A sagging stock market and the lagging dollar have only served to add allure to overseas venture capital

Ask any United States biotech executive about the industry’s problems and you’ll probably get a rousing speech on the dangers of offshore competition—especially from Japan. The U.S., you’ll be told, could lose out on biotechnology’s biggest payoffs.

But nationalism sometimes bows to financial realism. At least, that was the case back in 1985 when Thousand Oaks, Calif. based Arogen Inc. teamed up with Tokyo’s Kirin Breweries to commercialize erythropoietin, known in the business as EPO. The protein regulates the production of red blood cells; its market is nearly 200,000 sufferers of severe anemia around the world. Estimates on potential salesof EPO range as high as $350 million a year in the U.S. alone. Given those numbers, and given the deeply ingrained U.S. biotech executive’s fear of “losing out” to Japan, why would...

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