Staff Writer

TORONTO - There's a reason why the government of Victoria in Melbourne, Australia, is co-sponsoring numerous sessions at BIO 2002 on doing business globally. It's the same reason Canada Minister of Industry Allan Rock spoke at a plenary luncheon on Monday, and why Toronto is the host city for this year's conference.

Biotechnology has become such a highly competitive field that it's not necessarily wise for a U.S. company to keep all of its different business dealings on U.S. soil. To be truly competitive, the industry must look at the entire world as a pool of resources in which to grab the best opportunities, not only for research and development, but also for venture financing and cost-cutting measures.

And countries like Australia and Canada are placing their biggest assets in full view.

"We know we are competing with the world," said Rock, whose country is the home to 358 biotechnology companies, the second largest number on the planet.

In Canada, corporate taxes will be lower than the U.S.'s corporate taxes by the end of this year, Rock said. Canada's economy is expected to grow faster this year than any other country, and it is in its best economic condition in 20 years, he said.

Australia is a country with 300 biotech companies and 6,000 employees. According to Andy Gearing, CEO of Australia-based Biocomm International, Melbourne has the lowest research and development costs in the world, and the health and biotech sector is the fastest growing sector on the Australian Stock Exchange.

His country typically has been called upon for its experts, research services and money, only to have the rest of the world filter back the products. Gearing would like to see some of the products coming out of Australia and licensed to the rest of the world.

"We don't want to just see our kangaroos hopping out of the country," he said. "We want to see kangaroos hopping back with deals and money in their little pockets."

There are a number of reasons a U.S. company should consider working in other countries and why venture capital firms would invest in them, said Andy Schwab, a principal with Bay City Capital in San Francisco. While a lot of U.S. venture capital firms have deals in their own backyard, they still look outside of the U.S. because of the competitive advantages that include lower research and development expenses, better tax credits and government incentives, and friendlier regulatory environments, he said.

"There's no question the FDA is very difficult to work with in the United States," Schwab said, "and there are difficult activist groups" that fight genetically modified organisms and stem cell research, among other hot topics.

Schwab also said that other parts of the world have better science.

"Just as you wouldn't go to Australia to recruit a baseball team, you would go to Australia to recruit immunologists," he said.

Smart Drug Systems Inc., a company focused on drug delivery technology in animal health fields, has a small headquarters in Connecticut, but all of its work goes on in Australia due to a strong animal health expertise there, as well as lower research and development costs in Melbourne - which are 50 percent cheaper than anywhere else.

Schwab said the company also has an advantage dealing with the Australian government, which has a long history of approving animal health products. "They really understand the business better than the FDA," he said.

Having a global company, however, does have its management challenges, Schwab said. A company with a headquarters in Connecticut, research and development operations in Australia and a venture capitalist firm in San Francisco makes communication a bit tough.

"Try to pick a time for a conference call when somebody's not asleep," he said.

Earlier Tuesday, representatives of the U.S. Patent and Trademark Office, as well as biotechnology patent lawyers, spoke about ways to make the patent process a little easier.

"You have to show possession, although possession is not enough," said Rochelle Seide, an attorney with New York-based BakerBotts LLP. "You must teach how to make and use the claimed invention. You must also teach how to identify it."

Some companies encounter a roadblock when they want to patent a natural phenomenon that scientists have somehow altered. "It's patentable if it's not a natural phenomenon," Seide said. "When you're looking at a crystallized protein, it's not in its natural structure."

Dolly, the sheep cloned in 1998 in Scotland, caused a stir when Roslin Institute tried to patent it. Transgenic mice and calves also have been patented, creating a blurry line between a patentable novel invention and a non-patentable copy of something that already existed, said Warren Woessner, an attorney with Minneapolis-based Schwegman Lundberg Woessner & Kluth. Nobody has clearly said that humans are not patentable, he said.

"Claims to humans are useful," Woessner said. "You can prevent someone from making this human with any process."

Referring to a cartoon, Woessner suggested the legal implications that could ensue if God came down from heaven and challenged the patent office on patents that cover human cloning.

"Challenging those patents are going to be our job and not the Almighty's," he said. "And it's going to keep us busy for a long time."