Caltech Joins Rush to Foster Biotech Spinoff Companies

With visions of designer drugs and medical devices as the next mother lode in the technological revolution, California’s universities are pushing the frontiers of biological research and making it easier for their scientists to start up biotechnology companies.

Caltech is the latest major research university to join in the gold rush, announcing on Tuesday an $18-million gift from businessman Eli Broad to expand biological research on campus and help spawn a “corridor” of biotech companies in Pasadena.

Although Los Angeles-area universities have lagged behind their peers in spinning biological breakthroughs into biotech companies, Caltech President David Baltimore sees potential for a cluster of companies that will rival the spinoff ventures in the Bay Area, San Diego and Cambridge, Mass.

He envisions “tens and maybe hundreds of small companies taking individual discoveries from Caltech and other institutions in the area and developing beneficial products. . . . We are just on the takeoff platform.”

All around the state, research universities are developing close ties with the biotech industry, which they expect will take its place beside computers and telecommunications as an economic mainstay of the state.

Consider these developments:

* UC San Francisco is designing a new 43-acre Mission Bay biomedical research campus that is specifically designed to encourage biotech companies to locate next to university labs. A developer, who donated much of the land in the abandoned warehouse district, has already had a dozen inquiries from biotech companies interested in relocating there.

* The University of California’s BioSTAR project is trying to draw private investments for biological studies on many of its nine campuses that might develop into useful discoveries, such as methods to speed up the healing of wounds. The university has put up $10 million in matching funds to attract private money, and is offering investors first dibs on anything that smells profitable.

* The California State University Board of Trustees today is set to approve development plans for an $80-million biotech research park on 28 acres of the Cal State Northridge campus. The project is a partnership with biomedical entrepreneur Alfred Mann.

* USC is preparing to break ground on a $100-million biomedical research lab on campus that will turn raw scientific discoveries into useful products. UCLA hopes to establish a similar $100-million lab, provided that it can work out an arrangement with the same businessman who’s bankrolling Northridge’s biotech park and USC’s lab: Alfred Mann.

Symbiotic Relationship for Academia

Most of these ventures show signs of a growing symbiotic relationship between the biotech industry and the ivory tower. Until recently, Caltech has been a holdout, taking pride in being “insular” and frowning on cozy ties to the marketplace.

Some critics still warn that profit motives can distort lab results or discourage researchers from sharing information that might prove to be lucrative. “Most scientists don’t want to admit that their objectivity can be affected by large industrial sources of funds,” said Tufts University professor Sheldon Krimsky.

Yet such attitudes are changing in academia, including at Caltech, which along with a new president has had an infusion of new faculty.

Baltimore, a renowned biologist, acknowledges the risks but champions the rights of universities and scientists to reap the benefits of scientific breakthroughs.

“I think it’s a relevant part of the mission of a university to see that discoveries are relevant to societal needs,” he said.

Baltimore laments that his former employer, MIT, didn’t patent his 1970 discovery of an enzyme that allows retroviruses, like HIV, to replicate. The discovery won him the Nobel Prize in medicine in 1975.

“It was a great loss to MIT because MIT would have had one of the basic patents in biotechnology,” Baltimore said. Instead MIT forfeited its potential royalties. “I want to make sure that doesn’t happen here.”

Like many universities, Caltech is preparing to delve into promising new areas of research that evolve from the Human Genome Project, a federally funded effort to spell out the 3 billion genetic letters that determine heredity.

The detailed map of human chromosomes, to be completed by 2003, is expected to create a new understanding of the causes of aging, growth and disease--and it should result in new treatments as well as tools for diagnosing and perhaps even preventing a variety of human ills.

On Tuesday, Caltech officials announced that the $18-million gift from Los Angeles businessman and philanthropist Broad put them more than halfway toward their goal of raising $100 million for their biological sciences initiative, called, “Beyond the Genome.”

Broad, chairman of SunAmerica Inc., said this area of science “has the greatest potential to significantly improve the human condition in the coming century.”

The contribution will cover half the cost of a new biology laboratory. Other money will be used to hire a dozen new faculty and provide fellowships for additional researchers.

Caltech kicked off its campaign only four months ago when Caltech trustees Camilla Chandler Frost and Ben Rosen each gave $5 million to boost biological research.

Rosen, who is chairman of Compaq Computer, sees parallels between today’s biological breakthroughs and the advances in semiconductors and microprocessors of a generation ago.

“The rock stars of this century may be computer nerds, but the next group will be biologists,” Rosen said.

Surprisingly, Los Angeles and Orange counties, with their top-rated universities and hospitals, are overshadowed by the Bay Area and San Diego as centers for the emerging biotech industry.

The University of California BioSTAR Project found that only 46 of the state’s 391 biotech firms are in the two counties. BioSTAR defines the industry narrowly, including only those companies that use gene splicing and cloning in the search for useful drugs and other products.

The Bay Area has 197 companies; San Diego County 130.

Amgen Inc. is one of the few biotech companies in the Los Angeles area. The $2-billion-a-year company, located in Thousand Oaks, was started by several entrepreneurs with the help of a UCLA scientist.

Why haven’t other companies followed Amgen’s example?

Susanne Huttner, director of BioSTAR, argues that “the business climate has not been suitable for biotech start-ups.”

In the Bay Area, she said, biotech followed on the heels of the computer industry, which had already created a network of lawyers, accountants and venture capitalists needed to service fragile, young companies.

And in San Diego, the Salk Institute, the Scripps Research Institute and the University of California campus there have long encouraged spinoffs. UC San Diego, for instance, created the CONNECT program in 1985, which helps scientists present their ideas to venture capitalists.

‘This Is Just the Beginning’

A few successful companies can breed others. The handful of entrepreneurs who started Hybritech Inc. went on to launch other biotech companies--one firm “begetting” another.

All this contrasts sharply with the history of UCLA, said C. Kumar Patel, vice chancellor for research.

“Fifteen or 20 years ago, if a faculty member wanted to get involved in a start-up company he or she almost had to leave the university to make that happen, and that created an enormous barrier,” Patel said.

More recently, UCLA professors, with the encouragement of the administration, have started up three promising new companies, two in Santa Monica and a third in a rented space on campus.

“This is just the beginning,” Patel said.

Scientists at the University of California helped found at least 98 different biotech companies, with most of them inspired by three campuses: Berkeley, San Francisco and San Diego.

Under UC President Richard C. Atkinson, the nine-campus system has been trying to play an even bigger role in nurturing new biotech companies.

With the encouragement of Caltech, Pasadena officials plan to turn 100 acres into a biotech corridor less than a mile from Caltech and adjacent to the Huntington Medical Research Institute.

Having made zoning changes and completed a required environmental review, city leaders are now negotiating with two or three developers.

Caltech officials have discussed leasing some of the space and then subletting it to promising start-ups, perhaps at below-market rates as a way of promoting spinoffs by its own faculty, said one university official. In return, the school might receive a share of future royalties.

“We are making it easier for our faculty to be involved in spinoffs,” Baltimore said.

“I don’t think there is an opportunity to eclipse the tremendous biotech development in the Bay Area,” he said, “but I think this can be an important destination.”

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Biotech Constellations

The University of California’s BioSTAR project has identified 391 biotechnology companies in in the state, most of them clustered around San Diego and the San Francisco Bay Area.

UC Davis

UC San Francisco

UC Berkeley

UC Santa Cruz

UC Santa Barbara

UCLA

UC Riverside

UC Irvine

UC San Diego

Source: University of California BioSTAR Project

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Scientists as Stockholders

Ninety-eight biotechnology companies in the state have been founded by UC scientists. Some companies were co-founded by scientists from more than one UC campus. The list below reflects that overlap by giving credit to every campus affiliation:

Campus: No. of Companies

UC San Diego: 34

UC Berkeley: 32

UC San Francisco: 22

UCLA: 10

UC Davis: 6

UC Riverside: 4

UC Santa Barbara: 3

UC Irvine: 2

UC Santa Cruz: 1

Source: University of California BioSTAR Project