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Biotechnology: Continuing hype? Biotechnology: Continuing hype?
By Chee Yoke Heong
Source: Third World Resurgence, No. 167-168 July/August 2004)
PUBLICLY traded biotechnology companies in the US have been estimated to
have suffered cumulative losses of over USD40 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 USD2.3 billion
in net profit in 2003. Its rival, Genentech Inc, earned USD563 million.
After a three-year slump, biotech companies raised USD1.5 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 USD40
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 USD1,000 investment in Amgen
Inc. at its initial offering in 1983 would now be worth almost USD150,000.
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 USD40 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 USD900
million. In 2003, 314 public companies posted total losses of USD3.2
billion, which was better than the USD9.4 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.
Chee Yoke Heong is a researcher with Third World Network.
Endnotes
1. ‘Biotech’s Dismal Bottom Line: More than D40 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).
Biotechnology: Continuing Hype? Biotechnology: Continuing hype?
PUBLICLY traded biotechnology companies in the US have been estimated to
have suffered cumulative losses of over USD40 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 USD2.3 billion
in net profit in 2003. Its rival, Genentech Inc, earned USD563 million.
After a three-year slump, biotech companies raised USD1.5 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 USD40
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 USD1,000 investment in Amgen
Inc. at its initial offering in 1983 would now be worth almost USD150,000.
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 USD40 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 USD900
million. In 2003, 314 public companies posted total losses of USD3.2
billion, which was better than the USD9.4 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.
Chee Yoke Heong is a researcher with Third World Network.
Endnotes
1. ‘Biotech’s Dismal Bottom Line: More than D40 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).
Biotechnology: Continuing Hype? Biotechnology: Continuing hype?
By Chee Yoke Heong
Source: Third World Resurgence, No. 167-168 July/August 2004)
PUBLICLY traded biotechnology companies in the US have been estimated to
have suffered cumulative losses of over USD40 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 USD2.3 billion
in net profit in 2003. Its rival, Genentech Inc, earned USD563 million.
After a three-year slump, biotech companies raised USD1.5 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 USD40
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 USD1,000 investment in Amgen
Inc. at its initial offering in 1983 would now be worth almost USD150,000.
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 USD40 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 USD900
million. In 2003, 314 public companies posted total losses of USD3.2
billion, which was better than the USD9.4 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.
Chee Yoke Heong is a researcher with Third World Network.
Endnotes
1. ‘Biotech’s Dismal Bottom Line: More than D40 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).
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