Squibb Has the Formula for Biotech Firms
Two significant events in the development of biotechnology, an industry that will change American medicine, occurred in the past month. And the more important was the purchase by Squibb Corp., the 130-year-old pharmaceutical company, of 5% ownership in Cetus Corp., the tiny 15-year-old biotech pioneer.
The Squibb investment, which will total $115 million over five years, followed by weeks the Food and Drug Administration’s refusal to approve a Genentech Inc. product that promises to dissolve blood clots in heart attack victims--a big disappointment for the biotech industry. Genentech was sure its clot dissolver was a lifesaver. Maybe it is, the FDA said, but give us more data to substantiate the claim.
Reactions to the FDA’s decision--other than a sharp fall in Genentech’s stock--were varied. Some said the company was sandbagged by bureaucrats, others that Genentech blew its chance through its inexperience with the regulatory process.
There’s truth in both views. But sensible people recognize that while the agency may at times be overcautious, it must remain strict about drug approvals--although not everybody remembers the events that made it so.
In 1958, a drug called thalidomide, designed to remedy nausea during pregnancy, came on the market in Europe. But thalidomide had terrible side effects. It produced fetal malformations called “seal limbs”--babies born with flippers for arms or legs.
Thalidomide never got to market in the United States, though, because of FDA requirements for lengthy clinical testing. Then, when the awful truth about thalidomide became known in the early 1960s, FDA procedures were strengthened for good measure.
Medicine Understood
In the present case, asking Genentech for more data may delay one breakthrough, but it should not be overlooked that the FDA’s very stringency will help the biotech industry in the long run by gaining credibility for its products.
Meanwhile, Squibb’s investment gives Cetus an experienced guide through that regulatory process.
But the investment by the $1.8-billion (sales) drug company is significant for other reasons. “It hooks Cetus to an organization that understands medicine,” says analyst David MacCallum, of investment bankers Hambrecht & Quist.
He means that Cetus, like all the other biotech firms, needs to learn how to explain its work and its products not only to research biochemists but to physicians and hospitals and medical review boards.
Until now, the pharmaceutical industry that fills our medicine chests has been chemically based. That is, it has produced outside agents to affect the human body. But biological engineering effects a cure by genetically duplicating or altering substances occurring naturally in the body’s immune system. A good comparison would be between chemotherapy, which attacks cancer by burning out diseased cells--plus, unfortunately, any healthy cells in the vicinity--and proteins called lymphokines--the specialty of biotech firms such as Cetus and Amgen Inc.--which stimulate the white blood cells to kill cancer cells naturally. Biotech’s promise, in short, is more effective cures with fewer side effects.
The financial markets have hailed that promise. Biotech companies sell for astronomical prices--Cetus, which last year earned four cents a share, sells for more than $31 a share. And so have big companies in the drug industry and elsewhere, who have sought a piece of the future by either acquiring biotech start-ups or contracting for their research.
But Squibb has gone further, allying itself with Cetus by investing $40 million, yet preserving the small firm’s independence by taking only a 5% stake. Also, Squibb has committed $75 million to a research venture that will take Cetus’ genetic abilities into new areas--heart and blood pressure and antibiotic medicines.
Most important, Squibb--a company of 16,000 employees--will give Cetus, which has only 658 employees, the benefit of thousands of salespeople calling on doctors and hospitals around the world. It’s a deal, to sum up, that points the way for the biotech industry to deliver on its promise for American medicine.
