The emergence of the red biotech niche and its evanescent dissolution into the integrated parallel “knowledge system” of a new bio-pharmaceutical filière. An Evolutionary Perspective.

This chapter analyzes the emergence of the biotech niche. After the scientific discovery of the double helix of the DNA in 1953, for which James Watson and Francis Crick received the Noble prize, the birth of the modern molecular biology and genetic engineering, gave rise to a rapid development of new technologies related to the re-engineering and recombination of the DNA. These experimental technologies were firstly applied in university, and secondly also in business, producing a flows of newly created start-ups and university spin-offs. A significant number of new science-based dedicated biotech firms were created for the development and commercialization of numerous biotech innovations, mainly based on the conceptualization of new drugs and methods for the genetic treating of diseases. This technological shift occurred without displacing old pharma incumbents due to the symbiotic division of labour that emerged, based on alliances between up-front R&D, performed by biotech firms, and drug commercialization, performed by traditional pharma. The consolidation of the niche can be detected by the steady increasing of the number of biotech firms, and by the striking growth of the partnering strategies of the biotech firm with the phama firms. However, together with tightly vertically integrated partnering strategies we observed also an increasing number of horizontal strategic alliances between biotech firms (bio-to-bio alliances). During 1990s biotech firms started to acquire independent market power, signalled by an increased number of products that they were able to introduce in the market. Thus, the competition with the old incumbents becomes a concrete reality that generated a potential turbulence in the existing industrial structure. Large pharma firms, did not follow neither the alternative of internally absorb the new “disruptive” biotech technology shifting their internal R&D research, nor they were displaced out from the market by the new entrants, as shown by many cases of industry evolution a-la-Klepper. Interestingly, they use their established oligopolistic power to rapidly acquire these new competitors integrating them into diverse industrial conglomerate complexes, whose overlapping multilevel borders define now the nascent bio-pharma industry. We derived our empirical analysis using two large databases: Bioscan and Medtrack. We establish three primary findings. First, the division of innovative labour in biotech is not any more limited to a simple conceptual model in which biotech firms perform external R&D activities instead of pharma. The biotech partnering strategy encompasses more actors and more re-combinative processes than in the past. Second, the largest biotech firms became “poles of alliances” aggregation challenging the old traditional big pharma companies. Third, after 2000s the biotech niche is experimenting an evanescent dissolution into the integrated parallel knowledge system of the bio-pharmaceutical filière due to the large flows of M&A perpetrated by the Big Pharma firms. Keywords: biotech, alliances, innovation