The Rise of Biotechnology as Big Business

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The Rise of Biotechnology as Big Business

Overview

Biotechnology emerged as a big business in the last quarter of the twentieth century. The year of its birth was 1977. The promise of biotechnology has been compared to that of alchemy, which in the Middle Ages sought not only to turn lead into gold but to find the secrets of life itself. Biotechnology-related research is mushrooming not only in the field of medicine but in such areas as agriculture, fuels, plastics, the environment, and mining.

The meshing of science with business, however, is not without its problems. While scientific investigations may be done within an academic setting, the problems involved in taking these findings and making practical use of them are legion. This goal requires investment of capital in firms that will produce and package a product. The question of patents also arises. With an invention such as a car device, for example, there are no ethical problems, but with genes and organisms the situation is completely different. A legal and ethical debate has arisen over who can own genes and over issues of technology transfer. In the meanwhile, the business of biotechnology has added new phrases to the English vocabulary, including "research and development" (R & D), "technology transfer," and "venture capital."

Background

Scientific discoveries often wait many years before being used. For example, when a new drug is created it must undergo lengthy testing by the U.S. Food and Drug Administration (FDA) before it is approved. If the work takes place at a university, the drug development program must pass through a scrutinizing R & D committee before it can even get off the ground. The lengthy process of FDA approval, in turn, is a nightmare of bureaucratic red tape. Researchers must go through pre-clinical tests using both in vitro (test tube) experiments and in vivo (living animal) studies. At this point, researchers file for an "initial new drug" (IND). All work is highly regulated and must be supported with massive amounts of data. The drug then enters Phase I testing, involving a small number of humans to look for side effects. If approved for Phase II, researchers must recruit more subjects. Phase III involves even larger numbers of test subjects. An investigation may be ended at any point; some drugs have reached phase III and not been approved. Other Western countries have similar procedures, although the time taken may be shorter. Prospects of the business of biotechnology are therefore usually considered with a long-term outlook. Biotechnology has become a great economic opportunity in the twentieth century and is expected to loom even larger in the twenty-first.

Impact

In a laboratory at the University of California, San Francisco, Herbert Boyer inserted a synthetic insulin gene into a bacterium, E. coli. Boyer later convinced Robert Swanson, a venture capitalist, to invest in a company called Genentech. The term "venture capitalist" would soon become very important. Venture capitalists are individuals who invest in a company to start it up and support it. In 1977 Genentech reported the production of somatostatin, a human growth hormone created by recombinant DNA technology. That moment began a slow trickle of developments that soon became a downpour, involving diagnostic tools and techniques. Universities and fledgling companies entered the biotechnology race. Many consider 1977 the dawn of the "Age of Biotechnology."

Biotechnology's birth, however, was not without labor pains. Reacting to fears, Congress had sixteen bills introduced to regulate recombinant DNA research, but none of the sixteen bills passed.

Other developments came that year. Bill Rutter and Howard Goodman isolated the gene for rat insulin. Walter Gilbert (1932- ) and Allan Maxin likewise initiated a new epoch in the study of genetics when they devised a method for sequencing DNA using chemicals rather than enzymes. In 1978 Biogen, SA of Geneva was founded by a consortium of businessmen and scientists that included Gilbert. A pharmaceutical company, Schering-Plough, Inc. was a major investor.

The small company Genentech began to grow and signed research agreements with several large pharmaceutical houses. Bitter legal battles, however, soon erupted. The University of California sued Hoffman-LaRoche and Genentech, claiming that a line of cells used to produce interferon was created under their auspices. Another squabble ensued over royalties regarding the human growth hormone. Genen-tech in the process lost much money and the possibility of future royalties. These disputes, however, would lead to collaboration agreements between universities and industry to benefit both financially.

Cetus Corporation was founded by a physician, a biochemist, and a physicist. The corporation's initial work involved using genetically engineered organisms to produce industrial chemicals, such as ethylene oxide for making chemicals and plastics. In 1980 the corporation's Kary Mullis invented a technique for replicating DNA sequences in vitro, called polymerase chain reaction, or PCR, revolutionizing molecular biology. Cetus patented PCR and in 1991 sold the patent to Hoffman-LaRoche, Inc. for 300 million dollars.

In the past, diabetics had to purchase insulin made by extractions from the pancreases of cows and pigs. About five percent, however, suffered allergic reactions. In 1982 Genentech received the FDA's approval to market genetically engineered human insulin, in which every atom is identical to human insulin. In 1983 Eli Lilly presented this product to the market.

In 1980 the U.S. Supreme Court ruled that genetically altered life forms could be patented. The case involved the Exxon oil company, which wanted to patent an oil-eating microorganism. This landmark ruling opened enormous possibilities for the commercial growth of genetic engineering.

Collaborations between industry and academics began to build. In 1981 Hoechst AG, a German chemical company, gave Massachusetts General Hospital, a Harvard Medical School teaching facility, 70 million dollars to build a new department for molecular biology. The only "catch" was that the company would have the rights to license any technology emerging from the facility.

These new agreements prompted a series of hearings held by Congressman Al Gore on the relationship between the academic world and industry. The hearing focused on the potential for profit from the intellectual property as well as on patent rights the universities could own. Jonathan King of the Massachusetts Institute of Technology, however, reminded the biotechnology industry that the most important long-term goal of research is for the good of mankind. One of the problems with a marriage between academia and industry is that few businessmen understand the nature of science and research and few scientists know business.

In 1983 patents were granted to companies for genetically engineered plants, and Syntex Corporation received FDA approval for a monoclonal antibody diagnostic test for chlamydia.

In 1984 English researcher Alec Jeffreys (1950- ) hit upon the idea of using differences in DNA for identification. He coined the term "DNA fingerprinting." Jeffreys used the technique in March of 1985 to prove that a boy was the son of a British citizen. The use of DNA fingerprinting in forensics grew into big business, receiving major publicity in the O.J. Simpson trial of 1995.

In 1988 Harvard investigators Philip Leder and Timothy Stewart were awarded the first patent for a genetically altered animal, a mouse that is susceptible to breast cancer. In the same year SyStemix Inc. received a patent for the SCIDHU Mouse, a mouse engineered for AIDS research. The value of "transgenic animals" for research should not be understated. These animals are engineered to display human traits such as hemophilia or produce factors such as insulin. In the summer of 1999 a company's transgenic mice, programmed to express Alzheimer's disease, showed significant results after receiving a vaccine for the disease. (Sprague-Dawley rats are raised in special clinical conditions for the study of heart disease, high cholesterol, and even obesity.

The 1990 novel Jurassic Park evoked a lot of interest in biotechnology in its presentation of a genetic engineering experiment with dinosaurs going awry. This year also saw the launch of the Human Genome Project, an international effort to map all the genes in the human genome. In fact, much of the work on the genome project has been farmed out to small biotechnology companies.

"Biotech" companies and discoveries began to explode. From genetically engineered tissue to frost-resistant fruits, investigations multiplied. Universities and emerging companies negotiated complex agreements that even cross national borders. The Biotechnology Industry Organization (BIO) was formed in 1993 to promote growth and development in the industry. The BIO emphasizes that it takes 10 to 15 years of research to develop just one product. The venture capital needed to bring such a product to market can exceed 100 million dollars.

As the twentieth century ended, there were 1,274 biotechnology companies in the United States. There were also 300 biotechnology-related products and vaccines in human trials and hundreds more in development. During 1998, 385 new products were introduced and 364 new companies were formed in the industry.

Federally sponsored research in universities combined with the idea of technology transfer has paid off. "Technology transfer" is the patenting and licensing of discoveries made in academic areas and taken from the laboratory to the commercial sector. One example is the work conducted by Florida State University chemist Robert Holton, who began work in the 1970s on the Pacific yew tree bark. He received a grant from the NIH and in the early 1990s synthesized paclitaxel (TaxolTM). Taxol was first marketed by Bristol-Myers-Squibb in 1992 as a treatment for ovarian cancer (but used only as a last resort). In 1998 the FDA approved Taxol for the treatment of both ovarian and breast cancer. Taxol had sales in 1998 of 1.2 billion dollars. Time and investment eventually paid off for Taxol's owner.

The debate over patents, however, has continued. In 1997 the U.S. Patent and Trademark Office announced that it would allow patents on expressed sequence tags (ESTs), which are short sequences of human DNA that are used in genome mapping. Many scientists strongly objected to this announcement. Agreements with other countries, including emerging and developing ones, also involve legal and ethical hurdles yet to be addressed.

At the beginning of the twenty-first century the biotechnology industry holds great promise. The 50-billion-dollar figure shown by the industry at the end of the twentieth century should pale in comparison to future prospects. The business of biotechnology, moreover, is expected to expand into such areas as the environment, gene therapy, vaccines, manufacturing, food safety, and bioprocessing.

EVELYN B. KELLY