The word “biotechnology” conjures some intimidating images of people in white lab coats working with test tubes, and maybe expensive robotic equipment, that somehow magically results in the creation of new drugs.
Many people figure that whatever the science involves, it would go right over their heads. So, they tend not to ask too many questions about the industry.
Jupiter Images
|
The intimidation is somewhat justified. The science is extremely complicated. And the industry's business model can seem uniquely absurd: Biotechnology companies can spend millions of dollars a year and may never make a profit, while their executives may receive hefty bonuses just for trying.
However, this industry, which was born just 30 years ago in California, touches millions of lives around the world with the drugs it has produced or the medical devices it has created.
Rituxan, a therapeutic antibody developed by Idec Pharmaceuticals in San Diego to treat non-Hodgkins lymphoma and, later, rheumatoid arthritis, has been used on more than 960,000 people during the last nine years.
Byetta, developed by San Diego-based Amylin Pharmaceuticals, is a first-in-class drug to help people with Type 2 diabetes better control their blood sugar.
Diagnostics from biotech companies such as Gen-Probe in San Diego keep West Nile Virus and other diseases from being spread through the nation's donated blood supply. Other companies, such as Verenium in San Diego, are looking to use biotech to ease our dependence on foreign oil by making it more cost effective to ferment grasses to make ethanol.
And even making tools for researchers in universities and other biotech companies is a big business. Just look at Invitrogen in Carlsbad, which reported $60 million in profit last quarter from making chemical kits, food to grow cells and other tools that researchers use as they try to discover new drugs.
Today, 22,000 visitors from around the globe will descend upon downtown San Diego for the annual convention of the Biotechnology Industry Organization, or BIO.
Diverse delegations, from China to India to Iowa, will be trying to drum up business and recruit employees away to other locales that are pouring millions of dollars into creating a thriving biotech hub like those in California.
As industries go, biotech has the qualities cities want: It's clean and it fuels the economy with a well-educated, well-paid work force, said Joseph Panetta, who heads Biocom, the industry trade group for Southern California.
Biotechnology workers earn an average of $71,300 annually, according to the California Healthcare Institute. Those workers want good schools for their children and the next generation of employees, as well as good restaurants, good shopping and good cultural venues.
“Those are the kinds of neighbors I want,” said David Gollaher, who heads the California Healthcare Institute, a lobbying organization that supports the biotechnology industry.
GROWTH INDUSTRY
With a combination of scientific ingenuity, entrepreneurship and financial risk, the first biotechnology company, Genentech, was founded in 1976 in South San Francisco. Its first product, Humulin, approved in 1982, was the first ever synthetic form of human insulin.
Meanwhile, California's biotechnology industry has grown to encompass more than 50 percent of the world's biotechnology might. Most of the companies are centered in the Bay Area and San Diego.
California received $3.3 billion in federal research funding in 2005 alone, which is 45 percent more than the second biggest grant recipient, Massachusetts. Statewide, the industry attracted more than $3 billion in venture capital investment just last year.
Biotechnology is now the state's second largest high-tech industry, generating $73 billion in revenue annually and employing over 267,000 people. Only computer programming and related services employ more – about 306,000 people, according to the CHI. In San Diego alone, there are about 40,000 people working in 700 companies and research institutes that are a part of the biotechnology industry.
The old, technical definition of biotechnology is probably one reason why people don't think they understand what it is, Gollaher said: Genetically engineered human proteins made to replace proteins in the body of people who lack hormones or some other substance, which leads to disease.
What?
During its annual survey two years ago, the CHI asked people about their understanding of biotechnology. The answers, not surprisingly, had nothing to to do with recombinant DNA or monoclonal antibodies, two of the major scientific discoveries that fueled the industry's launch, Gollaher said.
“Most people said it was using the most advanced biology available to make medicines and other products, and I think that definition has stuck,” Gollaher said.
Those products could be anything from food, to fuel, to drugs, diagnostics, medical devices and tools to help in the discovery of even more biotechnology products.
Like the much older and larger pharmaceutical industry, biotechnology companies were first formed to treat illness and disease, said Panetta, of Biocom.
BIO VS PHARMA
Traditionally, pharmaceutical companies made products based on chemistry, he said. Biotechnology focuses on life processes, he said. It seeks to find a biological process that isn't working properly, figure out why and then use a biological substance such as a hormone, or a protein that should normally occur in the body, to regulate it.
Pharmaceutical companies are generally older and larger and have many products and divisions. Biotechnology companies tend to be smaller and created around just a few products or technologies.
And biotechnology tends to be more nimble and less weighed down by bureaucracy.
“When you don't have the luxury of having a lot to fall back on, you tend to make decisions more quickly and to move ahead and take more risks. You don't have the luxury of being complacent,” Panetta said.
However, the lines between the two industries have blurred.
Most biotechnology companies with a product in late-stage clinical trials have collaborated with pharmaceutical companies because human trials can be expensive, and pharmaceutical companies have much deeper pockets than biotechs, Panetta said.
And some of the oldest biotechnology companies, such as Genentech and Amgen, are massive in size and scope and now have some of the same bureaucratic and operational headaches as Big Pharma, he said.
Pharmaceutical companies are increasingly facing competition from generic drugmakers and are looking for new products, which they can find in biotechnology companies. That is a problem biotechnology is just starting to consider.
The pharmaceutical industry wants more than biotechnology's promising products; it wants its image, Panetta said.
The high cost of drugs and potentially deadly side effects of products on the market have helped stomp on the image of the pharmaceutical industry, which is often portrayed as purely profit driven.
Profits are something the biotechnology industry dreams of, but few companies report. That may have helped it maintain an image of wanting to help people's health, Panetta said.
“There's no question that Pharma wants to be seen as walking hand in hand with biotech to improve its image. But Pharma also wants to learn from the biotech industry how to operate more creatively, efficiently and with more of a team environment,” he said.
WHY IS IT HERE
San Diego is home to the third largest cluster of biotechnology companies in the world, behind the Bay Area and Boston. While Genentech is responsible for putting the Bay Area on the biotech map, San Diego can thank two major forces for giving birth to its concentration of companies: science out of numerous research institutes in Torrey Pines and the success of one local company, Hybritech, which spawned a generation of entrepreneurs with the cash and connections to start new companies.
As funding for basic research from the National Institutes of Health began to grow year over year, the science on the Torrey Pines Mesa began to leap ahead, Gollaher said.
In September 1978, Ivor Royston, then an untenured assistant professor at the University of California San Diego, and his research assistant Howard Birndorf, incorporated Hybritech to explore the use of monoclonal antibodies.
A month later, the scientists received funding from a SanFrancisco venture capital firm and hung a makeshift sign outside an office subleased from a San Diego research institute.
San Diego's multibillion-dollar biotechnology industry was born.
In late 1981, Hybritech went public. During the next few years, it commercialized a series of diagnostic kits for allergy, pregnancy, anemia and different types of cancer. By 1985, it had developed its most important product, the first monoclonal antibody test for prostate cancer.
The test, approved for market in 1986, became the most accurate way to monitor prostate cancer, the second biggest cancer killer among American men. It is known as the PSA test because it measures the blood for prostate-specific antigen, a protein that rises with the level of the disease.
In 1986, pharmaceutical giant Eli Lilly paid $400 million in cash and warrants to acquire Hybritech, creating a number of San Diego biotechnology millionaires.
Many of Hybritech's founders and first employees, who had become accustomed to the casual, entrepreneurial spirit of the company, chose not to work with Lilly.
“That sale created a whole bunch of free agents who became venture capitalists and executives in a number of companies,” Gollaher said.
Those executives – who include biotech veterans Royston, Birndorf, Howard “Ted” Greene, Cam Garner, David Hale, Tom Adams, Dennis Carlo and David Kabakoff – went on to form or nurture scores of companies, including San Diego's biggest biotech drug success story, Idec, which is now part of Biogen-Idec.
Meanwhile, scores of other biotechs have been spawned from the science out of UCSD, the Salk Institute, the Burnham Institute for Medical Research, the Scripps Research Institute and other small, local research facilities.
In fact, San Diego has become a case study for cities around the globe that are investing millions of dollars to foster the creation of a biotechnology cluster and the industry's well paying jobs.
For much of the past nine years, Panetta, at Biocom, has been asked to speak to countless business groups about growing a biotech cluster. It is not something that is easily replicated.
“Our biotechnology cluster grew through evolution, not revolution,” Panetta said.
As the industry has evolved, essential pieces of infrastructure have sprouted up to support it, such as law firms, accounting firms and public relations firms that cater to biotechnology company needs.
Meanwhile, the same evolution had already happened in the Bay Area, but on a much larger scale in terms of geographic area, people and investment. The Bay Area already had a deep venture capital pool, with firms such as what is now Kleiner Perkins Caufield and Byers, which was also investing in Silicon Valley technology companies.
San Diego, however, is just a short plane ride away for these investors who like to keep an eye on their money. So pioneering biotech financiers in Southern California were able to establish the networks and bring the funding to their startups.
Smaller has also had its advantages.
With research institutes within walking distance from each other in Torrey Pines, and hundreds of companies clustered around La Jolla and Sorrento Valley, San Diego's biotechnology work force cannot escape itself. Whether during the workday, during lunch and dinner at restaurants, or in social events over the weekend, biotech workers in San Diego are constantly mingling. And then there's the incestuous relationship, with many workers tracing their friendships back to Hybritech.
“It never ceases to amaze me how, after nine years of doing this, I'm learning of relationships that I didn't know existed that go back more than a dozen years,” Panetta said. “Company after company. you can find people who are now CEO and other C-level folks who go way back, from when they worked side by side in the lab together 25 years ago.”
