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Expert on Biotechnology Start-Ups Prefers the Cutting Edge

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Times Staff Writer

When it came time to start up their first biotechnology company in 1978, Howard Birndorf and Ivor Royston discovered that they were more at home in the complex world of monoclonal antibodies than the murky world of business.

Birndorf, with a graduate degree in biochemistry, once helped a friend set up a chain of shoe stores in the San Francisco Bay area. Royston was a medical doctor but, with the exception of his membership in a high school investment club, had no formal business experience.

The two scientists eventually turned to a “how-to” book that outlined a business start-up. Using a five-page business plan patterned after a model in the book, Royston and Birndorf eventually secured a $300,000 commitment from Kleiner, Perkins, Caufield & Byers, a San Francisco venture capital firm.

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Sold Company in 1986

Hybritech, the San Diego-based company that sprang from Birndorf’s and Royston’s efforts, was sold in 1986 to Eli Lilly & Co. in a deal valued at $485 million. At the time of the sale, Hybritech was the nation’s oldest and largest monoclonal antibody firm. The wholly owned Lilly subsidiary produces several diagnostic products.

During the last 10 years, Royston has researched the use of biotechnology that is expected to lead to advances in the detection and cure of cancer and other diseases.

But Birndorf opted to retire from active research and instead concentrate on the business end of biotechnology start-ups.

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Since leaving Hybritech in 1984, he played a key role in the founding of Gen-Probe and Progenx, two biomedical companies. Birndorf also assisted in starting up Gensia and Idec, two pharmaceutical companies, and now serves on the boards of Gen-Probe, Idec, Gensia, Progenx and the UC San Diego Cancer Center.

And Birndorf expects to be on the way to yet another start-up soon.

“Start-ups are the most fun for me,” Birndorf said during a recent interview in his Spartan office in La Jolla. “I’ve never worked for a big company, only start-ups.”

‘5 Necessary Attributes’

The 38-year-old executive who once turned to a how-to book is now regarded as an expert in the field of start-ups and is in demand as a speaker to entrepreneurs. His speeches focus on the “five necessary attributes” of a successful business: technical excellence, experienced management, reasonable financing, a strategic focus and a sense of urgency.

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To be sure, Birndorf’s success is linked to the fact that the companies he has associated with already had most of those “necessary attributes,” including technical excellence, reasonable financing and a strategic focus.

But Birndorf, associates said, brought along the experienced management and a sense of urgency that start-ups need to survive their first critical years.

“Howard’s expertise is the start-up, it’s what he does for his career,” Royston said. “He really enjoys taking virtually nothing and building it to the point” where a more traditional chief executive takes over.

Brook Byers, a San Francisco-based venture capitalist with the company that initially invested $300,000 in Hybritech 10 years ago, recently recalled that “Howard was bright, anxious, intense and aggressive--all the kinds of things he is now.”

“From an objective viewpoint, I really like doing start-ups with Howard because he can get more done in the first year than some people can get done in the first two years,” said Byers, who was the first chairman and president of Hybritech. “And, in the competitive world of biotech, lead time is all-important.”

Byers, whose firm has been involved in more than 100 start-ups, also served as chairman and founding president of Idec, Royston’s newest company. Byers’ venture capital firm served as the lead investor in Gen-Probe and Progenx. Byers serves as chairman of Progenx and is an investor in Gensia.

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Birndorf, biotechnology industry sources said, remains a unique example of a scientist-turned-businessman who continues to use his entrepreneurial skills to help move young companies toward solid ground.

“It is unusual for someone to put their reputation on the line again and again,” Byers said.

Most executives who taste success at their first start-up lack the stamina or desire to make a repeat performance because “it takes a lot out of you,” according to Byers.

Birndorf said he continues to work with fledgling companies because “it fits my personality. . . . I enjoy the beginning, the setting-up phase. That’s when things are exciting, and a company’s internal climate is so very important to me.”

But Birndorf also acknowledged that he has a hard time dealing with the corporate bureaucracy that develops as a company grows.

“I’m not real good in those situations,” Birndorf said. “But fortunately, I’m in a position where, financially, I don’t have to worry.”

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Financially, Birndorf “easily could have retired years ago,” according to Royston. Birndorf became a multimillionaire with the initial public offerings made by Hybritech in 1981 and Gen-Probe in 1987.

Despite that financial independence, Birndorf remains comfortable with the lack of glamour and creature comforts at start-ups. That comfort is in part driven by the knowledge that a successful start-up has the potential to return both financial and professional rewards.

But the constant changes during the past 10 years “have been very hard emotionally,” Birndorf acknowledged. “I grew very emotionally attached to those companies. I worked with those people (at Hybritech and Gen-Probe) for years, so they were my friends.

“Change is always frightening,” Birndorf said. But change also has given Birndorf an outlet for his seemingly endless supply of energy.

“Howard likes the momentum, he likes action and he likes checking things off the list,” Byers said. “There are certainly people who are better during the second or third year . . . but I can’t think of anyone who’s better at the first year or two,” Byers said.

Birndorf excels at completing relatively mundane tasks--finding the right building for a company, stocking its laboratories with equipment and qualified researchers--as well as ensuring that management, scientists and the venture capitalists can co-exist.

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“It’s important for the triumvirate to play well together,” Byers said. “And Howard really knows how to get them to play together, which is important because there can be some gigantic egos involved.”

Spartan Surroundings

At Progenx, his most recent affiliation, Birndorf operates out of an aging office at the campus-like headquarters of General Atomic (formerly GA Technologies) in La Jolla. Heating is relatively uneven during the winter, and its interior lacks the glamour found at newer buildings.

When Birndorf arrived in mid-January, he found “a desk, a phone and nothing else.” He sees his role as a tactician who will push the company, which already had a well-established cancer-detection and treatment technology and sound venture capital funding from Byers’ firm, to the point where a more traditional manager can take over.

“Because of my experience, I can provide a sense of urgency,” said Birndorf, who views his role as simple but necessary. “We don’t have time for on-the-job training.”

But Birndorf probably will leave Progenx when it begins to grow.

“As a company matures, it gets larger and a bureaucracy develops,” Royston said. That is a necessary part of growth, he said, “but Howard doesn’t do well in a bureaucracy. He likes to move fast; and, when a company gets larger, it has to slow down.”

Birndorf acknowledges that he doesn’t excel at a large company.

“There are people who are interested in security and, for them, Eli Lilly is the right choice,” Birndorf said. “Then there are risk-takers,” he said, who recognize that, the more risks you take, the higher the rewards.

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Birndorf left Hybritech shortly after UC San Diego researcher David Kohn showed a new technology to Hybritech research and development chief Tom Adams. The technology “didn’t fit in Hybritech’s immediate focus,” according to Birndorf, but he and Adams eventually left Hybritech to co-found Gen-Probe.

Since its founding in 1984, Gen-Probe has raised $41 million in financing through private and public offerings.

In 1985, when Royston began talking about yet another company, Birndorf spent “nights and weekends” working with Idec’s founders. The company since has attracted more than $4.7 million in venture capital.

Birndorf also serves on the board of Gensia, which he helped to form in November, 1986. That privately held company has raised $14.3 million in venture capital.

In January of this year, Birndorf joined Progenx, a biotech firm that recently received $1.6 million from its first round of venture capital financing. He is president, chief executive and a board member.

Is Birndorf likely to add yet another start-up to his already impressive list?

“I wouldn’t be surprised,” Royston said. “He’s got the background in biotechnology, he knows the business and legal ends, and he’s very good with people.”

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