How US can stay out front in biotech

Although the first fruits of the biotechnology industry are about five to 10 years away, the United States government is already worried about what it must do to keep its early lead in the field.

This concern was made manifest last week in a 612-page report released by the Office of Technology Assessment (OTA), the research arm of Congress.

Titled ''Commercial Biotechnology: An International Analysis,'' this report reflected the widespread view that biotechnology will be the subject of an intense international competition as the US, Japan, and several European nations vie for leadership. The fledgling industry is expected to have an enormous impact in a number of different areas: pharmaceuticals, animal and plant agriculture, specialty chemicals and food additives, commodity chemicals, and energy production.

So far, the US has a clear lead, the OTA finds: ''A well-developed life science base, the availability of financing for high-risk ventures, and an entrepreneurial spirit have led the United States to the forefront in the commercialization of biotechnology.''

Sungene Inc. is a case in point. Company president Tom Hiatt says his 31 -person business, started in 1981 with venture capital, is concentrating on the application of cell-culturing and gene-splicing techniques to produce new varieties of commercial crops with higher yields. Sungene hopes to have its first product, an improved variety of corn, on the market by 1987. According to some estimates, efforts of this sort could add $2.25 billion in annual crop productivity by the year 2000.

Despite the advantage that small companies like Sungene have given the US, the OTA finds little reason for complacency.

Japan, it appears, is emerging as the major competitor in this arena for two basic reasons. First, Japan has a large and sophisticated fermentation industry that will help it commercialize this new science, particularly in the pharmaceuticals field. Second, the Japanese government has targeted biotechnology and is both funding and coordinating research-and-development activities among industry, university, and government representatives.

The OTA report cautions that there are several issues that Congress must deal with if the US is to maintain its lead. Federal support for basic life-science research, the major reason for the nation's current competitive advantage, has declined in recent years. In addition, US support for relevant applied research has been much lower than in Japan and has dropped even more than that for basic research. Finally, clarification of US health, safety, and environmental laws may be necessary.

Naturally, the report is subject to a variety of interpretations on Capitol Hill. Democrats like Rep. George Brown of California are using it to argue that federal support for life-sciences research must be bolstered. Republicans like New Hampshire's Rep. Judd Gregg cite it as proof of the need to remove regulatory hurdles from the path of the new industry.

The body of the report, however, gives more support to the liberal than to the conservative position. It concludes that the two most important factors in this evolving competition are money and properly trained people. Regulatory issues, while significant, are ranked as less important: Japanese regulations actually are more strict than those in America.

On the financial front as well the US has the upper hand. Hundreds of new companies like Sungene are springing up here, bankrolled by venture capitalists and large companies interested in getting into the field. In Japan, most of the money is coming from the government.

The US also has the largest number of basic scientists, such as molecular biologists, working in this field. This highly trained labor pool is available because of the US government's large investments since World War II in the life sciences. But in recent years federal funding has been on the decline. ''If US government funding for basic life-science research continues its decline, the science base . . . may be eroded,'' the report cautions.

While America holds a clear edge in basic research, Japan has a definite advantage in applied research in related fields, the OTA finds. ''The Japanese may rely on the United States and other countries to prove the early feasibility of new technologies for commercialization. This strategy worked very well in the semiconductor industry, and Japan may very well attain a larger market share than the US because of its ability to rapidly apply results of basic research available from other countries,'' the report warns.

Sungene's Hiatt has a slightly different view. ''As far as I'm concerned, the government should support high-quality education, basic research, and maintain the nation's basic infrastructure like highways,'' he says. Applied research is better done by small companies than through federal programs, he adds.

Hiatt also questions whether there will be head-to-head competition in biotechnology. ''An interesting thing about this field is that there has not been a shake-out yet. The reason for this is that people are specializing,'' he says. The field is so broad and there are so many potential products, he argues, that it may be a very long time before companies, or countries for that matter, need be in direct competition.