The Multinational Monitor


F O C U S   O N   T H E   P H A R M A C E U T I C A L   I N D U S T R Y

Money In the Genes

Gene-splicing, once the province of science fiction, now offers private industry the prospects of lucrative returns. In the scramble to secure places in the market, biotechnology companies have created alliances-and tensions-with the academic community.

by Becky O'Malley

Biotechnology, a word most people had not even heard of 10 years ago, may mean big business-and big profits-in the near future.

Biotechnology is the commercial and industrial application of genetic engineering techniques commonly called gene-splicing. The major scientific breakthroughs of the last few years in cell and molecular biology have sparked attention in fields ranging from pharmaceuticals to coal mining. The alluring possibility that scientists will be able to manipulate genes of living organisms such as bacteria, fungi and plant and animal cells to develop marketable products has made biological research and development companies the hottest property in the rarefied world of venture capitalists.

The biotechnology industry has emerged from a mix of government aid, scientific expertise and private financial participation that varies from one industrialized country to the next. The scientists involved are a relatively small in-group of creative experimenters equally at home in Paris, San Francisco and Geneva. Their backers are companies operating at high levels of global finance.

In the United Kingdom, commercialization of biotechnology has been slow until recently, but the Thatcher government has apparently decided that it is one area worthy of government investment. A new British company has been formed to do biotechnological research and development, backed by government capital from the National Enterprise Board and private money from several banks and insurance companies, with the relatively modest capitalization of $28.8 million. Established pharmaceutical companies such as Lilly have also been expanding their in-house bioengineering projects in Britain and the U.S. In Japan and Germany, research and development of biotechnology has received active government financial support aimed at developing products and processes that can be marketed by industries there.

In France, the banking and holding company, Paribas, has taken an active part in exploring the industry. Robert Lattes, Research Director of Paribas, says that his company decided a few years ago to put money into overseas investments, particularly in the U.S., and to develop a market share of advanced technologies in the health care area. "We think that biotechnology is a very interesting and promising field where the development could be as important, in the next 25 or 30 years, as data processing, semiconductors and microprocessors have been in the last 25 years," Lattes says. "We want to be there."

To help get there. Paribas co-founded with Venrock--the venture capital company of the Rockefeller family-a biotechnology enterprise called Centecore. Incorporated near Philadelphia, Centecore has links with key scientists at the Wistar Institute, a non-profit Philadelphia biological research center. Paribas' venture seems to have paid off; Centecore is one of the first U.S.-based companies to develop hybridomas, cells that have been engineered to produce large quantities of antibodies.

Centecore is only one of several Paribas entries in the field. For instance, it has organized a consortium of French-based multinationals to provide up to U.S.$20 million over five years as backing for a new commercial organization designed to exploit gene manipulation. Joining Paribas are Aire Liquid (petrochemicals and pharmaceuticals), BSN-Gervais Danone (food and pharmaceuticals), Moet-Henessy (French champagne and, more recently, California wines), and the French state-owned oil company, Elf Aquitane.

For their money, the backers of the new company-to be named Transgene-will receive 65 percent of the ownership shares. The other 35 percent will be distributed among the scientific founders of the company, the institutions where they work, and a research foundation the scientists will control. Transgene's "scientific founders" are Phillipe Kourillsky, of the Institute Pasteur in Paris, and Pierre Chambon of the University of Strasbourg. Transgene is setting up its own lab on the Strasbourg campus, so links with the research of the founders will undoubtedly be close.

Transgene's Peculiar shareholder arrangement is designed to forestall some of the criticism the bioengineering industry receives. Over the past few years, many people-most prominently, the Nobel Prize winning biologists Francois Jacob and Joshua Lederberg-have argued that profits from the commercialization of scientific work in the university should go at least in part to the scientific community rather than to the business community.

Other critics have added that the biotechnology industry may reap rewards that are rightfully owed to the public. "All this research was done with the taxpayers' money; now private industry is picking up the marbles," says Dr. David Ozonoff, chief of the environmental health section at Boston University's School of Public Health.

Safety is another area in which controversy has surrounded bioengineering. Some scientists, as well as at times the general public in university cities where bioengineering research is conducted, express fears about the possibility of lethal, self-reproducing bacteria escaping from labs and entering the community.

The heavy prospect of commercial production of interferon, a substance some medical researchers believe may have wide application as a cancer treatment, seems to have swept away much of the public and governmental uneasiness over the possible dangers associated with the research. The U.S. National Institute of Health, recently relaxed guidelines established in 1976 to regulate publicly-funded bioengineering research.

Safety standards around the world are loosening up. For instance, in Great Britain, Professor Brian Hartley of the University of London, working for International Nickel Company's Biogen, has a pilot plant ready to produce 3000-liter batches of organisms for Biogen interferon, with the blessings of the British Safety Regulatory Body. Just last year, Genentech, the pioneer San Francisco biotechnology corporation, created a minor furor by making organisms for insulin production in batches of only 100 liters, exceeding a 10-liter limit the U.S. had in effect at that time.

The industry's tensions with academia still exist, however, and are unlikely to ease. In early September, for example, a legal battle developed among the University of California, the Swiss-based pharmaceutical giant Hoffman-LaRoche and Genentech, one of the leading bioengineering firms. Two UCLA professors succeeded in culturing and maintaining a line of leukemia cells and it was later discovered that these cells produced modest amounts of interferon. Their discovery unintentionally found its way into the laboratory of Genentech, which has agreed to supply Roche with interferon. The University of California was preparing to sue both companies for rights to the discovery, but before the university went to court, Roche and Genentech sued to prevent the university and scientists from claiming any ownership rights to the process. At press time, Donald M. Reidhaar, University of California general counsel, said that the university planned to file suit against both Roche and Genentech in early October.

Becky O'Malley is a staff writer at the Center for Investigative Reporting in Oakland, California. She is director of the Center's Project on Science and Technology.

Table of Contents