|Biotechnology and the Future of World Agriculture (GRAIN, 1991)|
Just two US chemical companies, Monsanto and Du Pont, have together an annual biotech-related R&D budget of some $390 million. (15) Other chemical giants such as Eli Lilly, Schering-Plough and Hoffmann-La Roche each spent an annual $60 million on biotech as early as 1982, (16) a figure that has at least doubled since then. TNCs with comfortable turnover figures that run into several or many billions of dollars can support these mega-investments without a dire need for short-term returns in the field of biotechnology. By comparison, a typical NBF spends an annual $5-10 million or so on R&D, much of it contracted by a TNC, while running substantial losses on the whole operation.
The Japanese started late, but are catching up fast. Virtually all corporate biotech research in Japan is done by giant chemical and pharmaceutical companies, together spending $1.4 billion on biotech in 1989 alone, while the government handed out another $550 million, much of which went into co-operative projects with the industry. (17) The big biotech names in Japan include Mitsubishi (Number One in chemicals), Ajinomoto (the largest food-processor), Kirin Brewery (the biggest brewery) and Kyowa Hokko Kogyo (big in chemicals), each of them annually spending between $60 million and $75 million on biotech R&D. (18) 'The Japanese obviously have a lot of money,' remarks industry analyst Robert Kupor. 'They have targeted biotech as a major area they would like to get into."9 Apart from increasing in-house research, the Japanese giants are now actively shopping around in the US and Europe for qualified biotech expertise. They find much of it in NBFs, several of which have already accepted substantial equity investments from their big Japanese brothers.
When looking at the structure of the biotechnology industry in the North, some geographical distinctions have to be made. In Japan, biotechnology is almost exclusively developed in the laboratories of the large TNCs. In the United States, most of the money spent on biotech also comes from TNCs, with a myriad of smaller NBFs puttering along to survive in market niches or offering their skills to their larger brothers through contract research. Most of these NBFs are the biotech 'research boutiques', referred to earlier. In Europe, it depends where you are. In France, Germany and Switzerland, there is hardly any opportunity for small venture capital biotech companies, and research is mainly in the hands of the traditional drug and chemical giants. The UK offers a picture similar to that in the USA, as several NBFs were formed and are trying to survive like their counterparts across the Atlantic.
Some industry analysts point to the fact that new NBFs are still being set up, thus promising a growing diversification of the sector. But a closer look at the founders of these new companies reveals that many of them are being set up as joint ventures by TNCs which are already dominating the sector. Of the 135 NBFs founded in 1988-89, as listed in the French biotech magazine Biofutur, most have been set up or are controlled by the larger corporate groups. Some of them, focusing on agricultural biotechnology, are listed in Table 4.1. These are the 'true' New Biotechnology Firms. Born out of the need of TNCs to pool their expertise together, they are controlled, financed and run by the true masters of the big-revolution.
In the turmoil of TNCs throwing their weight behind the biotech boom, the original NBFs have a hard time surviving. Some industry executives expect that nearly half of all US NBFs will be taken over within a decade, and a third of them within the next five years. (20) This might even happen more quickly in the ag-biotech sector, where commercial products still have to find their way to the market. Faced with huge R&D costs and meagre sales, the original NBFs have three options for survival. One is to do contract research for TNCs, on which virtually all of them are eking out their living. The second is to try to stay in the race by merging with other NBFs. Finally, there is the increasingly prevalent move to sell out to the TNCs.
Of the typical ten major NBFs working on agriculture in 1985, few were left in their original position in 1990. Internal cannibalism has raged among the NBFs in recent years. DNAP took AGS, Biotechnica swallowed up the ag-biotech division of Molecular Genetics, and Calgene bought Plant Genetics. As well, external investment has been pouring in from the big groups. Japan Tobacco bought 25% of Belgium's PGS, of which Sandoz already controlled ten per cent. With the take-over of Hilleshog, Sandoz also obtained 15% of AGS. Du Pont bought 15 million shares of DNAP. The list goes on. Finally, straightforward take-overs by TNCs have transfigured the NBF panorama as Lubrizol took full control of Sungene and British American Tobacco Co. took over the ag-biotech research centre of Twyford. Table 4.2 lists some of the latest investment manoeuvres.
If all these names and abbreviations make you dizzy, just take a look at Table 4.3, where the R&D expenses of the top 25 agricultural biotechnology companies according to two investment-analysing houses are listed. Only four of the original NBFs managed to get on the list: DNAP, Calgene, PGS and Agricultural Genetics. The vast majority are TNCs and their subsidiaries. Yet this is still a distorted picture, biased towards the smaller companies. Firstly, the US and European investment analysts do not include the Japanese situation, where TNCs dominate the scene. Secondly, the NBFs listed are to a large extent already controlled by the TNCs in the same table either through equity investment or through contract research. Finally, the TNC figures are grave underestimates, as only agricultural biotech spending is listed. Many TNCs have total annual biotechnology R&D expenses of $100 million and more, only a part of which is dedicated specifically to agriculture. It is precisely the integration of different sectors (medicine, food, pesticides, seeds) which forms the formidable strength of biotechnology for companies which are involved in several fields. A major breakthrough in, for example, tissue culture research might be of use for different parts of the same TNC. The seeds division might use it in improving new plant varieties, the pesticide division could find it helpful for developing their products, and for the pharmaceutical researchers it might provide a powerful tool to screen potential medicinal plants for useful properties. In that context, it would be more realistic to add a portion of the basic biotech research to the agri-biotech spending, in which case the NBFs would completely disappear from the horizon.
'Interfirms Cooperation Agreements' (ICAs) are another feature of increasing importance in shaping the global biotechnology market of the future. They draw from an industrial strategy whereby companies that have complementary expertise or parallel market interests co-operate on a selective basis with their main competitors. Such contracts between TNCs and the biotech research boutiques have already been mentioned, but increasingly TNCs are slashing deals amongst themselves as well. 'Biotechnology networks' are proliferating like mushrooms in most OECD countries. According to the European Commission, the ultimate goal of such agreements is often the take-over of one partner by the other. But it can also be an effective way of dividing markets and sharing the cost of research in a way that is beneficial to both. The end result is even further concentration. In the words of the EEC Commission,
The science and technology system directly associated with or organized by global companies is increasingly shaped and controlled by tightknit networks of alliances, integrations, joint ventures and projects. (21)
Graph 4.1 shows how such agreements are spinning a tight little web amongst biotechnology companies.
The Netherlands provides an example of how the sector is being controlled by a few companies. According to a study done by the KNBTB, one of the largest farmers' unions in the country, a full two-thirds of all corporate biotechnology research in the Netherlands is carried out by only four corporations: Gist-Brocades, AKZO-Parma, Unilever and Duphar. (22) Another group of 12 companies, some of them TNCs as well, command an additional 15%. The remaining 20% is done by start-ups and other companies. The NBFs have a limited share, with many of them being controlled by their larger brothers anyway (see Graph 4.2). Between 1980 and 1988, corporate research in this area grew by 75%, with public research falling behind with only 45% growth in the same period. But control is not only measured by looking at R&;D spendings. Much of the so-called public research is strategically oriented by TNCs, either straightforwardly through contract research at the universities, or through a direct voice in the priority-setting process which governs the public research agenda.
The main instrument of the Dutch government in directing public research is the so-called 'IOP-b Programme', a funding mechanism to promote public biotech research, set up in 1981. A survey was held among companies as to what the research priorities should be. In the first survey round, only the eight largest companies were involved. In the second, among 49 small- and medium-size companies, the Dutch commission concluded that since the smaller companies did not oversee the whole field of research, their views should not be taken into account. As a result, the TNCs now heavily control the direction of the whole programme. Of all seats available in the different committees to decide on the spending of the IOP-b budget, over one-third have been assigned to private companies, with over half of these being occupied by the four top TNCs. (23)
TNC control of public research has been subject to intense debate and concern. There is probably no other field of science where corporations have entered the university campus in such a big way. Universities and other public institutions, under pressure from budget cuts and austerity programmes, are looking for additional funding, while TNCs sniff around for cheap labour. The new marriages might be beneficial for both, one could say: the TNC makes the funds available and the university carries out the research. Monsanto 'donated'$23.5 million to Washington University for biotech research; Bayer is contributing to the Max Planck Institute in Cologne for the same purpose; and Hoechst built an entire $70 million biotech research laboratory for the Massachusetts General Hospital where research on crop genetics is also carried out. Lubrizol has more than $20 million tied up in research contracts at 18 universities and other public institutions. (24) These industry-university contracts have caused much controversy for obvious reasons. 'You don't need to know algebra to figure out how that committee works,' says US congressman Albert Gore, talking about the committee that governs the Monsanto/Washington University deal. 'No research can be done unless the company gives permission.'
Burke Zimmerman, then with the biotech company Cetus, says about the Hoechst grant for a biotech laboratory: 'Essentially everyone in that lab is an indentured servant to Hoechst. (25) In most contracts, the TNC has the right to the first look at the results and can delay publication of them until patent possibilities are investigated. In his excellent study on this matter, Martin Kenney, then professor at Ohio State University, concludes:
The point is not only that the knowledge being sold was paid for by the public but, even more important, that the university, a peculiar and fragile institution . . . is being subsumed by industry, one of the very institutions with which it should, to some degree, be in conflict. When university and industry become partners, the entire society is endangered . . . (26)
The emerging picture, then, is one of an extremely powerful technology mostly developed and controlled by a few large companies, either directly or through control of public research. The picture also shows a total concentration of biotech research within the OECD. In a report for the World Bank it is calculated that up to 1985 only $300 million (or 7.5% of the global figure) was spent on biotech R&D outside the US/EEC/Japan bloc. (27) With Canada and Australia responsible for most of this amount, the Third World emerges as a complete outsider in the big-revolution. With the explosive growth in biotech research in the North since 1985, this outsider role is becoming ominously inextricable.