years.[1]

Though the successes of a biotechnology company in making a medical breakthrough may be few and far apart, should it happen, the return on investment is tremendous. For instance, a US$1,000 investment in Amgen Inc. at its initial offering in 1983 would now be worth almost US$150,000.

Beyond the hype

However, under the gloss this is an industry that generates much debate and concern. Government officials who wish to promote the technology often cite a growing industry which can generate billions of dollars, quoting figures which are calculated from data based on highly questionable assumptions. It is the occasional commercial success and the hope of getting a piece of the biotech pie (as perceived by the industry and its supporters) that drive the enthusiasm of governments to set up biotechnology centres or hubs in their backyards.

At the biotechnology industry's annual convention this year, governors, mayors and ministers were present in full force offering incentives from tax breaks and government grants to free parking space, in the hope of luring biotechnology companies.

But successes are hard to come by as the industry is still concentrated in a small number of biotechnology clusters and a few companies, even if it succeeds in producing viable and safe products.

'This notion that you lure biotech to your community to save its economy is laughable,' Joseph Cortright, an economist who wrote a report on the issue published by the Brookings Institute, was quoted as saying.[2] 'This is a bad-idea virus that has swept through governors, mayors and economic development officials.'

Cortright said the biotechnology industry tends to 'cluster' around just a few places where there is a high concentration of venture capital communities, universities and highly educated workforces, making it difficult to start from scratch.

But this is not stopping government officials from dreaming about setting up their own biotechnology industries that will produce multi-billion-dollar breakthroughs in research that will cure diseases or that will lead to the development of new strains of novel crops.

The San Francisco Mayor Gavin Newsom was quoted as saying to an audience at the convention: 'We are frustrated. You need parking requirement changes, we'll take care of it. You need tax incentives? You've got it. Whatever you need.'

Similar voices are heard coming from the Malaysian Minister of Science, Technology and Innovation Jamaluddin Jarjis who led a contingent, including government officials and representatives from the private sector, aimed at wooing investors to invest in Malaysia's biotechnology initiative, the Biovalley. Like Singapore and India, Malaysia has embarked on a mission to set up a biotechnology centre to spearhead the country into the biotechnology era.

'We are committed to providing attractive incentive packages to biotechnology companies investing in Malaysia,' the minister promised. That package would cover a wide spectrum of financing structures, including business angel financing, venture capital financing, debt ventures and technology banking.[3]

This relentless belief in the technology and the high regard it is given more often than not ignores the many aspects of the failure and weaknesses of the technology. This situation is described by some as how biotechnology is being regarded as a religion - a metaphor that describes how groups of people may see biotechnology, like religion, as the answer to longevity and, indeed, immortality.[4]

Biotech mirage

However, the downside of biotechnology is emerging and can no longer be ignored. The much-hyped potential economic and financial benefits are a mirage when considering the negative financial returns for decades. Publicly traded biotechnology companies in the US suffered estimated cumulative losses of over US$40 billion from 1990 to 2003, according to Ernst & Young, as stated above. Fourteen years ago, net losses at the 194 US biotechnology companies then listed publicly amounted to US$900 million. In 2003, 314 public companies posted total losses of US$3.2 billion, which was better than the US$9.4 billion total loss in 2002 when Ernst &Young says merger- and restructuring-related accounting charges made losses unusually large.

Because of the volatility of the biotechnology stocks as they are so often driven by speculation, a company's stocks can also plunge overnight at the slightest indication, whether it is based on fact or rumour, that things might not go right. For instance, La Jolla Pharmaceuticals' shares dropped 72% within a day last year on news that its lupus drug failed to demonstrate efficacy in a trial. Also, any breakthrough, should it happen, may take years to materialise. In other words, the much-hoped-for profits from investing in biotechnology stocks may not emerge, while losses are highly likely.

Apart from the medical field, which first launched the biotech revolution when Genentech in the mid-1970s developed human proteins by splicing genes into bacteria - a process that came to be known as genetic engineering - much activity is also happening in the field of agriculture and animal husbandry. Genetically modified (GM) crops such as maize, soyabean and canola are fast entering the food chain around the world. Leaders in this field are dominated by a handful of companies such as Monsanto, by far the biggest seller of GM seeds/crops in the world, controlling about 80% of the world's total GM farmland. It also happens to be the world's second largest seed company, with profits hitting millions of dollars.

Recent developments in the industry point to the fact that biotech is not as good an investment as is believed and regulatory authorities that are less open to biotechnology are making the industry less attractive as health and environmental risks are better appreciated.

Monsanto in May 2004 announced that it has decided to 'defer' all further efforts to introduce Roundup Ready wheat, a crop that was genetically modified to resist the company's own herbicide called Roundup.[5] The reason cited was that the GM wheat was 'less attractive relative to Monsanto's other commercial priorities'.

However, public protests and consumer rejection are more likely the reason. Resistance towards the introduction of GM wheat has been intense, coming from farmers, environmentalists, consumers as well as grain traders. In 2002, Monsanto applied to commercially grow the GM wheat in the US and Canada. However, the company announced last year that it would not try to commercialise its GM wheat in Europe. For six years it has failed to get GM crops approved for import or cultivation in Europe because of public concerns about the environmental consequences and safety of GM crops. A number of European Union member governments are increasingly concerned that they are not getting adequate data from the companies, and more importantly that there are insufficient (even lack of) safety studies, on both the environment and human health.

A few days after the Monsanto announcement was made, a company spokesperson was quoted as saying that the company will stop its GM canola breeding programmes in Australia, at least for 2004, following a series of state moratoria on the practice which 'have created an environment of commercial uncertainty'.[6]

Following Monsanto's decision, another giant industry player, Bayer CropScience, has also decided to pull out from planned GM canola trials in New South Wales, Australia, citing growing resistance to the practice from the public[7], a year after the company decided to halt all trials on GM plants in the UK. It was the last company that was carrying out GM trials in the country.[8]

Meanwhile, Novartis Seeds and Aventis CropScience have also joined Bayer CropScience in informing the UK government that no GM crops are being grown this year.[9]

And the list goes on. Large-scale commercial research into GM crops in the UK is to come to an end after Syngenta, an Anglo-Swiss biotechnology company and another major industry player, said it would close its laboratories because of poor business outlook for the technology. The company instead plans to move its operations to the US where there is a more favourable business and regulatory climate (i.e. less regulation).

Though its US research centre will continue developing agro-chemicals, all its work on biotechnology will, however, come to a stop with a loss of 130 jobs.[10]

Besides environmental and health risks, and questions over the financial viability of investing in biotechnology, there is growing evidence from the experiences on the ground that the technology is not benefiting a large number of people whose lives depend on it.

Recent experiences of farmers in Kenya, Indonesia and India - whether they are growing GM sweet potatoes or GM cotton - have shown that for the majority of these people, the promised benefits of high yields and thus better incomes have not materialised.[11]

Despite this evidence, the biotechnology train is determined to move on. Monsanto plans to continue to develop other traits of GM wheat 5 while Syngenta will continue with plans to develop GM wheat despite Monsanto's decision to suspend its own programme.[12] And governments continue to pursue investors without a full appreciation of the risks involved. The hope is that this enthusiasm is accompanied by awareness of the reality and the risks so that the right choices can be made to ensure that appropriate science and technology serves the goal of sustainable development.

Endnotes

1. 'Biotech's Dismal Bottom Line: More than $40 billion in losses', The Wall Street Journal, 2 May 2004.

2. 'States, cities court biotech, but is it worth it?', Associated Press, 9 June 2004.

3. 'Test-bed biotech ideas in Malaysia', The New Straits Times, 8 June 2004.

4. 'Commentary: Biotechnology as religion', by Leigh Turner, Nature Biotechnology 22:659-660.

5. Press release by Monsanto, 'Monsanto to Realign Research Portfolio, Development of Roundup Ready Wheat Deferred', 10 May 2004.

6. 'Monsanto suspends GM canola programs', AAP/Sydney Morning Herald, 12 May 2004.

7. 'Bayer pulls out of GM canola trials', Australian Broadcasting Corporation, 3 June 2004 ( http://www.abc.net.au/riverina/news/200406/s1124071.htm).

8. 'Top GM food company abandons British crop trials', by Robin McKie, The Observer, 28 September 2003 ( http://observer.guardian.co.uk/print/0,3858,4762874-102285,00.html).

9. 'Despairing GM firms halt crop trials', by Paul Brown, The Guardian, UK, 15 April 2004 ( http://www.guardian.co.uk/gmdebate/Story/0,2763,1192043,00.html).

10. 'Syngenta shuts GM labs in UK', by John Mason, Financial Times, 1 July 2004
(http://search.ft.com/s03/search/article.html?id=040701000928).

11. 'Broken Promises', by Lim Li Ching, Institute of Science in Society, 13 May 2004
(http://www.i-sis.org.uk/full/brokenpromisesfull.php).

12. 'Syngenta says it has no plans to halt its GM wheat program', 12 May 2004
(http://www.agrimarketing.com /show_story.php?id=24992).