|
  Build a better molecule and the world will beat a path to your door. San Diego’s remarkable biotechnology industry is doing just that. It’s old news that San Diego is the nation’s third-largest biotechnology center. But in recent years the city’s life science prowess has taken on a global dimension: San Diego is nearly a mandatory stop for big pharmaceutical companies, wherever their headquarters happen to be. If companies don’t have branch offices here, they have collaborations with San Diego-based institutes or researchers, or license technology developed here. The trend is most strikingly visible with Novartis. The huge Swiss-based pharmaceutical firm has set up two independent research institutes here, funded with a total of $850 million. In November, a $100 million venture capital fund of Novartis moved to San Diego from Novartis’ home town of Basel. It is a huge commitment and vote of confidence by Novartis that a major part of the company’s future will be developed in San Diego. Other major foreign firms with strong San Diego biotech connections include Aventis and GenSet (France); Boehringer Ingelheim Ltd. (Germany); Chugai, Kirin Brewery Co. Ltd., Japan Tobacco, Sankyo, Sumitomo Pharmaceutical Co. and Tanabe Seiyaku Co. Ltd. (Japan); Elan Pharmaceuticals (Ireland); Roche (Switzerland); and AstraZeneca, GlaxoSmithKline, SkyePharma and Smith & Nephew plc (United Kingdom).
In short, San Diego is popular for its brains, not just its looks. “What they’re saying is this is a region where they have to be if they want to be with the forefront of biotechnology,” Barrow says. “That’s exactly what we saw in telecommunications. Everybody wanted to cluster around Qualcomm and its technology. With biotechnology, it’s broader.” Starting with the traditional base of the University of California, San Diego, Scripps, Salk and other research-based institutes, San Diego spun off a series of small biotech companies that gradually grew. Big pharma collaborated with local researchers and an increasing number of companies such as Johnson & Johnson and Novartis established a physical presence at the southwest tip of California. The effect is cumulative and continuing, Barrow observes; Novartis’ huge presence here will doubtlessly stir other big pharmas to follow suit. Chugai was one of the first foreign companies to set up a biotech presence in San Diego, dating back to 1989 when it bought Gen-Probe, a diagnostics company. In the mid-1990s, Chugai expanded its toehold by spinning off a company from Gen-Probe to produce therapeutics. This entrepreneurial evolution of San Diego biotech seems so straightforward and natural as not to merit examination. But it is not the norm for aspiring life science centers. They often set aside land and offer lush incentives to create an industry, instead of letting the industry bubble up from below. For example, Barrow says, North Carolina followed the exact opposite course with its famed Research Triangle: the state induced foreign-based companies to set up North American operations. But until very recently, the Research Triangle didn’t spawn many biotech spinoffs. And even today, San Diego ranks far ahead of North Carolina as a biotech center. Indeed, the city of San Diego has more biotech companies than any city in the world. No biotech companies are located in San Francisco proper. (Genentech, the world’s first biotech company, is located in South San Francisco, a separate city.) Other states such as Michigan and Georgia are trying a different tack, while still using the same top-down approach: they’re taking anticipated settlement payments from tobacco companies to fund more research. Michigan plans to put in $1 billion over 20 years to develop its “Life Sciences Corridor.” Georgia plans to beef up its cancer research. True, San Diego biotech is not a laissez-faire creation — the public funds that go to UCSD being one example. And San Diego’s voters gave free land to the Salk Institute some 42 years ago. But the motivation was to make basic biological discoveries that could help cure diseases, not to form spin-off companies. In those innocent times, the technology transfer process so critical to modern biotech didn’t exist, in part because federal law made it too cumbersome. Jonas Salk himself, when asked if he would seek a patent for his polio vaccine, famously remarked, “There is no patent. Could you patent the sun?” With such an altruistic start, even if heavily modified by the rush for commercialization and cash, San Diego biotech merits another twist on an old adage. It’s the nice guy who doesn’t always finish last. Smart Is Beautiful The comparison with North Carolina, Michigan and Georgia aptly illustrates how San Diego’s strength in research and business development overcomes its main weakness: a high cost of living. Commodity industries such as auto manufacturing will respond much more readily to the lure of government dollars than a research-driven field such as biotech.
“San Diego has a strong influx of entrepreneurs,” says Hans-Peter Bissinger, who in mid-December arrived as the managing director of the Novartis BioVenture Fund. “It has an excellent entrepreneurial environment, an excellent understanding of creating companies, an extraordinary human resource pool, and is becoming a very smart city. Therefore, it attracts intelligent entrepreneurs in a very livable area. I’m following the entrepreneurs.” Last year, Bissinger’s fund invested in seven California companies, four of which are in San Diego County. In its mid-2001 report on the biotech industry, Ernst & Young reports that San Diego clocked the nation’s highest growth rate in biotechnology for the first half of the year. Statistics like that are important to investors and pharmaceutical companies, says Ivor Royston, managing member of Forward Ventures, a venture fund. “When we are talking to potential investors in Forward Ventures, they want to invest in us because they want to have access to technologies that are coming out of San Diego,” says Royston, who also co-founded Hybritech, San Diego’s first biotech and the acknowledged seed company of the region’s bioscience industry. “The world recognizes San Diego as a hotbed of biotech activity in the United States.” The Japanese venture capital firm JAFCO, with $500 million under management in the United States and $3 billion worldwide, has set up an office-in-an-office in La Jolla, at the headquarters of Forward Ventures, which focuses on life sciences investments and has $340 million under management. JAFCO has had ties with Forward Ventures for years, Royston says. JAFCO partners look to the San Francisco Bay Area for information technology investing, but say when it comes to biotech, San Diego has the edge. Royston says lately he’s seen a surge of interest from Chinese and Taiwanese entities. “When they heard about JAFCO, they said, ‘maybe we should consider having an office here,’” Royston says. “‘We have an office in the Bay Area, but it’s staffed by an IT person. Maybe we should have a biotech office in San Diego.’ They don’t want a biotech office up there.” The region’s biotech brainpower crosses the spectrum. “San Diego has biopharmaceutical products, proteomics platforms, genomics, bioinformatics — all of those together,” Royston says. San Diego’s attraction extends to foreign biotech companies. Royston points to the example of Sequenom, originally founded with headquarters both in San Diego and Hamburg, Germany. Sequenom’s technology allows for fast and accurate sequencing of single-nucleotide polymorphisms, or SNPs. These are gene variants caused by a single change in the DNA “alphabet” that makes up genes, and can drastically affect how a gene functions. Sequenom received money from the German government, which in the mid-1990s was anxious to jump-start its lagging biotech industry. Sequenom grew, and last May merged with a complementary company, UK-based Gemini Genomics. The combined companies decided to make their headquarters on Torrey Pines Mesa in San Diego. Paul Kelly, Gemini’s chief executive and president, told the Web site Pharmafile that the merged company saw more opportunity in the United States. “It’s been a disappointment that the genomics sector hasn’t developed in the UK, which is the home of the sequencing industry,” Kelly told Pharmafile. What San Diego lacks, and is beginning to get, is a set of top-tier biotech companies. Idec Pharmaceuticals is the front-runner, based on its research and development of monocolonal antibodies to treat non-Hodgkin’s lymphoma. Idec’s stock value as of late January gives it a market value of $9.4 billion. The company is building a $1.3 billion manufacturing plant in Oceanside.
“Recently we’ve been hiring from the UK, Argentina, Germany, from all over the world,” Rastetter says. Indeed, an afternoon spent at Idec’s growing Torrey Pines campus leaves a visitor with the impression of a company on the go. Young, casually dressed professionals of many nationalities seem everywhere and always on the move. Rastetter, an avowed shutterbug who now sports a high-tech digital camera, has a very clear picture of where the company is going. It is his goal that within five to 10 years Idec will be one of the world’s three largest biotech companies. From Controversy To Acceptance While Chugai was one of the first foreign companies to set up a physical presence in San Diego’s biotech community, Sandoz, which later merged with Ciba-Geigy to form Novartis, stirred up the most controversy with its plans for San Diego. In 1993, Sandoz and The Scripps Research Institute announced a far-reaching 10-year alliance that gave Sandoz first right of refusal to technology developed at Scripps. The deal gave Scripps millions of dollars and helped ensure Scripps’ discoveries would be commercialized. However, the agreement touched off a firestorm across the country. Skeptics such as Ron Wyden, now a senator and then a congressman from Oregon, said Sandoz got too much. The San Diego Union hotly played up the breadth of the agreement as one that was turning Scripps into a quasi-research arm of Sandoz, taking away its traditional academic freedom. Undercurrents of fear were stoked with inferences that the crown jewels of American biotechnology were being delivered to a foreign company. Moreover, the deal apparently did not distinguish between research directly supported by Sandoz and other research. Under pressure from the National Institutes of Health, Congress and Scripps and Sandoz rewrote the agreement to limit Sandoz’ authority over the technology and strengthened the freedom of researchers to do third-party consulting and accept funding from sources outside of Sandoz. But nine years later, Novartis has sunk its roots into San Diego on a far larger scale than that of the first Scripps deal. Novartis located its new headquarters near Scripps to make collaboration easier. Instead of provoking controversy, Novartis’ presence here is welcomed. “We couldn’t be more delighted that there is a big presence in San Diego of big pharmaceutical companies,” says Scripps spokeswoman Robin Goldsmith. “It’s safe to say that it’s a wonderful thing for this community to have such a huge bioscience presence and such synergy among the various kinds of organizations that can only inure to the benefit of the public.”
Looking back to the Sandoz controversy, Goldsmith says it’s obvious the fears were groundless — Scripps wasn’t about to give up its academic freedom. “We had a similar industrial collaboration agreement with Johnson & Johnson beginning in 1981,” Goldsmith says. “So the idea of a very positive collaboration with a large pharmaceutical company that could take our basic research discoveries and move them through our R&D pipeline is something we’ve been a strong adherent of for the last 20 years. We always viewed that as a very positive way for the scientists to take their basic research discoveries and move them into diagnostics and therapeutics. “It’s wonderfully productive for the community, for other scientists who are already here, for the San Diego economy, for the workplace — but we’ve always felt that way about the way TSRI established agreements with pharmaceutical companies. I’m not sure the people in San Diego really understand the kind of investment that the international scientific community has made here.” One who does is Donald W. Grimm, a venture partner with Hamilton Ventures. Foreign-based companies that arrive in San Diego are really no different from their large American counterparts, notes Grimm. Whether based in the United States or overseas, these big pharma companies are multinational corporations that need to think globally. “The international presence is dominated by pharmaceutical companies that have deals with the biotech companies,” Grimm says. “To me, that is no less valuable than Novartis having a building here.” Bradley J. Fikes has covered the region’s bioscience scene for 15 years, is a business writer with the North County Times and a regular contributor to San Diego Metropolitan.
|
Home | Info | Cover Story | About Us | Back Issues | Search
These international companies come to San Diego to tap into the region’s strong research base, says Abi Barrow, former director of programs at UCSD Connect. (A native of Scotland, Barrow herself exemplifies the international flavor of San Diego biotech.)
Put another way, money can’t buy some things. That’s true even for venture capitalists, whose business revolves around dollars.
Idec’s CEO, Bill Rastetter, says the limiting factor to the company’s growth is that it can’t hire enough people.