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Industry of Life:
The Birth of the Gene Machine 

ANTHONY J. PARISI / New York Times 29jun80


Industry of Life: The Birth of the Gene Machine ANTHONY J. PARISI / New York Times 29jun80


The Four Pacesetters

Genetech Corporation
Headquarters: South San Francisco. Founded in 1978. 110 employees. Has announced more DNA-made products than competitors. Joint venture with Eli Lilly for human insulin; with A.B. Kabi of Sweden for human growth hormone; with Hoffman-La Roche for interferon. Half-owned by employees. Lubrizol, a lubricating oil company, holds 20 percent. Venture capitalists own the rest.

Cetus Corporation
Headquarters: Berkeley, Calif. Founded in 1971. 250 employees. Concentrates on industrial and agricultural chemicals, also interferon. Joint ventures with Standard of California for chemicals and fruit sugar; with National Distillers for fuel alcohol. Founders, employees and private investors own almost 40 percent. Standard California 24 percent, national Distillers 16 percent, Standard Indiana 21 percent.

Genex Corporation
Headquarters: Rockville, Md. Founded in 1977. 50 employees. Concentrates on industrial chemicals. Has interferon contracted with Bristol Myers; another contracted with Koppers, a mining and chemicals company. Management owns about 45 percent, Koppers 30 percent, InoVen, a venture capital company backed by Monsanto and Emerson Electric, about 25 percent.

Biogen S.A.
Headquarters: Geneva, Switzerland. Founded in 1976. About a dozen employees, plus others under contract. First to make interferon. Schering-Plough, a New Jersey pharmaceutical company that owns 16 percent, plans to begin pilot production of the <???> drug using Biogen's process. Inco, formerly International Nickel, owns 24 percent. Remainder held by management and various outside investors.

ROCKVILLE, Md. Leslie Glick makes a living making living things. By carefully mixing solutions in test tubes, he modifies the genes of garden-variety bacteria to create more talented ones tailored for specific tasks, like making insulin or converting garbage into fuel.

Dr. Glick is a genetic engineer; he creates forms of life that create goods. And, although he tends to take this feat for granted, he seems acutely aware that he and his colleagues in his remarkable profession are shaping a new industry: the industry of life. "It's the same as with any technology," he said off-handedly. "The only difference is that, for the first time, it's the biologist who has come up with something that has commercial potential."

That something is the almost mystical technique known as recombinant DNA. With it, molecules of deoxyribonucleic acid-the long, twisting strands of atoms that are found in the cells of all living things and that contain the genes that are the "blueprints" of life-are snipped apart and reassembled in novel forms. The new bacteria might be used to make pharmaceuticals cheaper, produce whole new classes of drugs, turn out chemicals more efficiently, dean up toxic wastes or accelerate food production.

It was only eight years ago that scientists in California, building on the groundbreaking work of James Watson and Francis Crick, the Cambridge University researchers who had deciphered the double-helix configuration of the DNA molecule two decades earlier, learned how to insert genes from the DNA of one bacterium into the DNA of another in such a precise way that they could fashion an organism that possessed the desired features of both. Although there were and are other ways to create microorganisms, recombinant DNA made all of them seem clumsy by comparison, and scientists promptly declared that recombinant DNA would do for bioengineering what the transistor did for electronics.

They were right. Already, a dozen small companies seem on the verge of introducing commercial products made with the recombinant DNA process, and advances may come even faster now that the Supreme Court has ruled that new life forms created in the laboratory can be patented.

One of the promising DNA companies is the Genex Corporation, formed in 1977 by Dr. Glick, a molecular and cell biologist by training, with seed money from a venture capital company called InoVen. Last year, the Koppers Company bought 30 percent of Genex for approximately $3 million, and today Dr. Glick says his company is worth about $75 million. InoVen, whose backers include the Monsanto Company and the Emerson Electric Company, now holds 25 percent.

Other companies are concentrating on the older techniques of making new microorganisms, aware that there is still plenty of room for innovation in the burgeoning business of bioengineering. Still others are specializing in the materials and equipment needed by the companies conducting all this research.

"There are now a thousand research labs in the U.S. doing some kind of cloning; that's a market;" observed Stephen Turner, the 35-year-old president and principal owner of Bethesda Research Laboratories Inc., also based in Rockville. His four-year-old company sells research enzymes, the raw materials of the genetic engineer, to those labs. Some of the enzymes are made with recombinant DNA. "It's not as sexy as interferon cloning," said Mr. Turner, an economist, "but it's a real-world business."

The big companies are rushing into the business, too. Although an assortment of major corporations had been entwined with the small cloning companies for some time through a web of equity interests, joint ventures and research contracts, most refrained from establishing their own programs, until recently. Their reluctance

stemmed in part from the early furor over the possible hazards of recombinant DNA research. They feared the controversy would lead to bad publicity and a permanent tangle of Government regulations. Indeed, in 1978, following a two-year moratorium on recombinant DNA research, during which the dangers were studied, the National Institutes of Health did issue tight guidelines for DNA research.

Gradually, though, as hours upon hours of laboratory work piled up without some killer strain of bacterium accidentally escaping from a lab, the agency greatly relaxed its rules. The researchers found that their experiments yielded few surprises. But to be sure, they created a particularly weak bacterium to work with; if a troublesome mutation did get loose, it would have a hard time surviving. Even the bacterium developed to eat oil from off shore spills that was involved in the Supreme Court decision, a bacterium that was not created with recombinant DNA, has happy limitations: It cannot survive without water and once it gobbles up the oil, it simply dies and becomes part of the food chain.

As the concern over safety eased, most of the major pharmaceutical concerns started setting up in-house research programs, and the chemical companies and others are now following suit. Earlier this month, the Shell Oil Company donated $2 million to clinical research on interferon, and the company says it is now negotiating to set up a joint venture with a genetic engineering company. E.I. du Pont de Nemours & Company started a broad program in genetics more than a year ago.

So far, researchers concentrating on pharmaceuticals have made the greatest strides, probably because the science is most closely related to that industry. They have duplicated several hormones, including one that stimulates growth and might be used to treat dwarfism and accelerate healing. They have made human insulin for the treatment of diabetes, which is expected to replace the increasingly costly kind that comes from pigs and cows and causes unacceptable side effects in nearly 2o percent of the diabetics who must take the drug. They have learned how to produce two types of interferon, a substance made sparingly by the body that, in quantity, may prove invaluable in combating viruses and cancer.

Genetic engineers say there is no inherent reason why recombinant DNA should lend itself more to the drug business than others, and many believe that it may have even greater impact in the chemical industry.

"It's a technology that's just waiting for industrial application;" said William F. Amon Jr., vice president of the Cetus Corporation, of Berkeley, Calif., one of the oldest and largest DNA companies.

Cetus, which is 61 percent owned by the Standard Oil Company of California, the Standard Oil Company (Indiana) and the National Distillers and Chemical Corporation, operates out of 12 different buildings, has 250 employees and is worth about $300 million, according to Mr. Amon, although its capitalization currently amounts to only about a tenth of that figure.

In its production facilities, the company uses conventional genetic engineering to make organisms for manufacturing antibiotics. But in the lab, it has turned to recombinant DNA to make ethylene oxide, a petroleum derivative that is a starting material for making other chemicals and plastics; ethylene glycol, the basic ingredient in antifreeze, and fructose, the simple form of sugar found in fruit. It is also trying to perfect a yeast bacteria that could withstand high temperatures and greater concentrations of alcohol, which would aid in the production of gasohol. And Mr. Amon said Cetus would soon announce a new joint venture to produce interferon, the antiviral drug.

The first company to make interferon was Biogen S.A., of Geneva, Switzerland, which is 16 percent owned by the Schering-Plough Corporation and 24 percent owned by Inco Ltd., formerly International Nickel. Schering-Plough recently applied to the National Institutes of Health to begin pilot production of the drug using Biogen's bacteria. That seemed to put Biogen in a race with the Genentech Corporation, of South San Francisco, which many industry analysts consider the leading company in recombinant DNA.

Genentech, which concentrates mainly on pharmaceuticals, has announced a half-dozen drugs and hormones, including interferon, that were made with recombinant DNA, more than any other company. It has formed a joint venture with Eli Lilly & Company, which plans to market human insulin made with Genentech's microorganisms. Small quantities of insulin are now extracted from the pancreases of cadavers for diabetics who cannot take animal insulin, but the supply is limited. Lilly will begin testing its synthesized variety later this year, and human insulin could become the first product made with recombinant DNA that is distributed to consumers.

"At this point, it's a matter of getting the necessary Government approval," said Robert Swanson, Genentech's 31-year-old president.

Mr. Swanson, who studied both organic chemistry and business administration, started Genentech in 1976 with money from a half dozen venture capital firms, including a subsidiary of the Lubrizol Corporation, which makes lubricating oil, and InoVen, the firm that Monsanto and Emerson Electric are involved in. Today, the officers, directors and staff of Genentech own half the company, Lubrizol holds 20 percent and the rest is split among InoVen and the other investors. The company says its market value exceeds $100 million.

Relatively little is known about the finances of the DNA companies because all but one, Enzo Biochem, are still privately held. Founded in 1976, the company went public just two weeks ago. The owners offered 770,000 shares, or 6o percent of the business, at 61/4 a share. Even though the prospectus said Enzo Biochem lost money during its last fiscal year on a gross income of just $133,000, mainly from the sales of enzymes, the company had no trouble selling its stock. Investors have since bid the price of the shares up by a third, to 83/8 bid, by late last week.

Based on recent transactions, the paper value of the four pacesetters has doubled since the start of the year, to more than $500 million, or about a fourth of what the common stock of Monsanto is currently worth. Yet their sales are insignificant, and all they have to show is a lot of potential. Only one, Genentech, says it operates in the black. Research companies often run up big deficits, of course, but many of the DNA products that now seem so promising, such as interferon, may prove to be duds, and fierce competition could cut deeply into the profitability of even the successful genetic inventions.

"I agree with most of the optimistic assessments of what this technology will lead to; said Scott R. King, an analyst with F. Eberstadt & Company. "I just question the time frame that many people have in mind. Sure, recombinant DNA is like the discovery of semiconductors. But keep in mind that we didn't see cheap pocket calculators until 25 years after the transistor was developed."

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