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It takes time and money to play in the genetics big leagues. Developing a genetically engineered drug or hormone can take up to 10 years and $400 million, says Lisa Raines, vice president of government affairs for the Massachusetts biotechnology firm Genzyme.
Since private companies fund at least 60 percent of all U.S. gene- therapy trials, having a steady flow of capital is crucial to a company's chances for success. But Ernst & Young, a nationwide accounting firm, calculated in 1994 that more than half of all biotechnology start-up firms did not have enough capital to stay afloat for two more years.
One major problem is that most products are only in the early stages of testing and federal regulatory approval. As a result, firms that market gene-therapy products such as the viral and fat-based vectors used to deliver therapeutic genes to a patient, are limited in what they can sell to public and private laboratories.
“We believe gene therapy will have a huge impact on medicine within 10 years, but we don't know what technology will get us there,” said James M. Wilson, head of the University of Pennsylvania's Institute for Human Gene Therapy.
Compounding the business problems, biotechnology firms lost money in 1994. Indeed, in the competitive world of gene testing, where prenatal tests such as amniocentesis have captured a $270 million market, the financial landscape “is littered with corpses,” according to The Economist.
Still, investors already have bet more than $1 billion that their chosen gene-therapy companies will be among the survivors of the approximately two dozen firms currently in the business. Biotech firms that buy out gene-therapy companies, or the rights to technologies they are developing, are among the biggest bettors.
In July, after Rockefeller University researchers identified the so-called “obesity gene,” Amgen Inc. of Thousand Oaks, Calif., paid $20 million for the university's patent and promised much more if the hormone (leptin) that the gene produces proves useful in treating overweight people.
The fact that there are some 50 million overweight Americans made the commercial implications of the obesity gene irresistible to investors, who drove up Amgen stock by $4.37 to $84.25 - a 5.5 percent gain in one day.
Amgen is not the only big biotech company that sees wisdom in buying rights to promising ideas, or, for that matter, buying entire gene-therapy companies. In October, the newly formed German/U.S. biotechnology giant Hoechst Marion Roussel announced it would invest up to $210 million to cement deals with three companies that have expertise in human genetics and genomics. The deal includes the $160 million purchase of Cell Genesys, of Foster City, Calif., which specializes in T-cell gene therapy for AIDS.
Then there is Biogen's $35 million investment in the Philadelphia start-up firm Genovo, which focuses on gene therapy for lung and liver disorders. And Corange and Sequana Therapeutics sealed a $51 million deal to hunt down the genes related to osteoporosis.
Gene therapy also has spurred a number of corporate mergers. In a recent $295 million deal, Sandoz Ltd. of Switzerland merged with Genetic Therapy, which has a patent for ex-vivo therapy. Global pharmaceutical giant Rhone-Poulenc Rorer Inc. paid $84.4 million to merge with Applied Immune Sciences, which specializes in cell therapy and vector research and development.
For gene-therapy companies with little or no income, enormous development costs and numerous regulatory hurdles, becoming an attractive buy-out candidate is now a common goal. “Most are interested in selling out,” said Stuart Orkin, a molecular biologist at Children's Hospital in Boston. “Whether they deliver a product is not germane. They just need to recoup their venture capital.”
Because the cost of doing genetic research is so high, many gene therapy researchers affiliate with a gene therapy company. “The successful people in the field are affiliated with biotechnology companies now,” says Matthew J. During, who heads the laboratory of pharmacology and neurogenetics at Yale University.
The disappearing boundary between traditional academic research laboratories and commercial biotech enterprises has some observers worried that research is being driven more by the profit motive than science. “Many of these trials are not your traditional university- backed research,” says Jeremy Rifkin, president of the Foundation on Economic Trends. “They're sponsored by commercial enterprises and are not designed to show efficacy. But they will show up on the bottom line because the moment they can produce a [regulatory] approval and a clinical trial, their stock goes up.”
The search for profits is drawing more and more gene-therapy companies into experimental treatments for cancer and AIDS, which are attractive targets for investment because so many patients need treatment. Diseases such as cystic fibrosis and Huntington's chorea are so rare, however, that except for federally funded research they get relatively little scientific attention.
“It costs just as much to develop a product for a common disease as it does for a rare one,” said Nelson A. Wivel, director of the NIH Office of Recombinant DNA Activities, which oversees the RAC.
In the 1980s, in an effort to get results of government-funded research into the marketplace, Congress passed the Technology Transfer Act to facilitate the marketing of government inventions. The act created Cooperative Research and Development Agreements, which allow companies to purchase licensing rights to patents held by government agencies. The arrangement allows private firms to gain exclusive rights to the technology developed, in exchange for helping to fund the research.
Where the money comes from, of course, has an impact on the direction of research. Thirty percent of the researchers who receive private biotech funding say what they choose to study is influenced by the potential marketability of their findings.
The more that market concerns drive the research, the more likely it is that bottom-line pressures will misdirect the use of legitimate gene therapies, says Wendy McGoodwin, executive director of the Council for Responsible Genetics. She cites a 1994 case in which a federal grand jury in Minneapolis indicted a pediatric endocrinologist, executives at Caremark, a health-care company, and a sales executive at the biotechnology giant Genentech Inc. for illegally promoting Genentech's genetically engineered growth hormone protropin. The case involved kickbacks and a questionable screening study designed to identify and refer (as potential patients) public school students who were short for their age.
Protropin was designed to treat people with a genetic condition called hypopituitary dwarfism, but in a 1992 study the NIH found that at least half of the 1,500 people taking the $20,000-$40,000-a-year drug “do not have classical human growth-hormone deficiency.”
In June, Caremark pleaded guilty to one count of mail fraud in the case and paid civil and criminal fines totaling more than $125 million (including penalties from a related case). The pediatrician was convicted in October on two counts of accepting kickbacks; the Caremark and Genentech executives were acquitted.
McGoodwin says the protropin episode should be a warning against the tendency to imagine gene therapy as a cure-all for social ills - in this case, a bias against people of below-average height.
“Why seek medical solutions to a social prejudice?” she asks. “Why not seek a social solution instead of pumping hormones into kids?”
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