Module I: The Business of Biodiversity

The market size for pharmaceuticals was US$320 billion in 1999, with an 8 to 12 percent annual growth rate in the major markets. R&D expenditures totaled more than US$40 billion (1997 figure), 12 percent of which was spent on synthesis and extraction, and 15 percent of which was spent on screening and preliminary evaluation. Less than one percent of these R&D expenditures was spent in non-OECD countries (i.e., developing countries). Leading firms include Glaxo-SmithKline, Aventis, Merck, Pfizer-Warner, Astra-Zeneca, Bristol-Myers, and Novartis.

Other markets related to genetic diversity include the following:

• Agrochemicals have a market size of about US$30 billion, with relatively slow growth. The market is highly regulated, with growing competition from transgenic crops in the major markets. R&D expenditures are approximately US$2.5 billion annually. Leading firms include Novartis, Bayer, Dow, BASF, and Dupont.
• Commercial seed sales amount to some US$30 billion per year, with R&D expenditures at approximately US$2 billion annually. Major firms include Dupont-Pioneer, Monsanto, Syngenta (formerly Novartis), Aventis, Dow Agro, Limagrain, and Seminis. Ex-situ collections (gene banks), both private and public, are the principal sources of genetic materials.
• Industrial enzymes have a market size of about US$1.5 billion, with a high growth potential, as products promise to replace synthetic industrial chemicals. Leading firms include Novo Nordisk Biotech, Genencor, Aventis, Roche Molecular, Diversa, Maxygen, and Dyax.
• Fragrances and flavors have a market size of some US$10 billion, growing annually at an average of 7.2 percent since 1992. This field has many opportunities for new product discovery, and high quality natural products can often command a premium market price.
• Herbals and botanicals have a market of nearly US$11 billion in the United States and Europe, with an annual growth rate of 16 to 18 percent in the United States. A few products dominate the market: garlic, echinacae, ginko bilboa, St. John’s wort, and goldenseal. Leading US firms include American Home Products, Pharmavite, Leiner, East Earth Herbs, and Solgar; the top countries exporting to the US are India, China (mainland and Hong Kong), Germany, Mexico, Chile, Japan, Spain, Korea, and Brazil.

A number of factors affect the market for biological samples, in some ways limiting the potential for income generation through the exploitation of biological diversity. While biological diversity creates huge potential for discovery of new useful compounds, there are many sources of supply of raw samples. Biological samples also tend to be relatively expensive to collect and extract, and active compounds are expensive to isolate and replicate. Resupply is often seen as a problem, and there is increasing competition from other methods of development, including rational drug design, combinatorial chemistry, combinatorial biology, and biologics.

As a result of these factors, the price of biological samples is only slightly more than the average cost of collection, and profit is minimal from the samples alone. Prices for biological samples average around US$50 for 20 to 100 milligrams of extract.

In order to obtain significant benefits from biological resources, source countries must develop and market a unique set of biological, cultural, and technical resources in order to create greater opportunities for negotiating adequate compensation. This compensation should include measures to promote conservation, indigenous scientific and technical capacity, and sustainable development. Most bioprospecting agreements for raw samples include up-front payments, a small royalty rate (0.5 to 1.5 percent), and capacity-building (training and technology transfer).