Bioinformatics: Ready Or Not For Prime Time?

By Ketaki Sood, Larta Research Economist and Rohit Shukla, Larta VOX Publisher

While computation and data analysis in biology dates back several decades, it was the emergence of powerful computing platforms and tools alongside new gene sequence data that pushed the development of the new field of bioinformatics. Bioinformatics, defined simply as the marriage between computer science and biology, wherein computers and mathematical tools are used to manage and analyze biological information is, not surprisingly, not well understood. Not only is bioinformatics extremely interdisciplinary, including the fields of statistics, mathematics, computer science, biochemistry, physics, and linguistics, but it is also rapidly transforming, causing much debate on the very definition of the term. Furthermore, the various notions of what constitutes a bioinformatics company and the absence of market leaders in the industry have further hampered understanding of the field.

Spurred by the research efforts of the Human Genome Project in the early 1990s, bioinformatics came into the spotlight as the IT component of biotechnology that enabled the development of biological research beyond in vivo research (experiments or analysis conducted inside a living body or organism) and in vitro experimentation (work performed in isolation from a living organism, in a laboratory setting). A new dimension, in silico, or computer-based experimentation came into its own. Bioinformatics, in general, incorporates both genomics (the study of genes) and proteomics (the study of proteins, and their structures and functions), and is best known for the analysis and storage of nucleic acid and protein sequences. Currently, bioinformatics is being applied at every stage of the drug discovery process, but is mostly used in the target identification and target validation stages.

Research firm IDC projects that spending on IT-related products by the life sciences industry will reach $30 billion by 2006, up from $12 billion in 2001. This is not surprising as R&D and the consequent explosion of data and information in the life sciences industry continue to grow at a rapid pace. Furthermore, bioinformatics is being viewed as the solution to the woes of the pharmaceutical industry, which is under immense pressure to develop new drugs as existing drug patents face expiration and R&D costs escalate. R&D expenditures to create new drugs rose from $700 million 1995 to $800 million in 2001, and is expected to inflate to a mammoth $1.6 billion by 2005. On top of spiraling costs, it takes approximately 15 years to develop a new drug with the added risk of one in five drugs failing to pass human clinical trials.

The tools and methodologies associated with bioinformatics can drastically reduce the time, cost, and expertise required for new drug development. Experts believe bioinformatics has the potential to reduce the annual cost of developing a new drug by 33%, and the time taken for drug discovery by 30%. Meanwhile, cash rich pharmaceutical companies are willing to spend large amounts of money to incorporate IT into the drug discovery process. The large drug companies accounted for $3.6 billion of the $12 billion spent by the global life science industry on IT. In addition, IT spending by large pharmaceutical companies is estimated to grow 24% annually. This convergence of life sciences and IT on the one hand is helping pharmaceutical companies overcome the challenge of collecting, processing, storing, and analyzing data in the drug development process, and on the other hand, is creating a big market opportunity for bioinformatics and other computer and software companies. Indeed, the analysis of drug performance in patients and the legitimate extrapolation, compression and simulation of data also provide patients, medical groups, regulatory authorities and pharmaceutical companies alike with information on which to base critical decisions. Highly complex data streams have now become intelligible information, thanks to the power of this extraordinary confluence of disciplines.

Why then has bioinformatics failed to blossom into the next big thing in biotechnology? Why are venture capitalists shying away from bioinformatics investments? And why are bioinformatics stocks a fraction of what they were a few years ago? The bioinformatics market is nascent and somewhat fractured. It is characterized by numerous individual companies catering to the particular needs of drug developers rather than fewer companies focused on providing integrated solutions to broader R&D requirements. In short, the lack of standardized applications addressing general R&D issues has limited the growth of bioinformatics and inhibited its development into a full-fledged industry. There is also a lack of integration between the various players in the bioinformatics business model (software vendors, database providers, hardware providers, etc.), and between the internally developed systems of drug companies and technologies provided by outside vendors. This has caused several pharmaceutical companies to internalize their bioinformatics programs. Complicating matters is the entry into the bioinformatics market of heavyweights like IBM, Intel, Oracle, Hewlett-Packard, and Dell, which see the life science industry as a lucrative business opportunity. While extremely promising, the market isn't big enough as yet to support the large number of existing companies. Competition from industry giants like IBM and Intel only spells more trouble. The catch-22 scenario is obvious, but worth repeating: so long as the market is fractured and niche-oriented, standardization and scale associated with an industry will be difficult to establish, and so long as smaller companies are unable to provide integrated applications, such standardization cannot happen. Meanwhile, the IT and computing giants will leverage their position in the medical instrumentation and diagnostic tools business to develop lucrative tools and services in which integration is key. It is not clear that standardization would develop under their watch either.

No one doubts the importance of bioinformatics in the drug discovery process, especially as data from R&D grows at exponential levels. But, the growth levels projected for the industry seem overestimated and lofty. The bioinformatics market is yet to mature and create a consistent, predictable, profitable sector for itself in the life science industry. In addition, the industry is one with relatively low barriers to entry and increasing competition from larger established IT companies. Only the fittest companies that address the standardization and integration issues will survive.

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