Genentech — the start of alliances between large pharmaceutical companies & startups, biotech beginnings
To learn more about Genentech adventure, read Sally Smith Hughes -
Genentech, the beginnings of Biotech
Understanding the historical context of industries’ yesteryear provide a better understanding of their workings today. Their successes and failures are often inherited from past political, social and technical emergence. The production and protection of knowledge, including the significant role of intellectual property, are also key to their success today.
This article aims to outline the emergence of biotechnology through the lens of a methodological framework. Unfolding during a time marked by the start of open innovation and the necessity of exploring large technological uncertainties, most pharmaceutical companies were risk averse.
The race for the production of recombinant human insulin technology (bacteria), through genetic manipulation, was taking hold during the 80s between the laboratories of Stanford and University of California San Francisco and elsewhere in the United States (Harvard).
A few years earlier, two professors, founders of recombinant DNA technology and fathers of the biotech adventure — Boyer and Cohen — began a collaboration that would push the frontiers of genetic recombination.
As regulation of the industry advanced, both professors saw the fraction between the entrepreneurial and academic worlds. They will help to unite this fraction over the coming years.
The professors continued to worked in their respective labs, Boyer founded Genentech while Cohen became a board advisor for Cetus, another biotech startup initiated by a group of scientists.
The reduction of uncertainties related to feasibility
Genentech, anticipating the National Institute of Health regulations, took a technological bet to focus on the manipulation of synthetic DNA rather than the human DNA, subject to more stringent handling and operating conditions. The ethical code of the NIH oversaw publically funded research initially within the areas of the leading players. This was amended due to national competitiveness, regulatory frameworks (including the production limit) accompanied the industrialization of these biotech pioneers.
The reduction of business uncertainty
There was never big questions about the use of that technology. Insulin was only the beginning of the vast horizon of technology applications driven by Genentech. With a “lean” approach, Genentech first crystallized media attention by tackling a scientific challenge, to create somatostatin showing recombinant technology of DNA. This is human insulin, with direct market application from technology, which became the quest of this scientific and entrepreneurial adventure. Genentech “scientific knowledge, technical expertise and motivation were key assets to successfully compete with the labs launched in the same race.”*
Only the legal environment could have made the business venture fail. the case study Diamond vs Chakrabatry (an engineer from GE initiator of the first patents on life designed by a human) opens up the industry applications within which Genentech had a strategic positioning. It had been a precursor shaping the intellectual property landscape all along.
A ground-breaking collaboration between Genentech and Lilly, a respected international manufacturer of insulin, introduced for the first time a collaborative scheme between a large industry player and a startup within the pharmaceutical industry. Scientists in the startup conducted research which was too applied for the academic world and too early stage for classical pharmaceutical company.
The collaboration model included pre-financing, commercial licenses and funding dependent on the success of a twenty year research and development program with Genentech and contractual protection from one application of their technology. It would be initially limited to only the industrial application of insulin production. In exchange, Lilly held an exclusive contract for this technology and the associated effort to transform industrial processes.
Common interests and common objective are both clearly identifiable in the collaboration. On one hand, it is an indispensable partnership strategy for Genentech to challenge an industry where sometimes powerful players are a century old and for the insulin company a first direct application of technology with high business value. This offered a strong position for Lilly who did not want to risk losing its insulin production market, historically derived from natural animal insulin extraction.
Lilly initially bet on two competing technology scenarios, one fronted by Genentech and the other by the laboratory, City of Hope.
Genentech’s design ecosystem, key individuals
Boyer, UCSF microbiology laboratory and radiation expert, is a cornerstone of this ecosystem and a talent acquisition vehicle for Genentech, acting as a direct bridge with the academic world and its laboratories. Boyer is a key element to streamline research costs of the early biotech adventure.
Swanson, a former biologist at MIT who moved to the MIT Sloan Management school and co-founder of Boyer, declared “We built bridges between the academic and industrial worlds and forged a network helping us maintain our proven technical leadership position within the academic and industrial groups who pursue molecular biology applications”. He is the entry point of an emerging ecosystem of Venture Capitalists, after having forged his weapons in the Valley and through previous experiences in this world. Until the mid-80s, it remained the architect of alliances and partnerships between the biggest names in the pharmaceutical industry. Genentech continued to lead integration capabilities as an end to end pharmaceutical player, including research and development, certification, production, marketing and creating new markets.
Kiley, lawyer counsel, having adapted to the needs of the startup in its infancy, built its knowledge base on Genentech. Kiley raised awareness very early amongst its protagonists, of the contractual and intellectual property that enabled the design of industrial linkages and research of Genentech with its ecosystem.
Follow the Genentech story through the book, which traces the IPO and the entrance to capital and buyouts by large pharmaceutical in the iconic biotech adventure. One tip on the future of the adventure, Roche is today’s owner.
* The words of the author Sally Hughes Smith — Genentech
