Jim Greenwood Keynote Address at BioJapan 2005

I am honored to be part of this celebration of biotechnology in Japan. The turnout and excitement here today speak to the progress the Japanese biotech industry is making on every front: in the research laboratories, in the media, in the halls of government, and in the corridors of events like this one where research and development collaborations begin.

A couple of months ago, I got my first introduction to this kind of biotech excitement at the BIO 2005 convention in the U.S. city of Philadelphia, an event that many of you also attended. There, I experienced firsthand the incredible diversity of this industry and its players. And I saw that we in America, just like you here in Japan, are part of a global industry. Those of you were there know the convention was like the Olympics of biotech - competitive, sure, but with a spirit of unity and idealism that carried us all back to our companies or organizations with renewed optimism and passion for our mission. That mission is to create solutions for health, hunger and the environment. I can feel that same spirit here today.

My topic this morning is "enabling conditions for biotechnology." How does a country compete in the global biotech arena? How do ideas advance from academic hypotheses to therapeutic breakthroughs on the pharmacy shelf, seeds in the field, and efficiencies on the manufacturing floor?

But the first question, the fundamental one, should be: Why does it matter that we enable biotechnology? And the answer, which is easy to lose sight of in our day-to-day work and worries, is that this is a transformative technology, a technology that is going to change . . . everything. As much as steel or the steam engine or the computer, this is a strategically vital technology that will help determine the winners and losers in the global economy, while lifting quality of life in ways we're only beginning to imagine.

Let's start with health. Japan, Europe and the United States are all aging societies. About one in every three Japanese citizens and one in five Americans will be over 65 by 2050. Within a few decades, the burden of aging and elderly populations could wilt our economies and our sense of dynamism. But what if aging were not a burden? What if the aged could provide to society the benefits of their wisdom and experience unwithered by degeneration, disease and disability? What if our aged populations could make us stronger, not weaker? Biotechnology provides the tools that can make this dream a reality.

Biotech will make medicine predictive, preventive and precise. Soon, we may be able to put our genomes on a card, and use the information to plan disease prevention strategies. We'll have access to exquisitely sensitive diagnostics that will detect pre-disease states. So we'll prevent cancer or Alzheimer's disease before it strikes, in much the same way as we use drugs like statins to prevent heart attacks. Our doctors also will use all this information to match us with the drugs most likely to help us and least likely to hurt us.

For many, this new medicine - predictive, preventive and precise - will arrive too late, and it may not be adequate to address the effects of accidents and injuries. That's why biotech scientists here in Japan and elsewhere are racing to develop regenerative medicine technologies, including stem cell therapy. Stem cell therapy is already curing spinal cord injury in animals, and could someday repair heart damage after a heart attack and regenerate pancreatic cells to cure diabetes.

Biotech can even provide vaccines and therapies to fight the infectious diseases that still ravage the developing world, and to protect against bioterror attacks. And all of these new products will be in demand from billions of people worldwide - that's going to be a tremendous boon to the economies that create these products.

In the coming decades, all of these biotechnologies - technologies everyone here has a role in developing - will make us stronger, healthier and more productive over a longer lifespan. This is the centerpiece of the biotechnology mission.

Let me tell you about another, very different way biotechnology can make Japan and other industrially advanced nations stronger: It can slash our dependence on foreign oil. The appetite of advanced economies for imported oil makes us vulnerable to shortages and price spikes, contributes to global warming, and puts Japan, Europe and the U.S. in increasing competition with emerging powerhouses such as China and India for a finite global supply.

For those of you who are not familiar with industrial applications of biotechnology, allow me to explain how biotech can help: Biotech enzymes can break up plant matter - even the cellulose that makes corn stalks, rice and wheat stand upright. These enzymes can dissolve all the stalks, stems, leaves and chaff into small molecules of sugar that can then be turned into ethanol. This is a technology that could change the energy markets profoundly, and soon.

Last year brought the first commercial shipment of ethanol made from agricultural waste, and the costs of biotech enzymes are falling so quickly that bioethanol is on the verge of cost-competitiveness with petroleum-based gasoline. In fact, the cost could sink to 88 yen a gallon by 2020. Just as important are the environmental benefits of this shift to a renewable fuel source that creates no net greenhouse gases.

To maintain our standard of living while feeding a growing world population, we'll also need to apply biotechnology to agriculture. Already, six biotech crops, including corn, soybeans, and cotton, produce an additional 2.3 billion kilograms of food and fiber per year in the U.S. alone and reduce the use of pesticides by 23 million kilograms.

But this isn't just a U.S. phenomenon. About 90 percent of the 8 million farmers who planted biotech crops last year were in the developing world, and research is under way worldwide to deliver benefits specifically targeted to regional climates and needs. The future will bring biotech crops able to thrive in arid climates or salty soils, as well as foods that are more nutritious and contain healthier oils. Biotechnology can also be used with conventional breeding techniques to develop livestock free of mad cow disease and E. coli, and farmed fish that grow faster and have a lighter impact on aquatic ecosystems.

Japan is to be commended for its pragmatic vision in developing and applying regulatory regimes that enable these advances, and we look forward to working with you to spread the experience and understanding we share with you in this area to other countries that could benefit.

Biotechnology's impact extends even to conventional manufacturing of everyday products like paper, textiles, vitamins, plastics, detergents and dozens of others. Biotechnology is replacing chemical technologies with cellular and enzymatic ones - cutting resource use and toxic pollution. The economic impact of these quiet changes can be staggering: The consulting firm McKinsey & Co. predicts biotech will create more than 17.5 trillion yen in added value in the chemical industry alone by 2010.

In short, biotechnology has the potential to transform vast swaths of the global economy. That's why we're all here and why the national government, regions and cities in Japan are investing so heavily in biotechnology. This health-oriented, environmentally friendly industry is solving the problems that matter most, and in the process growing at double-digit rates and creating jobs that pay well more than the average wage.

In fact, worldwide, the industry is doing phenomenally well, even at what I believe is only the dawn of the biotech era. Let me share a few numbers:

• There are now more than 4,000 biotechnology companies worldwide, including more than 460 bioventure startups in Japan.
• More than 200 biotech medicines have reached the market-up five-fold from 1995. Sales of these products hit 6 trillion yen in 2004. More than 300 additional biotech medicines are in clinical trials, and thousands more compounds and targets are in early-stage R&D.
• Biotech companies raised 2.3 trillion yen in new financing in 2004, making it the second best year ever, with strong performances in the U.S., Europe and Japan, where Sosei went public last year at about this time with a splash. The pace of financing is running almost as strong this year. In fact, biotech companies are better capitalized than ever before in the industry's history, with more than 11 trillion yen raised since 2000.
• In the United States, the market value of publicly traded biotech companies has leapt nearly 850 percent in 10 years, approaching 44 trillion yen. These companies are expected to turn profitable in the aggregate by 2008.
• Pharmaceutical companies are seeking out biotech partnerships in record numbers. Last year brought more than 500 new deals, up 40 percent from 2000. Add the deals between biotech companies and there were about 900 new alliances last year.
• It may surprise you to learn that more than half of these alliances, 480, were cross-border deals, including 57 involving Japanese companies.
• The news is also good for agricultural biotech. A record 80 million hectares of biotech crops were planted in 17 countries last year, up 20 percent.
• On the industrial side, current numbers are harder to come by, but many projections, including those of McKinsey, suggest this segment could ultimately eclipse agricultural and healthcare applications. BIO's next industrial biotech conference, in Hawaii, will highlight opportunities in the Asia-Pacific region.

Biotech is clearly thriving in the new millennium. And yet our industry is also quite fragile. That's because biotechnology is small companies doing big science. Most of our companies employ fewer than 50 people and they're developing technologies that can take a decade and hundreds of millions of dollars of investment to bring to market. Many experimental products fail during testing.

We hope that new tools incorporating computer modeling, pharmacogenomics and other technologies will improve those odds. As we learn more about life, as more pieces of the molecular puzzle fall into place, we'll bring the targeted precision of the latest generation biotech medicine to the art and science of drug discovery itself, as well as to agricultural and industrial biotechnology product development.

But to get there from here we have to ensure that those enabling conditions I mentioned are in place, both in Japan and throughout the world. Of course, there is no universal model for success. Every biotech community is an organic reflection of the unique cultural and scientific circumstances in which it arises. But even so, I believe there are a number of underlying principles that transcend geography and cultural differences. The bottom line is: Any region that wants to build a biotech industry must have world-class science, respect for intellectual property rights, plenty of capital, a straightforward and reasonable regulatory path, and an adequate commercial market.

Let's start with enabling conditions at the national level.

• First, any nation that hopes to cultivate biotechnology must support science and math education to ensure biotech companies have the workforce they need. Ultimately, one of the limiting factors on biotech growth may be access to qualified scientists and regulatory experts. Taiwan, for example, has high ambitions for its biotech industry but needs about 2,000 more researchers.
• Second, generous funding for basic academic research is essential. University researchers created the foundational technologies of the first generation of biotech - recombinant DNA and monoclonal antibodies. And they continue to expand the boundaries of what is possible. Here in Japan recently, academic researchers have grown capillaries from embryonic stem cells, and successfully used parthenogenesis to create a mouse with two mothers. These are the kinds of breakthroughs that could lead the way toward regenerative medicine.
• Which brings me to the next enabling condition, and that is freedom to pursue science based on ideas, not ideology. The U.S. is in danger of falling behind in the regenerative-medicine race because of near-paralyzing limitations on the work that government-funded scientists are allowed to do. Academic scientists interested in embryonic stem cell research are eligible for government grants only if they work with cell lines derived before August 2001. As we all know, much has changed in the last four years, especially in the field of stem cell research.
• But how do we go from early-stage research such as that underway in stem cells to therapies for millions? Well, the first step is technology transfer. It takes additional research, manufacturing scale up and expensive clinical testing to turn a great idea into a product and launch it into the marketplace. A smooth technology transfer system that expedites the transition from academia to commercial research is, therefore, another enabling condition for biotechnology. In the U.S., many discoveries gathered dust before the 1980 Bayh-Dole Act, which allowed universities to patent and license discoveries financed by government grants. Here in Japan, recent, very successful reforms have helped spawn many university spin-off companies.
• A related enabling condition is a strong system of intellectual property protection for medicines and indeed all the products of life science, including plants, animals, cells, genes and cell products. Investors simply will not provide the enormous sums required to develop biotech products unless they are certain those products will be protected from competition for some length of time.

Although there are still many controversies surrounding patenting, we are making progress. A growing number of countries, including China and India, are coming into compliance with World Trade Organization rules for pharmaceuticals. This is good news for all of us, since these are very large markets with a growing middle class.

• In addition to private investors, small biotech companies depend on government support to get breakthrough ideas off the ground. This support can take a variety of forms: regional incubators, grant funding, business development assistance, even direct investment. Because of the risk involved, it often takes a government hand to advance early-stage technologies, or technologies for which the existing market is small. That means an extra push to get off the ground stem cell research, bioenergy, biodefense products, and vaccines for diseases plaguing the developing world.

One of the best policy models may be the orphan drug programs adopted by Japan, Europe and the U.S., which have spurred development of more than 250 new drugs for rare diseases and have been a major catalyst of the biotech industry's growth.

• As biotech products advance through commercial development, a predictable, science-based, efficient regulatory system becomes another enabling condition. It's imperative that you, as Japan's biotech leaders, make sure your regulatory officials know how the rules, procedures and their implementation affect our industry's ability to bring new drugs to patients and agricultural products to farmers and consumers.

In the United States, BIO is the industry's primary advocate for issues involving U.S. Food and Drug Administration, the U.S. Department of Agriculture, and other regulatory agencies. Right now, we are working to ensure that new concerns about drug safety do not slow down drug reviews and approvals. As you develop products with an eye toward the U.S. market, I encourage you to let us know what obstacles concern you, so that we can work to lower those barriers. In the coming months we will begin to renegotiate a law through which industry pays fees to the FDA for drug review, while the agency commits to performance goals, such as reviewing applications within specified time frames. This may be our best opportunity for several years to improve the system.

I understand that this is a time of transition for the Japanese drug regulatory system as well, that in fact some fundamental restructuring has taken place as a result of the International Conference on Harmonization. I applaud the reforms that have been made, and I am optimistic that the changes will ultimately benefit our industry. However, I would strongly urge you to get involved and make sure biotechnology's voice is heard on issues such as staffing, speed, consistency and transparency of the system. Regulators want and need to know the impact of their actions on your ability to attract capital and develop life-saving products. Too often, biotech executives are too preoccupied with their business to get involved in the policies that ultimately can determine whether or not their business succeeds.

Many of BIO's members have said they would like to see, throughout Asia, regulatory systems that are more receptive to our companies' products. We realize it's necessary to test medicines in Asian patients because there can be significant differences in drug response vs. other populations. But in the interest of getting life-saving therapies to patients as quickly as possible, we would like to see a full shift to smaller bridging studies, and especially bridging studies that can be used to support applications in multiple countries. In Japan, new regulations allowing the submission of clinical data from other countries, which also give Japanese companies the cost-saving option of outsourcing, are a big step in the right direction.

Of course, what would be ideal for biotech companies around the world is a fully harmonized global regulatory system. One drug development program, one application: Worldwide approvals. The International Conference on Harmonization has made strides toward this goal, at least for Japan, the U.S. and Europe, although we may never reach complete harmonization even among those three systems. But the JBA, BIO and every other biotech and pharmaceutical association should be harmonized in our pressure to standardize the process as much as possible, to avoid redundant testing and paperwork.

On the agricultural side, Japan has been a bright spot for biotechnology. The approval process for biotech crop imports is strict, but it works well, with more than 20 products cleared. In the U.S., we are currently working on issues surrounding the regulation of pharmaceuticals made in plants, and transgenic and cloned animals. The regulatory agencies' handling of these products may well determine the financial viability of companies engaged in these avenues of research.

• An efficient, science-based regulatory system is critical to biotechnology, but so, too, are marketplace incentives. If markets for new therapies and vaccines are insufficient, investment will evaporate. Now, we all know that the market for medicine looks nothing like other consumer markets, for cars, say, or cell phones. In most cases, the primary market is not the consumer who enjoys the product, but the government. The United States comes closer to having a real market for medicines than any other industrialized nation, but even there the government's role is growing. With the advent of government-sponsored drug coverage under the Medicare program for our senior citizens and disabled, the government's share of the drug market will soar from just 2 percent this year to 28 percent in 2006. Where the biotech industry succeeded in the design of this program was in bringing private-market mechanisms to bear. Consumers will have choices among probably dozens of competing private plans. There will be no centralized government purchasing agency for drugs.

Marketplace rewards and reimbursement policies that ensure patients have access to our breakthroughs are absolutely critical to the health of our industry. Without these incentives, biotech companies can't raise the money they need from investors to fund R&D of the next generation of therapies.

For evidence, we need only look at what's happened in Europe, where severe price controls reign. As recently as the early 1990s, Europe led the U.S. in drug research and development, but today it's fallen behind, and by 2012 R&D investment is projected to sink to half of U.S. levels. European powerhouses like Novartis, GlaxoSmithKline and AstraZeneca are investing billions of dollars in U.S. R&D facilities.

Of course, the American model is not ideal for everyone - on that point, even most Americans would agree. Our system is overly complicated and leaves about 15 percent of the population uncovered by any health plan. However, imperfect as the system is, it provides incentives for innovation that are powering biotech advances.

We need your help in making sure incentives are available here in Japan, the second largest pharmaceutical market in the world.

I've talked quite a bit about the national policies that are needed to foster a strong biotech community, but some enabling conditions are more local. Startup bioventure firms need incubator space and seed money; they need help with business plans. As they grow, they need highly trained workers. Regional and local governments can create these conditions, and indeed they are working hard to do so throughout Japan, in regions such as the Kinki Bio-Cluster, the Kanto Bio-Cluster, Hokkaido and Greater Nagoya.

Some enabling conditions we can create ourselves. Virtually every biotech company needs the support of investors, corporate partners and research collaborators. One of Pfizer's top executives is fond of saying that even Pfizer - the world's largest pharmaceutical company - cannot do it all alone.

That's one of the reasons membership and participation in organizations like the JBA are critical to the growth of your business. City and regional-level networking organizations are also powerful: The regions that succeed in cultivating biotechnology typically have a vibrant network of universities and companies, with plenty of networking events and opportunities for cross-flow of ideas.

But we also have to think beyond our regional and national borders. Biotech is global, and sometimes the best ideas and partners may be 10,000 kilometers away. Meetings like this one, as well as BIO's BIO-Asia partnering meeting in January and the BIO 2006 convention in Chicago, help bring the worldwide biotechnology community together.

Participating in the JBA, your local or regional biotech association, and perhaps even BIO, also gives you a voice in the larger government policies that affect the biotechnology industry-tech transfer, regulations, reimbursement. Ultimately, it is you, as the leaders of biotechnology in Japan, who enable the conditions of success.

I've attempted this morning to lay out a few principles, but as I close, I want to reemphasize that there is no one recipe for building a biotechnology industry. Each biotech community is unique, evolving from unique regional strengths. In Australia, biotech researchers are combing the coral reefs for potential therapeutic compounds. In Iceland, they're mining a unique healthcare and genealogical database for disease targets. In the farming-intensive Midwestern United States, the drive is to develop new agricultural products using biotech. Here in Japan, the National Bioresource Project is under way to develop one of the largest collections of biogenetic resources in the world, along with the Protein 3000 Project and a major personalized medicine project based on single nucleotide polymorphisms.

Today, the United States dominates the biotechnology industry globally, but that will change. You might wonder why I would fly to 11,000 kilometers to help encourage that change, to cheer on the competition. Well, the fact is, biotechnology is not a zero-sum game. It's collaborative, it's cumulative, and the more science that's done around the world, the more everyone, everywhere benefits. Discoveries made in Japan - of new genes or proteins, for example - help scientists and companies in the United States, and vice versa. If a Japanese company develops solutions that make manufacturing more efficient and eliminate toxic emissions, U.S. companies and our environment benefit. If one of you creates a product that cures brain cancer, American patients benefit.

Back in the 1960s and '70s, people began to talk of a global village, linked electronically. We've achieved that vision, with satellites, fiber optics, cell phones and the internet. Today, we need a new vision, a bigger vision. After all, our environment is global. Agriculture is global. Humanity is global. Life is global. Biology underlies it all, and biotechnology is the next great global industry. I am proud to join you in this endeavor and hope to see you all at BIO-Asia and BIO 2006 in Chicago.

Domo Agigato gozai-Mashita.
[Thank you very much.]