Business of Biotech Comes of Age in S.D. : Science: The industry has gone from the curious to the serious, fed by early and remarkable success.
This is a Navy town, a tourist town, an aerospace town.
But, in growing corners, San Diego is becoming known as a biotech center, a place where scientists are trying to find cures for AIDS and cancer, asthma, diabetes and herpes, as well as ways to minimize the trauma caused by heart attacks and strokes.
Their discoveries already help doctors make better diagnoses of infections and cancers, enable women to learn if they are pregnant within days of conception, and allow the skin to mend faster after a burn. Local biotech advances are also credited in the development of new crop pesticides.
That San Diego is playing a significant role in biotechnology is already appreciated by molecular biologists, chemists and geneticists--scientists and researchers who are discovering, on the cellular level and, increasingly, down to the molecular level, what causes disease and how to fix it.
San Diego’s role in biotechnology is also known among the high-risk venture capitalists who collectively are staking hundreds of millions of dollars on theories and hunches that could heal the sick--or perhaps lead to nothing, supplanted by another scientist’s theory.
As a result, attorneys and accountants, scientific supply houses and Wall Street analysts are adjusting to the emergence of this burgeoning industry, whose growth in San Diego was spawned by the renowned research of the local science triumvirate--UC San Diego, the Salk Institute, and the Scripps Clinic and Research Foundation--and fed by the remarkable success of one early commercial upstart called Hybritech.
Today, biotechnology, a speculative high-tech business of the ‘70s that was high on notion and short on substance, has successfully rooted in San Diego.
As it enters the ‘90s as San Diego’s new sunrise industry, biotech has matured from the curious to the serious, from some romantic darling created by scientists-cum-entrepreneurs to a thriving commerce anchored by things too small to see, nourished by one scientific breakthrough after another.
“It’s got a long-term future. It’s not like our tuna industry, or shipbuilding,” said Dan Pegg, president of the Economic Development Corp. and himself a director of a biotech firm. “This is a clean industry, with high-paying jobs and good career paths. It’s the perfect industry for San Diego.”
“San Diego is getting its act together. It’s on the map, there’s no doubt about it,” said Ray Dittamore, a managing partner in San Diego for Ernst & Young, which annually surveys the biotech industry nationwide.
In its 1991 report, Ernst & Young ranked San Diego fifth in the nation--behind San Francisco, the tri-state region around New York City, Boston and Washington--for the greatest number of employees in biotechnology. With more than 3,000 such workers, San Diego placed ahead of the combined Los Angeles-Orange County region, which was sixth.
The survey also placed San Diego fifth in the number of biotech companies. The area is host to 90--compared to 160 in the San Francisco Bay Area and 54 in Los Angeles-Orange County.
Perhaps even more representative of the fast-paced growth in San Diego, Dittamore noted, is the fact that local biotech firms generated about 20% of all the financing activity that occurred nationwide in the industry in 1990.
“San Diego is clearly a bona fide biotech center,” he said. “If it’s fifth on the list (in terms of companies and employees), and got 20% of the funding, that says something: that San Diego companies are getting a disproportionate share of biotech financing.”
According to a study by UCSD’s Connect Program, founded in 1985 to help nurture high-tech entrepreneurship in San Diego, local biotech companies in 1990 raised $130 million in corporate partnerships--money from outside companies for research, marketing and licensing rights, manufacturing and equity. That one year’s investment accounted for 30% of all corporate money invested in San Diego’s biotech industry to date, illustrating the surge of outside money coming to San Diego. There has also been a dramatic increase in the past year in the number of biotech companies that advanced in maturity to the point where they made public stock offerings.
Although locally developed medicines are still in clinical trials and have yet to win approval from the U.S. Food and Drug Administration, local executives are already talking of the explosion the San Diego biotech employment base will see once their companies enter the manufacturing and distribution phases of product development.
Nor has the region’s biotech growth gone unnoticed among scientists.
“In terms of growth potential, in terms of the number of new companies that have sprung up there, San Diego is far and away out-competing the other cities in terms of biotechnology,” said Judy Chambers, a molecular biologist with the Washington-based American Assn. for the Advancement of Science.
“San Diego is No. 1,” she said.
Local scientists are starting their own biotech companies in San Diego, while established firms are moving here from elsewhere.
Consider Isis Pharmaceuticals, which was formed in March, 1989, by Stan Crooke, head of research and development for what was then SmithKline Beckman, a large, traditional pharmaceutical company based in Philadelphia.
Taking the advice of investors, lawyers and accounting firms, Crooke decided to establish Isis in San Diego County--specifically in Carlsbad, because land and housing were cheaper along the North County coast than in La Jolla, where most biotech firms have located.
“We considered establishing ourselves in Boston, or the Research Triangle in North Carolina, or the San Francisco Bay Area, but we ultimately chose San Diego,” Crooke said.
His 70-employee company is developing so-called “antisense” medicines--drugs designed to interrupt the production of disease-causing proteins. Isis is trying to apply antisense technology--which is so new that it’s being considered at only a handful of biotech firms nationwide--to cancer, inflammatory diseases and cardiovascular and viral ailments.
“San Diego’s got the technical support, services and facilities one needs to start a small company and to help it grow,” Crooke said. “Moreover, there’s a real entrepreneurial spirit in San Diego--even among the technical workers in he labs. On the East Coast, there’s still a notion that larger is better, and more secure. Out here, though, the work force understands better the ups and downs of small companies--the risks they’re taking.”
Art Benvenuto is president and chief executive officer of Marrow-Tech, which is developing technology to grow human skin cells outside the body--cloned skin, if you will--for applications in toxicology testing as well as transplantation. In December, 1989, he moved the company--which had 12 employees at the time--from New York to San Diego. Today it has 55 employees and is growing.
Benvenuto knew the area already; several years earlier, he was president of San Diego-based IVAC Corp., a manufacturer of electronic medical equipment. He wanted to return with his new venture.
“There are some real reasons why companies like Marrow-Tech wind up in San Diego,” Benvenuto said. “It really makes a difference to a company to be located in these kinds of technology centers. It could make the difference between making a company important and making it very important.
“There’s a vast talent pool in San Diego,” he said. “These kinds of companies aren’t built around one person. It takes a team of people, and San Diego provides that kind of talent.”
San Diego’s investment in biotechnology began with the likes of UC San Diego, the Salk Institute, and the Scripps Clinic and Research Foundation, three of the most respected institutions in the United States in the basic research of life science. Their staffs and associates initially stocked the pool of biotechnology expertise in San Diego.
That synergism, in turn, fueled the commercial biotech industry in San Diego, taking up residence in smart-looking office buildings and bright, well-equipped laboratories at prestigious addresses, primarily in La Jolla and, to a lesser extent, Sorrento Valley.
Many were founded by the institutional scientists themselves. Classic among them was Hybritech, founded in 1978 by UCSD Professor Ivor Royston to develop a technology of developing and applying hybrid, monoclonal antibodies for use in medical diagnostic kits.
Monoclonal antibodies are synthesized versions of what the body produces normally to fight infections, but with several key advantages: They are pure, can be produced en masse in the lab, are designed to seek out specific, targeted cells, and, unlike their natural counterparts, are immortal and have an essentially unlimited shelf life.
Hybritech capitalized on monoclonal antibody technology--the ability to design monoclonal antibodies to mark particular types of proteins--by using it to make diagnostic kits to signal pregnancy, Strepp throat, prostate cancer and chemical precursors to heart attacks, among other medical problems.
In 1986, the company was sold to pharmaceutical giant Eli Lilly & Co. for $490 million in cash and securities, a windfall that was shared among Hybritech’s officers and employees, including a high-tech dishwasher who walked away with $500,000.
Other biotech companies, with their own agendas but looking to Hybritech as a role model in both its scientific and commercial success, sprouted in San Diego.
“Hybritech’s purchase by Lilly freed up a lot of (Hybritech) people who were entrepreneurial and who now wanted to do other things,” said Jim McCamant, editor of Medical Technology Stock Letter, published in San Francisco. “Science has been in San Diego a long time, with UCSD and Scripps and Salk. Hybritech helped generate the venture people--people who said, ‘Let’s do that again.’ ”
Indeed, there followed an explosion of new companies in San Diego--almost literally one a month during the 1980s. Many--a third, by some estimates--failed to prove their theories in time to win continued private investment, and withered. Others merged, or were acquired by larger companies.
Others not only survived but thrived. Some have gone public, their stocks riding on the announcement of scientific breakthroughs like kites on a gusty day.
They have seemingly nonsensical but decidedly high-tech-sounding names that, together, sound almost like a Dr. Seuss lyric: Amylin and Biosite, Cytel and Gensia, Lidak and Ligand, Mycogen and Stratagene and Telios and Viagene.
Compared to the academic and research institutions, the pace is quicker, the stakes higher in the commercial biotech arena. Millions of dollars can be won or lost on a scientific bet. And, through the efforts of the companies, new medicines are discovered, diagnostic tools developed and new techniques promoted, leading to both commercial and altruistic dividends.
On April 4, for instance, 7-year-old Agouron Pharmaceuticals announced a potential breakthrough in finding a cure for AIDS. Its scientists had determined the structure of an enzyme essential to the replication of the AIDS virus in the body, and filed for patents on 50 computer-designed chemicals--one of which, the company hopes, may be the one to block the formation of the enzyme and stop the disease.
The next day, the company’s stock more than doubled in price--despite the fact that some of its investors wouldn’t know an enzyme from an end zone.
Indeed, this is an industry that feeds its players with thrills, risks and payoffs, even if the focus of all this attention is something too small to be seen, things that must be taken on faith or analyzed only with the help of computers and other electronic gadgetry that is amazing in its own right.
This industry’s workaday vocabulary is foreign to the masses: antisenseoligonucleotides, intracellular receptors and molecule immunomodulators.
Little wonder that San Diego’s growth as a biotech community may be lost on many local residents. It has been cloistered for the most part, a strange business with a strange vocabulary, the fruits of its works years removed from public consumption.
“A lot of people don’t understand what biotechnology is,” said Dittamore, of the biotech survey firm. “They think of some mad scientist in the back room of a lab doing all sorts of experiments. They hear things about it, but they don’t know what it is. They think of all kinds of negative things.
“You couple that with the long-term horizon involved--from starting a company to the time a new drug is permitted by the FDA. That’s a long time, maybe 10 years or longer,” he said. “So a biotech company has to be around a long time, and get a product to market, and have it be well received, before it starts validating the whole biotech industry.
“Then people say, ‘Gosh, now I see what it is--even if I still don’t understand it.’ But they see that these are good products that will benefit society.”
