By Frances Bishopp

HOUSTON -- While the $15 billion U.S. biotechnology industry leads the world market with some 1,300 companies, compared with approximately 750 companies in Europe, 224 in Canada and 500 in Japan, the news is not all good in this country.

Today, the U.S. has fewer start-ups compared with Europe, according to Steven Burrill, of Burrill & Co., a private merchant bank in San Francisco, and Europe's industry appears to be growing faster. Also, accessing Wall Street and public equity markets is currently more difficult than it has been in the past, Burrill said.

Burrill led a panel of international speakers at an educational session titled "Biotech '97 . . . What's Really Happening Worldwide," one of many sessions at this year's Biotechnology Industry Organization 1997 International Biotechnology Meeting & Exhibition. The five-day conference in Houston ends today.

Burrill pointed out that, over the last decade, the definition of biotechnology has changed. "Early in the industry, we were defining this around a very narrow set of sciences that included such things as genetic engineering and recombinant technology. Today, it is a whole toolbox of enabling technologies that includes sciences such as agriculture, environmental applications and combinatorial chemistry; tools that we will use to develop the new drugs for tomorrow," Burrill said.

"We have softened the definition from a purist, rather narrow definition of biotechnology to a more generic one," he added. "We have moved away from academia, the Nobel Prize of purism, for the development in the private sector of these technologies. It's okay to get rich, it's okay to have economic participation."

Another change, Burrill said, has to do with the science and technology itself. "We used to look for a little DNA, make a little RNA, make a little protein and make a little money," Burrill said. "Today, we are driven by enabling technologies. There is a whole set of new sciences that are changing the way we are discovering and developing drugs. We have brought in genomic technology and skill in combinatorial chemistry, which has changed the vehicle by which we do drug development."

Part of the change, he said, is better clinical development due to a molecular understanding of disease and a better understanding of the patient profile. "We are beginning to see the emergence of customized medicine," Burrill added.

Canadian Biotech 'Research Rich, Profit Poor'

In Canada, according to Alex McPherson, president and CEO of Biomira Inc., of Edmonton, Alberta, the biotechnology industry is "research rich and profit poor."

In Canada, though, the industry is coming of age products are reaching the marketplace, partnerships are being forged and biotech products are being increasingly sold outside the country.

Canadian biotechnology, McPherson said, must now be more willing to take the risk of going down the road to commercialization. "Canada must move products through the process in order to bargain from a position of strength," he explained.

Bernard Gilly, president and CEO of Transgene, of Strasbourg, France, told the group biotechnology is gathering considerable momentum in Europe, with the U.K. currently dominating the industry.

On the positive side, Gilly said, a number of U.S.-based investment bankers are now coming to Europe and the conventional marketplace is taking more flexible approaches to biotechnology companies.

Gilly said Europe secured 22 product approvals in 1996 vs. four approvals in 1995, and 33 overseas partnerships in 1996 vs. 19 in 1995.

European science plays an important role in such areas as genetics, while remaining under-utilized, he said.

On the negative side, Gilly pointed out that European political and administrative wheels move very slowly; agricultural biotechnology products are still raising controversy; regulatory issues are still unclear for innovative health care biopharmaceuticals; and, most importantly, Europe needs a demonstrative Pan-European commercial success.

Japanese Regulations Not Strict, But Complicated

Keiko Oishi, manager of the strategy development department of CMIC Co. Ltd., of Tokyo, gave the group the Japanese biotech perspective. The industry, she said, focuses on pharmaceuticals, diagnostics, chemicals, food, agriculture, livestock, fisheries and the environment and has had two successful products: erythropoietin, with $960 million in sales in 1996, and human growth hormone, with $730 million in sales in 1996.

Japanese companies look for products that are later than Phase II clinical trials, are under development in the U.S. and Europe, have a strong patent position and have high marketability, Oishi said.

Rather than "strict," the Japanese regulatory environment could be described as complicated due to a cumbersome jurisdiction of various ministries and a lack of infrastructure to evaluate new technologies.

Oishi, who predicts fewer large U.S. and Japanese biotechnology deals in the next one to two years, said the area of genomics is still considered high risk in Japan.

Burrill closed the session with a description of a business model that, in his opinion, will propel the industry for the next 20 years. The real drivers of value, Burrill said, are a sustainable business platform, strong intellectual property, good management and a business driven around some form of cash flow that would finance the business over time. *