The birth of biotech: San Francisco, Boston, Geneva or Chicago?

25 Aug The birth of biotech: San Francisco, Boston, Geneva or Chicago?

Posted at 00:00h in Biotech, Entrepreneurs, Venture Capital by

CHICAGO – To start off our day, here’s a pop biotech quiz to see if you know your biotech history and trivia:

  1. What were the first six biotech companies?
  2. How many of these companies still exist?
  3. How many of them are still completely independent?

While I’m willing to bet that most of you will get at least three of the six companies right in the first question, very few will get all six companies correct. Here is the answer:

  1. Genentech
  2. Biogen
  3. Genex
  4. The Genetics Institute
  5. Cetus
  6. Amgen

As for the second and third questions, let’s see how you did.
Genentech, a San Francisco-based publicly traded biotech company, was started in 1976 by Stanford scientist Stanley Cohen and University of California at San Francisco scientist Herbert Boyer.
Boyer initially worked on human recombinant insulin and somatostatin (a precursor to the human growth hormone). While public and very successful, Genentech unfortunately is still largely owned by Hoffman LaRoche, which markets most of Genentech’s products outside the U.S.
Biogen was merged in 2003 into Idec and became Biogen Idec. This company was actually started in Geneva, Switzerland by Nobel laureate Walter Gilbert (a former Harvard professor) in 1978 and was initially known as Biogen NV.
Its first product was beta interferon. The company moved from Swtizerland to Boston in its early years. It’s still located in Boston.
Genex, which is based in the Washington, D.C. area and was also founded around 1980, is unfortunately long gone. It worked with Searle to scale up production of Searle’s aspartame sweetener (NutraSweet), which is based on two amino acids.
The Genetics Institute, founded in Boston in the early 1980s, is now a part of Wyeth.
Cetus, originally located in San Francisco and founded in the late 1970s as an innovative cancer therapy company, was acquired by Chiron in the early 1990s.
Amgen, which was originally known as Applied Molecular Genetics, was founded in 1980 in California with George Rathmann as its first CEO. Rathmann is an ex-Abbott executive. Applied Molecular became Amgen in 1981.
Of the six companies, only Amgen is truly independent today and master of its own destiny. It’s also the No. 1 biotech company in market cap ($73.7 billion) and has annual sales of about $9.5 billion.

Origins of Biotech

When did the biotech industry begin and what were the major catalysts? Though some say biotech activities can be traced back several hundred years, let’s stay with modern times. According to Bio.org, some of the seminal events creating the industry were:

  1. 1953: A publication from James Watson and Francis Crick in Nature describing the double helical structure of DNA began the modern area of genetics. Incidentally, Crick passed away at the end of July at the age of 88. Biotech lost one of its pioneers.
  2. 1958: DNA is made in a test tube for the first time.
  3. 1965: Harris and Watkins successfully fuse mouse and human cells.
  4. 1966: The genetic code is cracked.
  5. 1969: An enzyme is synthesized in vitro for the first time.
  6. 1971: First complete synthesis of a gene.
  7. 1972: The DNA structure of a human is discovered to be 99 percent similar to that of chimpanzees and gorillas.
  8. 1973: Stanley Cohen and Herbert Boyer perfect techniques to cut and paste DNA and reproduce new DNA in bacteria.
  9. 1974: The National Institutes of Health forms a Recombinant DNA Advisory Committee to oversee recombinant DNA genetic research.
  10. 1975: The first monoclonal antibodies are produced.
  11. 1977: The first expression of a human gene in bacteria.
  12. 1978: Recombinant insulin is first produced.
  13. 1979: Human growth hormone is first synthesized.
  14. Also in the 1970s: RNA splicing, gene targeting, discovery of polymerases and of course the first commercial companies to develop genetically engineered products.

During 1980, biotech began to take off when two events took place:

  1. Genentech and Cetus went public. In March 1980, Cetus raised $108 million in its IPO, which was the largest IPO of the American stock market at that time. In the fall of 1980, Genentech raised $36 million in its IPO.
  2. Congress passed the Bayh-Dole Act to encourage federally funded researchers and their university sponsors to license their patented discoveries to industry by giving them clear title to the patents. This began the modern era of business development and technology transfer.

Amgen’s Birth and the Chicago Connection

While the role of California scientists in beginning and forming this new industry during the 1970s is well known and documented, not much is mentioned of the role of Chicago scientists.
The recent publication of the book “The $800 Million Pill” by former Chicago Tribune chief economics correspondent Merrill Goozner explores the role of key University of Chicago scientist Eugene Goldwasser (a professor of biochemistry).
It also explores the role of former Abbott executive George Rathmann (vice president of research at the time) in the creation of the largest biotech product (called EPO or erythropoietin) and the formation of Amgen, which is the world’s largest biotechnology company.
Goozner’s book was recently reviewed in the May 2004 edition of Pharmaceutical Executive magazine and makes for a fascinating read. He profiles scientist Goldwasser who retired in 2002 after a 47-year career at the University of Chicago.
Goldwasser was born in 1922 (he’s 82 today) in Brooklyn. After his family moved to Kansas City, he won a scholarship to University of Chicago and majored in biological sciences. During his initial time there, Goldwasser worked in the university’s toxicity lab on antidotes for chemical warfare agents (this was after the Japanese attack on Pearl Harbor).
Upon graduating, he was drafted and sent to Fort Detrick where he worked on anthrax. He returned to the University of Chicago to complete a doctorate in biochemistry after the war ended. In 1952, he took a job at Argonne Cancer Research Hospital (which later became part of the University of Chicago hospital system).
Goldwasser was reunited with renowned hematologist Leon Jacobson who challenged him to identify the causal agent in blood that signals bone marrow to replace red blood cells.
While this molecular trigger had already been given the name EPO, no scientist had yet isolated it. This search would take Goldwasser another 20 years. According to Goozner, blood contains more than 200 proteins and EPO puts in only a brief appearance.
Goldwasser wasn’t the only scientist on the trail of EPO. Rivals in Chile and the California Institute of Technology published papers showing that excess EPO showed up in urine rather than blood.
In 1973, the work of Japanese scientist Takaji Miyake at Kumamoto University (who had read Goldwasser’s papers) became known to Goldwasser. Goldwasser arranged for Miyake to come to the U.S. under an NIH grant and work with him. The two met for the first time at the Palmer House Hotel in Chicago’s Loop.
During the mid 1970s, Goldwasser tried to gain the interest of Parke-Davis (now part of Pfizer) scientists, but Parke-Davis lost interest. He also tried to engage the interest of Abbott Labs, which also rejected his research.
Goldwasser applied to the FDA to initiate a Phase I trial at the University of Chicago to three dialysis patients with his small supply of EPO.
His goal was to demonstrate an effect on patients with anemia of chronic renal disease. He also advised the University of Chicago and the government that he had a patentable invention. When he didn’t hear back from these groups, he forgot about patenting his discovery.
The results of his small Phase I were promising but inconclusive. Goldwasser didn’t have sufficient quantities of EPO to test more patients and at higher doses.
As a result of the biotech financing boom of 1980, Goozner says Cetus board member and investment banker William Bowes called up a well-regarded biologist and cancer researcher at UCLA named Winston Salser. At the urging of Bowes, Salser set up Applied Molecular Genetics with an all-star scientific advisory board from southern California.
At the time, this Amgen forerunner was nothing more than letterhead and a list of possible research projects (including the chicken growth hormone for the poultry market, oil-eating bacteria for the petrochemical industry, malaria and other tropical diseases).
Since one of Salser’s post-doctoral researchers worked with Goldwasser, artificial EPO was on the wish list.
At about the same time, Abbott’s Rathmann traveled to the west coast and was very excited about the developments in biotechnology. He found Abbott to be very hesitant, though, about pursuing recombinant DNA engineering in Lake County (outside of Chicago).
Rathmann took a sabbatical from Abbott to learn more about this promising technology and went to UCLA’s Molecular Biology Institute at the recommendation of another Abbott colleague. In October 1980, he joined Salser’s new company as the first CEO.
Interestingly, Abbott senior executives (including Kirk Raab, who later became the CEO at Genentech) tried unsuccessfully to retain him.
To hedge its bets, Abbott invested $5 million in the new company (which it sold a few years later for $250 million). This helped the new company attract west coast VCs, which put up another $12 million. With this investment, the new company was off and running.
Once funded, EPO became one of the lead projects and Salser invited Goldwasser to join the new Amgen’s scientific advisory board. Goldwasser preferred to work for Amgen as a consultant and Goldwasser provided Amgen with the world’s only supply of EPO.
It should be noted that both Biogen and the Genetics Institute were interested in EPO. Though they both approached Goldwasser, he still decided to go with Amgen.
Amgen scientist Fu-Kuen Lin spent two years working out the process for sequencing the EPO protein and another year to sequence and clone the process using Chinese hamster ovary cells.
Lin’s first patent was filed on Dec. 13, 1983 with other patents filed on the process for producing recombinant EPO soon thereafter. During these three years, the EPO project was almost killed several times and there were initially only two scientists and an assistant working on it.
In order to finance the huge development expense of EPO, Rathmann sold off the Japanese market rights to Kirin Brewery for $24 million and the European rights to Johnson & Johnson for an initial $6 million and additional milestone payments and royalties.
Johnson & Johnson also received product rights in the U.S. for markets other than the dialysis market, which Amgen retained.
EPO was approved by the FDA on June 1, 1989. In 2002, Johnson & Johnson’s version of EPO (called Procrit) sold more than $2 billion. Amgen’s version (called Epogen) and its successor drug (called Aranesp) generated more than $2.5 billion in sales in 2002.
Though the Genetics Institute continued the EPO race with Amgen by wrapping up a deal with Miyake to access more purified EPO, Amgen’s Lin beat the Genetics Institute to the patent filing by more than a year.
Over the years, Goldwasser continued to investigate other aspects of EPO and focused on the kidney cells that produce EPO. While Amgen continued to support his lab at the rate of about $30,000 per year, the NIH lost interest in his work.
As Goldwasser never patented any of his work, his financial share of Amgen’s successful sales of EPO never materialized.
Still, he clearly was the pivotal person in the discovery and development of this product, which has revolutionized the biotech industry. Moreover, this product and Goldwasser’s work allowed Amgen to achieve the growth and cash flow that made it the world’s largest biotech company.
If Rathmann and Amgen stayed in Chicago, we might have had a different story for the role of the Midwest in the development of this amazing industry. See you next week!
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Michael S. Rosen is president and CEO of Barbeau Pharma and a founder and board member of the Illinois Biotechnology Industry Organization (IBIO). He can be reached at rosenmichaels@aol.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of The Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.