LSF Magazine Summer 2012

Summer 2012

LSF MagazineTelling the Story of Biotechnology

t h e

UbiquitousFrederick

The Right Woman for

the JobBonnie J. Addario

Trials and Travails of a Biotech

Pioneer Ivor Royston, Part II

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Frank

2 LSF News

Biotech Bookshelf

Trials and Travails of a Biotech PioneerIvor Royston, Pt. II

When San Diego cancer researcher Ivor Royston co-founded a biotechnology company, he found himself in a rough and tumble environment – not in busi-ness, the boardroom, or the marketplace, but among his academic colleagues.

The Ubiquitous Frederick FrankWorking behind the scenes, out of public view, investment bankers have shaped the financial architecture of the biotechnology industry. Frederick Frank of Lehman Brothers has been the most prolific, creative, and influential.

The Right Woman for the JobThe Bonnie J. Addario Story

Bonnie J. Addario was lucky. She had lung cancer and survived. Most people diagnosed with the disease are dead within a year. Bonnie wants to change that, and thinks she knows how to do it.

LSF Magazine

LSF Oral History ProgramHenri Termeer

LSF Board SpotlightSusan Desmond-Hellman

EditorMark Jones

Production ManagerDonna Lock

Staff WritersBrian DickHeather NelsonSusan Rogers

Design/LayoutZachary Rais-Norman4

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8

18

26

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Cover illustration by Gregoire Vion

This issue of LSF Magazine contains stories on the economic and institutional contexts in which innovative projects in the life sciences and biotechnology have been pursued (or not) in recent decades. One takes place on Wall Street, and in executive suites and boardrooms. Two others unfold in and around hospitals, medical schools, and research centers associated with elite research uni-versities.

The protagonists are an investment banker, a universi-ty professor, and a patient activist. Each has worked, and continues to work, to foster technoscientific innovation, to generate new knowledge, new wealth, and biological goods that will improve human lives.

All three stories show how organizations and mar-kets dictate the pace and direction of scientific research, and sometimes retard or block its forward momentum. They also show how human ingenuity can be applied to overcome organizational and economic impediments to progress. Finally, all three show how much times have changed – and how rapidly – thanks to innovators such as our investment banker, university professor, and patient activist.

Mark JonesDirector of ResearchThe Life Sciences Foundation

LSF is preparing to enter its third year of operation. The Foundation is making strong forward progress on multiple fronts. The story of biotechnology is being writ-ten and put to use.

The LSF staff is collecting records and documentary materials – sources without which no history can be authenticated. The LSF archive now contains a collection of gems, including the original business plans from Cetus and Biogen, papers from Genetics Institute, and fifty cu-bic feet of correspondence, photographs, and mementos from Syntex.

The LSF website at www.biotechhistory.org is a trusted resource. Educators have praised its “impressive, high quality assets.” Through social networking connects, LSF is reaching a young audience of life science students and enthusiasts around the globe.

Several publication projects are underway. Oral his-tory transcripts are being posted in LSF’s digital archive, two books are in preparation, and here, in LSF Magazine, highlighted articles and features offer hints of flavors and possibilities.

Early support for our endeavor has come largely from the generosity of the life science corporations that have stepped forward as LSF’s founding partners. As we move ahead, we shall look increasingly to individuals to join in.

We will soon announce our next steps. Stay tuned. We thank you for your interest and support, and invite you to read on.

Arnold ThackrayPresident and CEOThe Life Sciences Foundation

From the president and CEO

From the editor

2 LSF Magazine Summer 2012

LSF welcomes Thermo Fisher Scientific as a Founding PartnerThermo Fisher Scientific, Inc. has become a Founding Partner of the Life Sciences Foundation. Thermo Fisher Scientific is a leading global supplier of materials, instruments, and services to life science research and development operations. LSF extends it welcome.

LSF News

LSF & CHF honor Nancy Chang at BIOLSF and sister institution, the Chemical Heritage Foundation (CHF), co-hosted a special dinner on June 19th, in conjunc-tion with the 2012 BIO International Convention. The event recognized Nancy Chang, Ph.D., as the 2012 recipient of CHF’s Biotechnology Heritage Award. Dr. Chang co-founded Tanox Incor-porated, which developed therapeutic monoclonal antibodies. The award recognizes her many accomplishments and contributions to the growth of the biotechnology industry over twenty-five years of service. Previous recipients of the award joined leaders in the biotech community to thank Dr. Chang for her good work.

History Live featuring G. Steven BurrillOn April 12th, The Chemical Heritage Foundation (CHF) presented ‘History Live: The Changing World of Biotech’, featuring G. Steven Burrill, in Philadel-phia, PA. History Live presents first-per-son accounts of legendary careers before live audiences. G. Steven Burrill is CEO of Burrill & Company and Chair of the LSF Executive Committee.

San Diego & Boston ChaptersThe steering committee of LSF’s San Diego chapter held an inaugural meeting on May 31st. Ivor Royston, David Hale, Joe Panetta and Duane Roth lead the group, which convened to discuss LSF Fall programming. In partnership with the University of California, San Diego (UCSD) Libraries, LSF will host a special event on November 7, 2012, from 4:00 to 6:00 pm, in Atkinson Hall on the campus of UCSD. A distinguished panel including Kevin Kinsella and Tim Wol-laeger will discuss the ‘Past and Future of Biotech Venture Capital in San Diego County.’ Ivor Royston of Forward Ven-tures will serve as moderator.

LSF’s New England chapter met on May 18 in Boston to discuss LSF pro-gramming and plan a Spring 2013 event on ‘The Origins of Biotechnology in New England.’ LSF is pleased to welcome Mark Levin of Third Rock Ventures to the chapter’s steering committee. He joins Joshua Boger, Bob Carpenter, Bob Coughlin, Henri Termeer, and Peter Wirth.

San Francisco EventsFebruary 7, 2013 is the date for the Bay Area biotech industry’s “100 Pioneers” Dinner. The event will be co-hosted by Fred Middleton and Pitch Johnson. Stay tuned for further details.

Summer 2012 LSF Magazine 3

LSF welcomes Marc Casper, Nancy Chang, and Fred Middleton to the Foundation’s Board of Trustees.

Marc Casper is President and CEO of Thermo Fisher Scientific. He began his career at Bain & Company as a management consultant before moving into a series of executive positions at Dade Behring, including President – Americas. Mr. Casper moved subsequently to Kendro Laboratory Products, to become President and CEO. He joined Thermo Electron in 2001 as

President of the Life & Laboratory Sciences sector. He was named Senior Vice President in 2003, and in 2005, assumed responsibility for all operating divisions. After the company merged with Fisher Scientific in 2006, he was named President of Analytical Technologies. He became COO in 2008, and was appointed President and CEO in 2009.

Dr. Nancy Chang is a Senior Managing Direc-tor at Orbimed Advisors, LLC. Prior to Or-bimed, she co-founded Tanox, Inc., a company that developed humanized antibodies for the treatment of allergies. Chang served as Chair-man and CEO from the company’s beginnings in 1986 until its acquisition by Genentech in

2007. She has received numerous awards for her professional accomplishments, includ-ing this year’s Biotechnology Heritage Award. Dr. Chang serves on the Board of Directors of the Federal Reserve Bank in Houston, and is a member of the Board of Visitors at M. D. Anderson Cancer Center.

Fred Middleton has provided financial guid-ance to biotechnology companies for over thirty years. After a stint as Vice-President at Chase Manhattan Bank, he joined Genen-tech in 1980, and served in various executive capacities – VP of Finance, VP of Adminis-tration, VP of Corporate Development, and Chief Financial Officer. In 1984, he became a

Managing General Partner at Morgan Stanley Ventures. Mr. Middleton joined Sanderling Ventures in 1987, and remains there today as a Managing Director. Mr. Middleton is ac-tive on the boards of numerous life sciences ventures, and also serves on the Leadership Council of the David H. Koch Institute for Integrative Cancer Research at MIT.


F rank Desmond has a favorite story that he tells about his daughter, Susan. He was visiting his wife in the clinic where she was receiving chemotherapy for breast cancer.

They retired to a lounge. Seated nearby was a patient who had returned for treatment following the recurrence of a tumor. The woman was distraught, but her doctor had good news: “We’re giving you an incredible new drug called Herceptin.” The doctor pointed across the room to Mrs. Desmond, and said, “You can thank the daughter of this lady for bringing it to you.”

Susan Desmond-Hellmann led the development organiza-tion that studied the revolutionary product at Genentech in South San Francisco, California. Herceptin® is used to treat aggressive HER2-positive breast cancers. HER2 is a protein that triggers the proliferation of cancer cells. Herceptin® is an antibody that blocks its action. ”Previously,” says Desmond-Hellmann, “there were no effective treatments. HER2-positive metastatic breast cancer was a death sentence.” Herceptin® has dramatically improved survival rates.

Susan grew up in Reno, Nevada. Frank Desmond is a pharmacist, and ran the Keystone Owl Rexall Drug store. Susan helped out with bookkeeping. By the time she entered grammar school, she knew she wanted to be a physician. She followed an older sibling to the University of Nevada, Reno, as the second of seven Desmond children who would enroll at the school. Susan studied in a pre-med program, and after gradu-ation, stayed on to earn a medical degree in her home state, in 1978. She was then accepted at the University of California, San Francisco (UCSF) for her internship and residency.

“I felt like an underdog when I first showed up,” says Desmond-Hellmann. Most of her peers had come from Ivy League schools. The feeling didn’t last long. She soon proved

her mettle, displayed her talent, and became board-certified in Internal Medicine and Oncology. Her growing interest in cancer epidemiology led her across the San Francisco Bay to the University of California, Berkeley, where she earned a mas-ter’s degree in public health in 1988. Her graduate research on Kaposi’s sarcoma, an AIDS-related malignancy, led to an offer in 1989 from the Rockefeller Foundation to study hetero-sexual transmission of HIV in Uganda. Susan and her husband Nicholas (then an infectious disease doctor at UCSF) spent two “fantastic” years conducting research and teaching as visiting faculty members at the Uganda Cancer Institute at Makerere University in Kampala.

After returning to the states and establishing a private on-cology practice in Kentucky, Susan moved with her husband to

LSF Board SpotlightSusan

Desmond-Hellmann


Bristol-Meyers Squibb to develop cancer therapies. She served as Associate Director of Clinical Cancer Research, and was part of the team that brought the breast cancer drug Taxol® to market. She felt that she had found her niche: “It was like I had been training my whole life for that job,” she said. “I absolutely loved it!”

In 1995, her passion for drug discovery led her to Genen-tech. She joined the company as a clinical scientist in 1995. She was named Chief Medical Officer in 1996, and in 1999, became Executive Vice-President of Development and Product Operations. “I was promoting her every six to twelve months,” says former Genentech CEO, Art Levinson. “Her instincts were excellent.” During 14 years at Genentech, Desmond-Hellmann

was involved in the creation of an exceptional portfolio of innovative biopharmaceuticals, including – in addition to Her-ceptin® – Avastin®, Lucentis®, Rituxan®, Tarceva®, and Xolair®. She helped to transform Genentech into the leading U.S. manu-facturer of anti-cancer treatments.

In 2009, Desmond-Hellmann returned to UCSF, this time as Chancellor. As head of one of the world’s preeminent academic institutions, she is committed to implementing and refining a translational model of basic and applied research, and realizing the potential of personalized, precision medicine. She wants to see more collaboration between academia and industry in order to speed the process of new drug development.

Desmond-Hellmann is driven by a love of science, a com-mitment to improving patient care, and a strong desire to eradicate cancer: “Great science is going to make life better for human beings,” she says. “I want to change medicine. I don’t want things to be a little bit better; I want them to be a lot bet-ter. For cancer patients, extending their lives is good, improv-ing their quality of life is good, but curing their cancer is best.”

Susan Desmond-Hellmann in Uganda, 1989

Henri Termeer accepts the 2005 National Medal of Technology and Innovation, on behalf of Genzyme Corporation, from President George W. Bush


I n 1983, Henri Termeer was a senior level executive at Baxter Travenol, an established and thriving medical

products manufacturer headquartered in Deerfield, Illinois. When he left his se-cure position for a tiny biotech startup in Boston, friends and colleagues were per-plexed. They questioned his judgment, for the company had little money and no products. Termeer understood the risk, but remembers thinking, “Biotechnology is going to have an enormous impact. Be-ing in at the beginning is an opportunity

that comes just once.” Termeer became President of Genzyme in 1983. He was appointed CEO two years later, and held the position for twenty-seven years.

From the beginning, as Termeer ex-plains, Genzyme charted an independent course:

We didn’t follow the early biotechnology model of doing research, being supported by larger companies, and then raising a lot of equity. Instead,

we funded the company independently, with small, incremental steps. We met every Saturday and Sunday to discuss what everyone else was doing in biotechnology and to figure out what we could do that was unique. We decided to invest only in what we could afford. We didn’t want to support the company through a research contracts with major corporations. We wanted to own our technology.

Under Termeer’s guidance, Genzyme adopted a diversified development strat-egy that incorporated a variety of tech-nologies and generated a broad portfolio of products. Units operating under the Genzyme umbrella manufactured bulk enzymes, antibodies to combat leukemia, multiple sclerosis, and acute rejection of transplanted organs, polymer-based drugs for the treatment of chronic

LSF Oral History ProgramHenri Termeer

Oral histories are narrative accounts of events and his-torical processes as told from the point of view of eyewit-nesses and participants. They preserve the experiences, rec-ollections, and testimonies of history-makers.

LSF is assembling a virtual oral history archive. We are recording and publishing in-depth interviews with leading figures in biotechnology. They contain stories about the history of the field that have yet to be heard by scholars, journalists, and the general public. This month, we feature excerpts from a conversation with former Genzyme CEO Henri Termeer.

The Genzyme Center, Cambridge, Massachusetts.Built in 2003, the Center has received the highest rating issued by the U.S. Green Building Council, the nation’s foremost authority on responsible building practices


kidney disease, high cholesterol, and osteoarthritis, along with biosurgical and genetic testing products.

Genzyme is best known for its orphan drug program. In 1983, the U.S. Congress passed the Orphan Drug Act (ODA), which provided special tax breaks and seven-year monopolies to companies successfully developing new drugs for rare diseases. Without incentives, such projects would be economically infea-sible. Large drug corporations in search of blockbuster revenues had no interest, but the ODA enabled biotech companies such as Amgen, Biogen, Genentech, and Immunex to enter pharmaceutical mar-kets. Henri Termeer made orphan drugs a centerpiece of Genzyme’s business.

The company specialized in treat-ments for rare lysosomal storage disorders. Patients who inherit these

genetic conditions suffer from severe enzyme deficiencies that wreak ghastly metabolic havoc. Genzyme developed a series of enzyme replacement therapies that have miraculous, life-saving effects, but are expensive to produce. Pricing them became a subject of controversy. Termeer remembers debates from the early 1990s:

People in Washington began to call for a price control system for breakthrough drugs. One very famous politician asked, ‘What if one of you guys comes up with a treatment for HIV? You can charge any kind of price.’ I gave many speeches about this. I said, “The problem is not that we have a treatment for HIV. The problem is that we don’t have a treatment for

HIV.” The virus was killing millions of people all over the world. Trying to control the pricing of a non-existent cure was premature. I argued that it was important to create incentives to look for a cure. It was an interesting time, and, for the industry, a critical and dangerous time.

Termeer uses a parable to explain the moral rationale (which won the day) for commitments maintained by Genzyme and society at large to the development of innovative therapies for rare diseases, despite the high costs:

People often say, ‘Wow, this is very expensive. We can’t afford to do this. It’s unfair. We leave too many things untreated if we invest so much in one patient.’ In response, I sometimes recount a news story that I read awhile back. A circus was visiting York. A camel slipped in the streets and its legs went in four different directions. People tried to lift it with a crane, but they couldn’t because it was too heavy and the crane would break its chest. It took two days to save this camel. Traffic was diverted. They dug a hole and saved him. It’s part of civilization. We don’t say to a child, ‘You have this genetic disorder, but we have to build a road, we can’t help you.’ When we can help, it is our obligation to do so.

Mr. Termeer’s oral history tells the full story of his career and the rise of Genzyme. Look for it soon in LSF’s digi-tal oral history archive at

www.biotechhistory.org


The UbiquitousFrederick Frank

Biotechnology is a capital-inten-sive industrial sector. It usu-ally takes a biotech company

ten-to-twelve years to develop a new product. For young science-driven firms without substantial revenues, the search for funds is perpetual. Capital is life.

In the beginning, venture capitalists were the first to supply it, the first to bet on biotech. A few large pharmaceutical and chemical corporations also acquired stakes in biotech startups in order to keep tabs on the latest technological developments. Of late, ‘angels’ (high net worth individual investors) have made important contributions. However, in order to finance growth into maturity, most biotech firms have had to make the transition from private to public equity, where sizable capital can be accessed.

When the industry was still in its infancy, biotech CEOs began travel-ing to New York for lessons in high finance, and on Wall Street, a handful of investment bankers began learning the biotech business. The bankers soon started counseling clients, arranging transactions, and developing special-ized financial instruments to meet the needs of biotech companies and intrepid investors. In doing so, they shaped the financial architecture of the industry.

Frederick Frank, formerly of Lehman Brothers and now Vice-Chairman at Peter J. Solomon Company, was the

first life sciences specialist in investment banking, and the most prolific.

In a career spanning fifty-four years, Frank has served as the lead underwriter in more than 125 initial

public offerings. He has negotiated more than 75 mergers and acquisitions, including some of the largest and most important transactions in the

history of biotechnology.

So central was his role in biotech finance that he became known among Wall Street banking

peers as ‘the ubiquitous Fred.’


Bull marketFred Frank arrived on Wall Street in

1958, after graduating from Yale University with a degree in philosophy, serving a stint in Europe with the U.S. Army, and earn-ing an MBA from the Stanford Graduate School of Business. It was a good time to get started.

Wall Street was in the midst of a bull market that ran from early 1953 into 1969. The rise was fueled by money from the masses, investments flowing from new seg-ments of the public into stocks, bonds, and mutual funds – especially mutual funds. The shadow cast by the Great Depression had faded, and a new generation looked toward the future without trepidation.

“I interviewed with two leading invest-ment banking firms,” says Frank, “Merrill Lynch and Smith Barney. Both offered me a job. I was more interested in Smith Barney because they had the number one-ranked research department.” The firm also had a formal training program, which appealed to Frank because it introduced newcomers to every aspect of the business. The research portion of the program required trainees to produce an industry report. Fred selected the tire and rubber industry because Smith Barney hadn’t yet covered it: “I felt that a report on a strongly research-supported area wouldn’t contribute much.”

When the training program concluded, the firm assigned Frank to the research department: “I worked for Bill Grant,” he

says. “Bill was the head of research and also the drug and chemical industry analyst. He was a fabulous guy.” At the time, it was standard Wall Street practice for the pharmaceutical and chemical industries to be covered by the same analyst. Frank assisted Grant in both areas.

After several months on the job, Fred went to his boss, who was a chemist by training, and said, “Bill, it makes no sense. These two industries have little in common. Why don’t you cover chemicals, and I’ll cover pharmaceuticals?” Grant approved the idea. “He graciously let me do it,” Frank says. “I was fortunate.” Fred Frank became Wall Street’s first dedicated pharmaceuti-cal industry analyst. It wasn’t long before every firm followed.

Frank again reconfigured his area of specialization in 1962. He made an an-nouncement before a crowd of 300 at an annual Smith Barney research confer-ence: “I want you to know that I no longer cover the pharmaceutical industry.” His colleagues were puzzled. Frank went on to explain that he would henceforth include medical devices, diagnostics companies, and healthcare services within his pur-view: “I’m going to cover the life sciences industry.” He was only thirty years old, and relatively new to Wall Street, but he had already established a reputation as an innovator and trend-setter.

Frank also became known for his ge-nius in cultivating relationships. Robert

F. Johnston – who later became a serial entrepreneur in biotech, founding Genex, Cytogen, Sepracor, and others – joined Smith Barney as a fresh recruit in 1962. To Johnston, Frank was “the analyst who wrote up the little companies like Raychem and Millipore that younger guys like me were interested in. We didn’t care about Dow and Dupont.” He recalls that Fred had already acquired “a golden rolodex.” Johnston and other junior analysts would go to him to talk about companies. They knew him to be generous: “He’d make introductions for us.”

Smith Barney quickly recognized Frank’s natural leadership abilities. He was appointed Co-Director of Research at the firm, and then Vice-President and Direc-tor while still in his mid-thirties. In 1969, he left to join Lehman Brothers, again achieving Wall Street firsts – he became the first partner from the investment banking industry ever to leave Smith Bar-ney for a Wall Street competitor, and the first partner ever to join Lehman Brothers from the outside.

The first biotech investment banker

Three years later, Frank gave up research and analysis and moved to the investment banking side of the business. He began helping company executives negotiate mergers and acquisitions (M&A) and raise money in capital markets. It was, once


more, a good time to get started – paradoxi-cally. In 1969, a long period of expansion in the national economy was drawing to a close. A series of supply shocks – the tripling of oil prices by OPEC in 1973 was the largest – induced stagflation and a protracted economic malaise. Wall Street suffered through a decade of stagnation.

Pharmaceutical stocks dived, but drug companies continued to enjoy robust growth. The industry was quick to rebound. The introduction of blockbuster drugs – SmithKline’s ulcer drug, Tagamet®, was the first, in 1976 – bolstered the sector’s growth trajectory and premium investment valuation followed suit. The combination of trends led to a wave of consolidation that swept over the industry in the 1980s, and accelerated in the 1990s. It all added up to a prosperous time for healthcare investment bankers. Fred Frank managed several very large transactions for Lehman Brothers, including the Bristol-Myers Squibb merger in 1989 that formed what was, at the time, the second largest pharmaceutical corpora-tion in the world.

Frank was introduced to biotechnol-ogy in 1977 when scientist, inventor, pharmaceutical executive, and biomedical entrepreneur Alejandro Zaffaroni called on him to look at a small firm in the San Francisco Bay Area called Cetus. Zaffaroni was a Director. Cetus had been founded in 1971 by Nobel Prize-winning physicist-turned-microbiologist Donald Glaser and Berkeley, California venture capitalist Moshe Alafi, along with molecular biologist Ron Cape and physician Peter Farley, who served the company as CEO and President, respectively. Dr. Carl Djerassi, a co-founder of ALZA with Zaffaroni, was also a Director.

The Company was developing improved strains of bacteria for fermentation processes, and had recently begun to in-vestigate industrial uses of recombinant

DNA (rDNA) technology. The co-inventor of rDNA technology, Stanford University physician and pharmacologist Stanley Co-hen had recently joined the Company’s scientific advisory board. Frank flew to the West Coast and met with the principals. Cetus needed to raise additional capital. The executives and the Board of Directors

wanted to take the firm public. At that time, Cetus had no products, and fewer than ten employees. Fred gently advised the group to delay, but said, “The time will come.”

He credits Ron Cape with teaching him about rDNA technology and possible applications in the pharmaceutical and chemical industries: “I spent a lot of time

Fred Frank and Mary Tanner

In 1978, Lehman Brothers managed a transaction that turned out to be a very big deal for Fred personally. The client, Humana, sought to acquire a regional hospital corporation headquartered in Philadelphia called American Medicorp. When negotiations on a sale price broke down, Humana made a hostile tender offer to shareholders. Suddenly, TWA (Trans World Airlines) intervened as a ‘white knight’ – a second bidder willing to make a higher evalu-ation of the target. Frank explains the rationale of the airline’s interest: “They also owned hotels – beds in hotels, beds in hospitals.” Frank was convinced that the deal was crucial for Humana. He advised his clients to put in a higher offer. They did, and won the bidding.

Frank had assembled a large team to work on the acquisition. A young banker from Lehman Brothers’ associate pool had been assigned to the group, a woman named Mary C. Tanner, a young Harvard graduate. Frank was im-pressed with her contributions and incredible work ethic. After the transaction, she was expected to go back into the associate pool, but Frank had other ideas: “I thought, ‘She’s not going anyplace. This is the smartest banker I’ve ever met. She’s staying and working in my group.’”

Tanner joined the Lehman Brothers life sciences team, and eventually be-came the group’s chief operating officer: “She trained the young people and ran the projects and staff,” Fred explains. “We had the largest life sciences practice on Wall Street.” The duo worked in tandem on dozens of biotech stock offerings and mergers. Eventually, the business associates became a couple and an item ‘on the Street.’ They married in 1988. Tanner eventually took a leave to raise their son, but husband and wife were reunited professionally in 2009 at Peter J. Solomon Company, where Frank serves as Vice-Chairman and Tanner is a Managing Director.


with Cetus, getting educated. Ron Cape was a good mentor, very patient.” Frank was convinced that the new technology would become immensely important: “In my way of thinking,” he says, “this was a game-changing opportunity in the life sci-ences field.” Frank’s association with Cetus would continue through the company’s IPO and its 1991 merger with Chiron Corpora-tion, with various financings in between.

IPOsShortly after his introduction to Cetus,

Frank began calling on the Company’s principal biotech rival, Genentech. Ge-nentech was founded in 1976, also in the Bay Area, by University of California, San Francisco microbiologist Herb Boyer – who was Stanley Cohen’s partner in the inven-tion of rDNA technology – and a young entrepreneur named Robert Swanson. Frank talked at length with Swanson about Genentech’s possible future. He also spent time with venture capitalist Tom Perkins, the Chairman of Genentech’s Board of Directors, as the company prepared to make an initial public offering of stock. According to Frank, Perkins eventually gave him a friendly ultimatum: “‘Fred, you have to make a choice. If you want to work with us, you can’t work with Cetus. We’re too competitive.’”

Frank sensed that the Genentech of-fering was going to be spectacular, but declined with regrets: “I felt I had an obliga-tion to Cetus because I had been working with them for a few years. I did not accept the Genentech offer, and unfortunately was not involved in their extraordinarily successful IPO.” On October 14, 1980, Genentech went public and electrified Wall Street. The offering price was $35 per share.

Shares ran up to $85 before floating down to close at $71.25. The event cemented the new scientific field of genetic engineering in the public consciousness, not only as means of scrambling DNA, but also as a wealth-generating technology. “When Genentech hit,” says Frank, “I called up Cetus and said, ‘Now you’re going public.’ We led the offering.”

At Cetus, there was never a question that Lehman Brothers would underwrite the sale. Ron Cape explains that Fred Frank was “the most knowledgeable, the most personable, and therefore the most attrac-tive person to be our number one contact.” Cetus went public on March 1, 1981. Gross proceeds totaled $122 million. “It was a pretty phenomenal offer,” says Frank. At the time, it was the second-largest IPO in U.S. corporate history. The Genentech and Cetus stock offerings had a massive impact on the development of the biotech indus-try. By the end of the decade, over eighty U.S. biotechnology companies had followed the leaders and sold shares to the public, raising hundreds of millions of dollars to fund early stage R&D programs.

Despite the eye-catching success of the first two offerings, Lehman Brothers remained reluctant for a time to underwrite biotech IPOs. It was a struggle for Fred to convince his colleagues. Many of the sales were relatively small. Failed offerings would besmirch the firm’s reputation, and it remained difficult in the early 1980s for bankers to understand how companies mired in red ink, without marketed prod-ucts or substantial revenue streams would appeal to buyers in public markets. There were no historical precedents.

Still, Frank managed to put Lehman Brothers in front of several early biotech

Top to bottom:Alex Zaffaroni; Ronald Cape; Gordon Binder; George Rathmann


IPOs. The Firm led Applied Biosystems’ initial offering in July of 1983. Applied Biosystems was an instrument maker. Frank had argued that even though bio-pharmaceutical companies hadn’t proved themselves, the industry needed enabling tools, and Applied Biosystems already had a successful product on the market. That persuaded the Firm that Applied Biosys-tems was a viable enterprise. A month before Lehman had turned down a chance

to take Amgen public – against Frank’s strong recom-mendation to seize the opportunity. Amgen had only science; it lacked tangible wares.

Even though Fred did not underwrite the Amgen sale, the story of events leading up to it illustrates his ‘ubiquity’ and broad influence during the industry’s early explorations of Wall Street and public finance. Gordon Binder, then Amgen’s CFO, has written about it: Amgen was almost out of money. At a board meet-ing, CEO George Rathmann asked for suggestions. Binder, who had earlier met with Frank to discuss financial strategies, proposed an IPO and met with the usual objections: ‘How can you go public without revenues or earnings?’ Binder replied, “Fred Frank says we can.” The board swiftly agreed: ‘If Fred says we can go public, then we will.’

It wasn’t long before Lehman Brothers accepted Frank’s assurances that the world had changed. The firm became a major player in the biotech IPO game, the leader among Wall Street’s first tier investment banks – although Frank’s leading competitors in bio-tech finance were specialized boutiques such as Alex Brown, Cowen & Co., Montgomery Securities, and Robertson Stephens.

Mergers & acquisitionsIn the late 1970s and early 1980s, entrepreneurs

and investors alike were optimistic that biotechnolo-gies could revolutionize the pharmaceutical industry (and many other industrial sectors) by supporting the development of fully integrated, self-sustaining drug companies (i.e., firms that independently manage research, product development, regulatory affairs, manufacturing, marketing, distribution, sales, and other functions). Only a handful of companies from biotech’s first wave accomplished the goal, and, from that original cohort, only Amgen, located in Thousand Oaks, California, remains independent.

The first acquisitions of small biotech firms by big pharma corporations occurred in March of 1986: Bristol-Myers acquired Genetic Systems, a Seattle monoclonal antibody company, and Eli Lilly & Co. purchased Hybritech, a San Diego monoclonal antibody company. Many analysts believed the transactions signaled a coming tsunami. In fact, consolidation of the field did not proceed as rapidly as many predicted,

but it did proceed inexorably. Since 1986, there have been hundreds of mergers and acquisitions in the biotech sector, many of ‘blockbuster’ scale.

Arguably, none has been more important than the staged acquisition of Genentech by Swiss phar-maceutical giant F. Hoffman-LaRoche in 1990. The structure of the deal was original; many aspects were unprecedented. Fred Frank was its architect. By 1990, he was already highly regarded for his financial ingenu-ity, but many knowledgeable observers consider the Genentech-Roche deal his masterpiece. The terms and conditions were profoundly consequential.

The merger stabilized Genentech’s stock without compromising the firm’s autonomy or destroying its unique culture. It enabled the Company to maintain its research programs and introduce a string of impor-tant new biopharmaceutical products to the medical marketplace in the 1990s. The industry enjoyed an extended period of (mostly) fair weather on Wall Street from the mid-1990s until 2008. Genentech’s highly-visible success through these years helped to maintain the favorable climate. ‘Fred’s deal,’ as it came to be known, allowed the Company to continue its research-focused forward progress. It became an exemplar for configuring relations between biotech-nology and pharmaceutical companies in mergers and acquisitions.

In 1989, Genentech was the leading biotechnology company in the world, but it was in a predicament. The company had employed recombinant DNA techniques to develop three major pharmaceutical products – hu-man insulin, human growth hormone, and t-PA (a protein that dissolves blood clots), but the success was doubled-edged. The general expectation on Wall Street was that such a company would increase revenues and earnings at a rate greater than twenty percent each year. Genentech’s leadership knew that earnings rate would not be sustained if the Company continued to support its promising research and development programs.

The company had a strong pipeline of drug candi-dates, but taking full advantage of it would require huge R&D expenditures. The spending would place a drag on earnings. In addition, sales of Genentech’s t-PA, marketed under the brand name Activase® for the treatment of heart attacks, had not generated the substantial revenues and profits that had been expected. A high price per dose and an equivocal result in a clinical comparison of efficacy (in terms of mortality reduction) with the less expensive standard of care had attenuated the drug’s market penetration.

In the summer of 1989, the Company’s stock was sliding, and appeared as if it might drop into single digits. Two years earlier, it had traded in the fifties. It was hovering at $21 per share when Tom Perkins, Chair of Genentech’s Board of Directors, Bob Swanson, the Company’s CEO and Co-Founder, and G. Kirk Raab,

‘If Fred says we can

go public, then we

will.’


Genentech’s President and Chief Operating Officer, called on Fred Frank for financing ideas. They feared that the Company was becoming an irresistible takeover target.

Swanson and Raab had reached the painful conclusion that the only way to sustain Genentech’s research and preserve shareholder value was to sell the company. The board had given its assent. The Firm’s leadership sought terms that would prevent a buyer from raiding the kitchen without replenishing the cupboards – they wanted to ward off any attempt to squeeze the com-pany’s assets (patents, royalties, products, etc.) for whatever could be wrung from them, while rationing R&D.

Frank agreed to help. Jim Gower, Genentech’s Vice-President of Sales & Marketing was brought in to work on the project. Beyond Swanson, Raab, and the directors, Gower was the only person at the Company who knew what was happening. Frank opened preliminary discussions with potential buyers in September. Among U.S. companies, only one conversation acquired gravity. Merck was interested, but the dis-cussion was brief. Genentech’s insistence on operational autonomy was a source of discomfort. As Raab puts it, Merck saw that “they would probably turn the acquisition into Merck West. They didn’t think that was a good idea. They could pay to build Merck West cheaper than they could buy Genentech.”

Frank then made a trip to Wilmington, Delaware to explore the possibility of com-bining DuPont’s pharmaceutical business with Genentech’s. The idea made sense, he believed, because “DuPont, having acquired a mid-sized pharmaceutical company, still had no idea what they were doing in pharmaceuticals, not a clue.” In theory,

Genentech could sail into a safe harbor, DuPont would benefit from Genentech’s innovative capacity and R&D expertise, and there would be little incentive for the big firm to smother the small one by draft-ing it into the service of larger corporate projects. It would make more sense to let Genentech put DuPont’s pharmaceutical research to its own ends.

The previous year, Frank had architected the merger of Marion Laboratories and Merrell Dow Pharmaceuticals, a subsid-iary of the Dow Chemical Company. Dow pursued the merger to take advantage of Marion Laboratories’ high-performing sales and marketing organization. The big chemical company did not want to absorb Marion’s assets and put an enormous amount of ‘goodwill’ on its balance sheet that would have to be amortized. It wanted to shuffle Merrell Dow’s R&D program into Marion’s corporate structure. Fred saw that an acquisition premised on a similar kind of complementarity would suit Genen-tech’s wants and needs. He thought that Genentech-DuPont might make a good match. Unfortunately, he couldn’t find anyone in Delaware, or anyone advising the chemical giant, who agreed.

Genentech-RocheFrom the DuPont Hotel in Wilmington,

Frank got on the phone to F. Hoffman-LaRoche, Ltd. in Basel, Switzerland. He proposed pushing Roche’s U.S. business in Nutley, New Jersey into Genentech. Roche expressed interest; negotiations commenced. Frank met with Roche offi-cials in Zurich rather than Basel, in order to keep the negotiations secret. Although officially retained by Genentech, he effec-tively represented both parties. Former

Top to bottom:Kirk Raab; Robert Swanson; James

Gower; Thomas Perkins


Genentech Chairman Tom Perkins comments on the unusual arrangement: “Roche had enough confidence in, and respect for, Fred Frank that they did not use an investment banker. That’s pretty astonishing.” In the matchmaker role, Frank had to find a way to harmonize the interests of two corporate entities in very different sets of circumstances.

As always, price was an issue. Genentech needed protection while it developed products. How much would it cost Roche to provide it? Initially, Frank at-tempted to replicate a structure that he had crafted for the Marion Merrell Dow deal. In that transaction, Fred had pioneered the use of contingent value rights (CVRs), instruments that have since proven to be particularly well-suited to biotech finance. CVRs are securities issued in acquisitions to provide sellers with insurance against losses should the buyer’s stock underperform after closing. In the Marion Merrell Dow case, they entitled holders to cash payments if the stock traded below a predetermined price when the rights expired on a specified future date. Similar instruments called contingency payment rights (CPRs) protect buyers and tie payments to the achievement of specific scientific or commercial milestones involving acquired assets.

CVRs and CPRs are employed to bridge valuation gaps. Fred saw that they could bring divided parties closer together. They could, for example, satisfy share-holders of acquisition targets that they are receiving full value for the assets they are transferring, while simultaneously reducing amounts that buyers have to pay in cash for goodwill premiums. In the case of Marion Merrell Dow, CVRs assured Marion sharehold-ers that the Company’s highly profitable business would be appropriately valued. In the Genentech-Roche

case, Frank envisioned CVRs persuading Genentech shareholders that the company’s development pipeline and scientific capabilities would be properly appraised.

Governance issues were equally important to Genentech. The company’s leadership felt that opera-tional autonomy was essential to continued progress in research and development. Fred Frank agreed. He cautioned Fritz Gerber, Roche’s Chairman and CEO, Jürgen Drews, the Company’s head of R&D, and Henri Meier, the CFO, that if they attempted to meld Genentech’s people and programs into Roche’s system, they would inadvertently destroy what they were buying: “I explained that Genentech had a very special culture, which was different from theirs. At Genentech, you came to work anytime, day or night. At Roche, you came to work from nine to five, and you wore jackets and ties. I warned them not to upset the culture because that was what made the Company distinctive and innovative.” Gerber, Drews, and Meier were receptive to the message. “They had the vision,” Raab says, “to let Genentech be Genentech.”

‘Fred’s deal’ was characterized by a number of highly unusual features. Although Roche was purchasing a majority share in the company, it took only two of 13 seats on Genentech’s Board of Directors. “Fred Frank did a superb job of convincing them,” says Tom Perkins, “that this would be good for them, and good for all parties. It was done that way, and it worked.” The final agreement was full of stipulations that im-peded Roche’s ability to interfere with Genentech’s independent decision-making. “Obviously,” says Raab, “we couldn’t do anything to dilute or undermine their ownership position, but outside of that, they had little power over anything else.”

Roche’s due diligence was also extraordinary – the

Top: Roche

Headquarters, Basel, Switzerland

Bottom:The Genentech Campus, South

San Francisco, CA

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Venture Backed Mergers & Acquisitions

Venture Backed Initial Public Offerings

Historically, biotech companies have relied on venture capital investments to support growth through startup phases. Venture capitalists have, in turn, counted on initial public offerings (IPOs) as chances to exit invest-ments in companies that often lack substantial rev-enues and earnings. Since 2000, financial shocks and crises have made the public wary of risky biotech stocks.

The IPO market has diminished, but mergers and acqui-sitions have increased. Large corporations have taken advantage of opportunities to incorporate innovative biotechnologies. Can venture investors rely on mergers and acquisitions to realize and distribute returns to lim-ited partners? Will IPOs come back? Is there a sustain-able future for the biotech industry without them?

Sustainable?


company’s scientists and financial team never went to Genentech until the terms and conditions of the transaction were finalized. Instead, Frank hired a technical writer to interview Genentech’s scientists. He collected the information, took it to Zurich, sat with Jürgen Drews to review it, and that was the sum of the due diligence. Roche didn’t want to spook the talent. “That,” Fred notes, “was pretty extraordinary. It took a lot of courage and foresight on Roche’s part.” These aspects of the deal were wholly original and unprecedented.

Fred’s matchmatching skills are perhaps unparal-leled, but the merger did not go off without a hitch. When Fred had worked out the terms and conditions, and secured an approval from Genentech, he met with Fritz Gerber and Henri Meier at the Dolder Grand Hotel in Zurich and reviewed the details. At the elev-enth hour, Meier announced that Roche couldn’t go through with it as Fred had explained the fine points of the CVR. Fred was dismayed: “Here I am, think-ing I had an agreement with both parties. My client thinks that Roche agreed to this deal, and now I have no deal. At lunch that day, I created what became the Genentech-Roche deal.” He jettisoned the CVRs and created a new structure that Roche was prepared to accept, one that has since been widely studied and discussed. The new arrangement would result in a larger cash payment to Genentech.

On Frank’s advice, Genentech and Roche agreed to the following: Roche would buy $494 million worth of new stock from Genentech at the market price of twenty-one dollars a share. The company would simul-taneously offer to buy half of the shares outstanding at a 67% premium – $36 per share. Roche would pay $2.1 billion in all, and own 60% of Genentech. The remaining shares would be exchanged for a new form of redeemable common stock with an embedded option: Roche could acquire additional pieces of the company, or all of it, at any time during the next five years, for a fixed price which would escalate every quarter ending

at $60 per share in 1995. Genentech’s most enthusi-astic and optimistic shareholders complained that the deal imposed a ceiling on the Company’s value – the price of its shares would not likely rise above the price that Roche could pay to acquire them. Most were happy that their investment didn’t wither in a takeover with the stock at its nadir. The merger was approved.

With this structure in place, the price of Genen-tech’s stock over the next five years closely tracked the linear rise of Roche’s option price (while most public biotech stocks fluctuated more or less wildly). The deal had stabilized the Company, just as it was in-tended to do, Genentech had preserved its operational autonomy, and it had cash to spend aggressively on R&D. In 1995, with the stock trading at $57, Frank went to Genentech and said, “My assumption is that when this option expires, Roche isn’t going to exercise it.” He reasoned that the terminal option price did not reflect the actual achievements of the Company, which lagged original projections.

Fred advised Genentech to renegotiate and extend the arrangement. As an enticement, he suggested of-fering rights to market Genentech products outside the United States: “You’re not going to be able to market outside the United States and Canada as effectively as they are. They have a huge marketing organization.” Roche accepted, and the option was given four more years of life. Both parties agreed that options and obligations would terminate with finality in 1999, with no further extension.

In the second iteration, Frank inserted an option for shareholders. “Henri Meier was very much against this,” he says, “but the CEO, Fritz Gerber, was willing to do it.”

Roche’s purchase option price would escalate over the four years to a maximum of $82.50 per share in 1999. If Roche had not exercised its option at that time, Genentech shareholders could then sell their shares to Roche for $60 each. Frank believed that this structure would encourage Roche to complete the acquisition at

Top to bottom:Henri Meier; Fritz Gerber;

Dolder Grand Hotel, Zurich,

Switzerland


$82.50 per share. He expected the stock price to once again track Roche’s option price. If it did, shareholders would not exercise the $60 option. Calling in all shares at $82.50 would be Roche’s last chance fully to control the company.

Fred believed that Gerber and colleagues would do it. As the deadline approached, Wall Street got the idea that they would not. The sun was shining, Genentech was making hay, and Roche already held 60% of the Company. Investors came to believe, apparently, that Roche would not risk disrupting Genentech’s progress, and would let its options expire. The price of Genentech shares rose to $96. Roche exercised and purchased the remainder of the company for $3.7 billion.

Roche then did a remarkable and prescient thing. It took 22,000,000 shares of Genentech, and put them up for sale in a public offering, at $97 each. On July 20, 1999, Genentech’s stock resumed trading on the New York Stock Exchange under the ticker symbol ‘DNA.’ Raab comments: “Roche went on to do brilliant things. They relisted the stock. Genentech remained Genentech. Art Levinson was the CEO, and it continued to be a wonderful research and development and domestic marketing machine.”

‘Fred’s deal,’ protracted as it was, became the model of an ideal merger and acquisition involving biotechnology and pharmaceu-tical companies. In the years following the original agreement in 1990, Genentech generated new clinical trial data to rescue Activase®, and went on to introduce a remarkable series of innova-tive biological ‘blockbuster’ products that included Pulmozyme®, Rituxan®, Herceptin®, Xolair®, Raptiva®, Avastin®, and Tarceva®. In 1989, Bob Swanson and Kirk Raab sought desperately to pro-tect Genentech’s research. Fred Frank found a way to do it. Tom Perkins says, “I don’t think we could have done it better.”

After Genentech-Roche, Fred Frank went on to broker many more important mergers and acquisitions in biotechnology, deals that reshaped the competitive dynamics of the field. He was involved in the 1991 merger of Cetus and Chiron, and parceled PCR to Roche Molecular Systems. In 1992, he devised terms and conditions for the sale of Genetics Institute to American Home Products that closely resembled the Genentech-Roche format. In 2009 and 2010, he was involved in the biotech industry’s first two hostile takeover attempts, both made by Astellas Pharma. Frank and team represented CV Therapeutics in the first bid, and OSI Pharmaceuticals in the second. Astellas’ bid for CV Therapeutics failed when ‘white knight’ Gilead Sciences made the purchase. The acquisition of OSI was completed after Astellas substantially increased its offer. Frank did not represent either party in the industry’s third hostile buyout effort, Sanofi’s pursuit of Genzyme in 2010-2011, but he suggested the use of a CVR to help bridge the valuation gap in that deal.

In March of 2009, Roche repurchased all publicly-traded shares of Genentech for $46.8 billion. Fred Frank was not involved – he was caught up in the collapse of Lehman Brothers in the aftermath of the late 2008 financial crisis. However, he reportedly suggested to Dr. Charles Sanders, the head of the directors’ committee at Genentech charged with managing the transaction, that a less than 100% ownership arrangement could still be negotiated. Although he played a crucial role in consolidating the biotechol-ogy industry, his reflections on the process are wistful: “I think it’s very sad that there’s no Genentech, no Genzyme, no Genetics

Institute, no Chiron, no Cetus anymore…the pioneers are gone.”He is also disappointed that access to public capital has become

a critical problem for innovative young biotech companies – but not surprised. Frank points out that the overall return on public investments in commercial biotechnology, from the early days of Cetus and Genentech through the present, has been negative. “You can’t do that forever,” he says. “You can’t take a high-risk industry and have a negative return for thirty years and expect people to keep investing. We need to change a lot of things.”

Frank believes that, in order to survive and prosper, the bio-technology industry needs more collaboration, more risk-sharing, and more understanding of comparative advantage in research: “History shows that large pharmaceutical corporations are very good at ‘D’ – development. They’re not as good at ‘R’ – research. Early stage companies are good at ‘R,’ they have innovative sci-ence, but they aren’t as good at development – they can’t afford it, and they don’t have the experience. The industry has to become more collaborative.”

Despite the challenges, Fred still loves his work: “I deal with passionate people in the life sciences. They’re devoted to what they do. They aspire to build companies based on products that can improve the quality and longevity of life. What could be bet-ter than that? I feel great about it. It’s difficult and risky, but that makes it exciting and challenging.” Fred Frank recently celebrated his 80th birthday. He began working on Wall Street fifty-four years ago. He’s still active and fully-engaged. Has he contemplated retirement? “I came into the business vertically,” he says, “and I’m going out horizontally.”

Making a SplashThe Genentech-Roche deal made Fred Frank a legend

inside the biotech community. Jim Gower, who worked closely with him on the merger, on the Genentech side, recalls an evening in October 1997 when Fred was hon-ored with a Biotech Hall of Fame Award at the Annual Biotech Meeting in Laguna Niguel hosted by G. Steven Burrill and Brook Byers: “We were out by the pool at the Ritz-Carlton. Brook Byers presented the award. He introduced Fred as ‘the man for all times and seasons in biotech, the man who walks on water....’ Fred was seated across the pool from the podium. As only Fred could do, he picked up on that line and proceeded to walk straight across the pool to accept the award, and plunged into the water. He ended up treading water in full suit and tie. Everybody just cracked up.”

The RightWoman For the Job

The Bonnie J. Addario Story

Organized patient activism has be-come a prominent feature of the biomedical landscape in recent

decades. Most groups are disease-focused. AIDS activists invented the model. The breast cancer movement refined it. Bonnie J. Addario wants to perfect it for lung can-cer patients.

Patient activists have raised funds for re-search, increased access to experimental therapies, redesigned clinical trial protocols, and accelerated regulatory approvals for new drugs. With a little help from her friends, Bonnie Addario is currently breaking new ground – she’s trying to invent a new in-stitutional framework for cancer research.


Bonnie Addario, left to right:

Woodrow Wil-son High School

(SF, CA), 1965;With second

husband Tony Addario on their

wedding day;President of

Olympian Oil Company

In late 2003, Bonnie J. Addario felt a shoot-ing pain across her chest. Her physician suspected herniated disks, but prescribed therapies failed to alleviate her discomfort. Eventually, a CT (computed tomography) scan revealed a suspicious shadow on her left lung. Bonnie was informed by doctors that she had lung cancer, and that the tumor on her aortic arch was inoperable. She was fifty-seven years old. She went home.

“I would never have believed it.”Before her diagnosis, Bonnie was an energetic

wife, mother, and businessperson. She had never been sick, but she knew about unexpected reversals of fortune. When she tells her life story, she begins by saying: “If someone had told me this would be my path, I would never have believed it.

Bonnie graduated from high school in 1965. “College wasn’t an option for me,” she says. “My par-ents were first-generation immigrants. My brothers were expected to go on. I was supposed to find a man.” Bonnie married and began raising a family.

The union produced three children, but ended after twelve years with the family in dire financial straits. The young homemaker lost her house and car in the aftermath, and was forced into a series of menial jobs: “I did temp work for Kelly Girl. At night, I cleaned banks with my kids.”

Suddenly, fortune smiled. Bonnie landed a permanent secretarial position at the Olympian Oil Company in South San Francisco. The company

provided a range of services to gas and oil producers and marketers. Bonnie worked for the President and Chairman of the Board, performed well, and was rewarded with regular promotions. She displayed a knack for management: “I never went to business school. I figured it out along the way.” In little more than a decade, she became a retail manager, a sup-ply distributor, an oil trader, and, finally, President of the company in 1997. Along the way, she had remarried. Life was good.

Bonnie Addario’s success was unlikely, but her determination carried her through. Her untimely cancer diagnosis was a second potentially ruinous disruption in her life, and another test of will. “I sat in my kitchen and tried to relax,” she recalls. “I poured myself a glass of wine and opened the newspaper. My eyes went to a small article about a new cancer care partnership between the University of California, San Francisco [UCSF] and Sequoia Hospital, close to my home in Redwood City.”

The partnership was spearheaded by UCSF tho-racic surgeon Dr. David Jablons. Bonnie went to see him. He reviewed her case and offered a contrary opinion about surgery to remove the stage IIIB tumor – he believed that potential benefits out-weighed the risks. “It will be a challenge,” he said, “but I’m up for it if you are.” Prior to the operation, Addario received radiation treatments five days a week, and chemotherapy every Friday, at Sequoia, in order to shrink the tumor and increase chances of a good outcome.


The operation was a success. The surgeon re-moved the top left lobe of her lung, and part of her esophagus. The tumor was excised, although one of Bonnie’s vocal cords was paralyzed, and two major arteries in her heart were damaged and had to be repaired with grafts.

After the surgery, Bonnie developed vascular necrosis, a side effect of steroids prescribed to mod-erate weight loss. The flow of blood to her bones was impeded. The bones became brittle, and she frac-tured her femur and hip as a result. She underwent two major surgeries to repair the breaks, and then, a few months later, was treated for a pulmonary embolism. When it was all over, Addario’s prog-

nosis was upgraded. The ordeal left her physically depleted, but mentally charged. “My recovery was long and arduous,” she says. “I had plenty of time to think.”

Bonnie’s first instinct after her diagnosis had been to understand her condition and recruit expert medical counsel. Her search for information had been aggravating. Institutional support and educa-tion for lung cancer patients was virtually non-existent. The lack moved Addario to contemplate executive action in a new territory: “I knew I had to

educate people – patients, physicians, and the public – about lung cancer.”

The cancer that the NCI forgotBonnie embarked on advanced studies in the

biology, epidemiology, and politics of lung cancer. In conversation with other patients, she learned that the ‘standard of care’ is late-stage diagnosis, a dearth of treatment options, and poorly-coordinat-ed medical services. She also learned that research on lung cancer is relatively neglected.

In 1971, President Richard Nixon declared war on cancer. He signed the National Cancer Act into law, funneled a storm surge of federal dollars to-

ward cancer research, and empowered the National Cancer Institute [NCI] to administer the funds. The legislation became a source of hope for cancer patients and their families, but lung cancer became the disease that NCI forgot.

In the United States, lung cancer claims a life ev-ery three minutes. It takes twenty people per hour, 450 people per day. The disease kills more people than breast, prostate, colon, liver, skin, and kidney cancer combined, but funding for research on lung cancer lags behind all the rest. A mere 5% of the

Bonnie with her doctors, Dr. David M. Jablons and Dr. Fred Marcus

“I knew I had to educate people- patients, phsyician, and the public- about lung cancer.”

Source: National Cancer InstituteAll numbers for 2009, the latest year for which complete data is avalable

In 2009 the National Cancer Institute funded over $3 billion in cancer research. Below is a comparison of NCI funding for six prevalent cancers. A significant disparity can be seen between the incidence and mortality of lung cancer and the research funding it receives relative to other cancers.

Melanoma

Non-Hodgkin Lymphoma

Prostate

Breast

Colon

Lung

Melanoma

Non-Hodgkin Lymphoma

Prostate

Breast

Colon

Lung

New Cases Deaths

NCI Funding

The Stigmatized Cancer: Disparity in NCI Funding


NCI’s research support budget is allotted to lung cancer projects.

In 2001, the NCI’s Lung Cancer Progress Review Group, a panel of thirty expert clinicians, scientists, industry representatives, and patient advocates, reported that funding for studies of lung cancer was “far below the levels that characterize other common malignancies and far out of proportion to its mas-sive public health impact.” The lopsided distribution has not been rectified.

A comparison with breast cancer funding is telling. In 2008, lung cancer killed 161,840 Americans. NCI expendi-tures for lung cancer research amounted to $1,529 per lung cancer death. Breast cancer took 40,480 lives in 2008, but the NCI spent significantly more per breast cancer death: $14,145. Addario’s view of the situation is simple: “Funding should be distributed equitably.”

A review of priorities in lung cancer research uncovers further issues. Sixty-two percent of NCI funds are earmarked for studies on prevention, causes, sur-

vivorship, and outcomes. Only 38% are dedicated to early detection, diagnosis, and treatment. Addario questions the wisdom of the apportionment. Many lung cancer patients receive stage IV di-agnoses: “You have lung cancer. We’ll put

you on Carboplatin and Taxol. Your hair will fall out. You’ll get sick and throw up. Then you’ll die.” Seventy-five percent of lung cancer patients die within eight to ten months of diagnosis.

Addario believes that NCI’s empha-sis on prevention has to do with the

fact that lung cancer is stigmatized as a “smoker’s disease.” Patients diagnosed with lung cancer are regularly asked if they smoked – it’s frequently the first thing they hear when someone learns of their condition. The question is an

attempt to make sense of the world, to reduce the complexity of experience and discern order, but it’s simultaneously an attempt to assign blame. If lung cancer is the result of an individual’s decision to smoke, does it deserve as much attention as other common killers – breast cancer,

prostate cancer, or colon cancer?Bonnie wants to set the record

straight: “The world still assumes, appar-ently, that only smokers get lung cancer. That’s not true.” Some individuals are genetically predisposed to the disease,

“The world still assumes, apparently, that only smokers get lung cancer.

That’s not true.”


and environmental factors – atmospheric pollutants such as radon or the fine particulate matter found in smog, for example – contribute to the formation of lung tumors. Eighty percent of those diagnosed with lung cancer quit smoking decades earlier or never smoked at all.

Addario objects to NCI’s funding priorities because studies of causation, prevention, and outcomes will not improve deficiencies in diagnosis and treatment – areas of pressing need that are not similarly deemphasized in, for example, breast

cancer research. “The breast cancer movement has done a fabulous job,” Addario says. “The five-year survival rate for breast cancer is now above 90%. We want to achieve the same kind of results for lung cancer.” The five-year survival rate for lung cancer is 15.5%, and the figure hasn’t changed in 40 years. “That’s unacceptable,” Bonnie declares. “It can’t take another 40 years to make a difference. This needs to change!”

Institutional impedimentsWhen Bonnie recovered her strength, Dr.

Jablons asked her to join the UCSF Thoracic Oncol-ogy Cabinet, a multi-disciplinary advisory board established to help physicians with challenging or unusual cases, and to spearhead fundraising efforts for university departments involved in oncology research and care. Jablons spied an opportunity to add, in a single stroke, an experienced executive who understood organizational realities, and a can-cer survivor who would infuse board deliberations with the patient’s perspective.

Bonnie was introduced to Wells Whitney, the board chair. Whitney was also a patient of Jablons. Seven years earlier, he had been diagnosed with stage IV non-small cell lung cancer, and told that he had 10 to 12 months to live. Like Bonnie, his diagnosis spurred him to action. A scientist by training – he has a PhD in materials science from MIT — Whitney walked away from his job as Chief Scientist at Raychem, and immersed himself in scientific and medical literatures on lung cancer. He participated in the design of his own treatment regi-men, and, against the odds, reduced the size of his tumor by 50%. The result qualified him to receive an operation usually reserved for early-stage patients. Bonnie recognized that she and Wells had much in common.

Jablons’ intuition regarding Addario’s efficacy was soon confirmed. “My first assignment,” she

recalls, “involved writing to my friends and asking them for money. I raised $75,000 in two weeks. The UCSF board probably thought, ‘We’ve got a live one here.’” But Bonnie didn’t want her efforts to begin and end with her checkbook. She wanted to do more than maintain the institution. In her view, doctors, scientists, and administrators were too comfortable with the status quo, and disinclined to consider radical reforms to established modes of research and treatment. Addario felt constrained by aca-demia’s bureaucratic inertia.

“Informed patients live longer”Bonnie was eager to transform the ways in which

lung cancer is understood and treated, and skeptical that universities could serve as catalysts of change. She decided to create a separate organization with a threefold mission – to provide patient support and advocacy, to educate and dispel misconceptions about the disease, and to heighten public awareness of the relative neglect of lung cancer research. With assistance from Whitney and Jablons, Bonnie estab-lished the Bonnie J. Addario Lung Cancer Founda-tion (BJALCF) in March of 2006.

A few months later, the foundation made a public debut with a fundraising gala for lung cancer research in San Francisco. The evening drew a large crowd and raised an amount that was impres-sive (although “not nearly enough”). Bonnie was launched on her mission to fix a broken system. She was determined to improve the dismal statistics on lung cancer, one patient at a time. The BJALCF’s initial efforts were directed toward patient educa-tion and empowerment.

The foundation’s first public awareness campaign urged patients to get CT imaging scans for early detection. The message (“CT Scan – think of it as a mammogram for your lungs”) was emblazoned in glowing pink and green on the sides of buses and highway billboards nationwide. The BJALCF soon refocused, however, and began organizing a diverse resource network through which patients and fami-lies could access information, support, and services. “We wanted to help people find their own best care,” Bonnie explains. “We connected them to experts, caregivers, and service providers at multiple sites. We focused on teaching people about what was available.” The goal was to help patients become their own advocates – just as Whitney and Addario had, with positive results. “Information is power-ful,” says Bonnie. “Informed patients live longer. They just do.”

“That’s unacceptable. It can’t take another 40 years to make a difference.

This needs to change!”

“Fourteen Years and Counting”: Wells Whitney on Iressa®

When Wells Whitney started taking the cancer drug Iressa® in 2001, he wasn’t sure what to expect. After his diagnosis in 1998, he combated his cancer with the standard weapons: surgery and chemotherapy. A surgery removed a large main tumor; successive rounds of chemotherapy reduced the number of remaining nodules from nineteen small active growths to four dormant masses. He hoped Iressa® would help him sustain this heartening progress.

If chemotherapy is a sledgehammer and surgery a knife, Iressa® is a bow and arrow. Developed by British pharmaceu-tical company AstraZeneca for the treatment of advanced non-small cell lung cancer, the drug is designed to disrupt epidermal growth factor receptors (EGFR) on lung cancer cells, and block signals that promote tumor cell growth. Unlike chemotherapy, Iressa® targets a specific molecular pathway.

For Wells, it worked. He began taking Iressa® in 2001 as part of a compassionate use clinical trial, two years before the drug received accelerated FDA approval. Research showed that Iressa® shrank tumors in 10% of patients. Wells was a lucky ‘ten percenter.’ The drug transformed his fatal cancer into a chronic disease. “I still have cancer,” he says. “I’m not in remission, I’m not cured, but I’m dealing with it.”

In 2004, researchers at the Massachusetts General Hospi-

tal Cancer Center solved the selective response riddle. They showed that patients with a mutation on the EGFR gene tend to respond positively to Iressa®. The mutated EGF receptors are ten times more responsive to the drug than normal receptors. The mutation is most common in Asians, women, and non-smokers. “According to the genetic profile of my tumor,” says Wells , “I’m much more like a non-smoking Japanese female than a Caucasian male.”

Bad news arrived in 2005. Further trials of Iressa® revealed that patients taking the drug had a median survival of 5.6 months compared to 5.1 months for those on the placebo. Citing a lack of clear efficacy in life extension, the FDA took Iressa® off the market and restricted access to current and previous users.

Fourteen years after his diagnosis, and eleven years since his first dose of Iressa®, Wells continues to walk among the living. He is part of a small group of patients that has access to the drug through a mail-order pharmacy. For new lung cancer patients, Iressa® is no longer an option, but Tarceva®, another EGFR-inhibitor developed by Genentech and OSI Pharmaceuticals, has been shown to extend survival, is ap-proved by the FDA, and is available to patients.

Wells Whitney and Bonnie J.

Addario



“If money were no object…”Patient empowerment was one piece of the

puzzle. Addressing inequities in biomedical research was another. Bonnie saw that embedded attitudes and practices in the biomedical establishment needed to be perturbed and recast, and that the BJALCF needed to recruit thought leaders in lung cancer research to the cause. In order to make an impact on the conduct of laboratory and clinical research, the Foundation would need a bigger stage and the firm support of influential experts in sci-ence and medicine.

Toward these ends, the BJALCF organized a meeting of world leaders in lung cancer research and care. On November 9, 2007 the best and the brightest in cancer research gathered in Genentech Hall on UCSF’s new Mission Bay campus for the first annual BJALCF Lung Cancer Summit. Wells Whitney served as master of ceremonies. Attendees included representatives from the NIH, Genentech, CancerCare, an oncology patient support organiza-tion, and Changing Our World, a philanthropy and fundraising consulting group.

The keynote speaker for the two-day confer-ence was Michael Milken, financier, philanthropist, cancer survivor, and founder of FasterCures, a self-described ‘action tank’ working to improve biomedical research. The all-star roster of physicians and cancer researchers on hand included Jablons, Dr. Pasi Jänne of the Dana Farber Cancer Institute,

Dr. Mark G. Kris of the Memorial Sloan-Kettering Cancer Center, Dr. Fred Marcus of Sequoia Hospital and Dr. Harvey Pass of the NYU School of Medicine.

As the researchers rose in succession to talk about their research, Bonnie realized that ingrained conference habits are hard to break. The summit was struggling with a terminal illness of its own: ‘death by powerpoint.’ Addario intervened, drew a curtain on the long string of self-congratulatory progress reports, and refocused the meeting. “We don’t want to know what you’re doing,” she said. “We want to know what you would change.” She challenged the attending scientists, physicians, lung cancer patients and survivors, venture capitalists, pharmaceutical industry executives, and govern-ment officials to answer one question: “If money were no object, what would you do to increase lung cancer survival rates?” Bonnie encouraged the group to momentarily forget the obstacles and imagine the possibilities.

To be continued….Part II recounts how Bonnie J. Addario, in pur-

suit of improvements in lung cancer research and care, has pushed patient activism in new directions. She has formulated original ends for the BJALCF and devised innovative strategies for achieving them. Stay tuned.

The Bonnie J. Addario Lung Cancer Foundation holds an annual ‘Simply the Best’ gala


Ivor Royston

Trials and Travails of a Biotech Pioneer

Part II


When we left off Ivor Royston’s story in our last issue, he had just co-founded Hybritech, Inc., the world’s first monoclonal antibody company, in San Diego, in 1978. He didn’t yet know it, but he had embarked on an adventure not only in science and industry, but also in institutional politics.

Royston’s partners were Howard Birndorf, a lab technician at the University of California, San Diego (UCSD), and Brook Byers, junior partner in the San Francisco/Silicon Valley venture capital firm, Kleiner Perkins. Setting up the company was primarily Birndorf’s responsibility. He left his job at the university to secure lab space, hire staff, and manage the operation.

Byers commuted on a weekly basis from the Bay Area to guide the venture as the founding president. Royston served as an unpaid scientific consultant, spending one day per week on company business, while holding a seat on the board of directors.

Royston wasn’t hankering to establish a career in business. “I just wanted to manufacture antibodies,” he says. “I was excited because the technology was brand new, and perhaps a way to treat cancer.” He considered the business a sideline: “I was an assis-tant professor of medicine. I wanted to be tenured someday.”

Byers spent the last quarter of 1978 conducting due diligence on the technology and market op-portunities. His investigations led to an important strategic shift. He saw that the market for research antibodies would remain limited, but he identified a market with far greater promise – in vitro diagnos-tics tests sold to clinical laboratories. Byers learned

from experts in the field that monoclonal antibodies could significantly improve the accuracy, speed, and reliability of these products.

Royston credits Byers with recognizing that “the real power of the antibodies was to use them as ingredients in diagnostic kits.” Birndorf concurs: “We weren’t thinking as big as Brook and Kleiner Perkins. They were thinking in terms of a $100 mil-lion worldwide market.” Hybritech was redefined as a diagnostics company.

Developing an antibody against hepatitis became the first project, because it would enable a move into blood screening. Largely due to Birndorf’s efforts, the company achieved the milestone in four months. “Kleiner Perkins was very pleased,” Royston recalls. “They pumped in more money – millions.”

Over the next several years, Hybritech’s found-ing team recruited scientific talent from San Diego’s world-class academic research institutions, includ-ing UCSD, the Salk Institute for Biological Studies, and the Scripps Research Institution. They brought in experienced managers from the pharmaceutical and medical diagnostics industries to scale up pro-duction and oversee organizational expansion.

The company put diagnostic products on the market and commenced research programs on cancer therapeutics. After an initial public offering of stock in 1981, Hybritech began to grow explo-sively. By 1984, the company employed hundreds of people, and that year turned a profit – making it a rarity among biotechnology firms. Only Genentech had managed to report profits on a consistent basis.

In the late 1970s, bioentrepreneur Ivor Royston had one foot in the academy and

another in business. Dual allegiances of this sort were unusual in the life sciences.

Royston became a lightning rod for controversy. His story offers a window on

institutional changes wrought by the commercialization of new biotechnologies.


The institutional provocateurThrough it all, Royston carried on with his work

at UCSD. When he first started moonlighting at Hybritech, there was some confusion at the univer-sity about how to regard his commercial ties and activities. At the time, owning and operating a busi-ness was virtually unheard of among life science, clinical research, and medical teaching faculties at elite research universities. Many of Royston’s col-leagues weren’t sure that it was allowed; some were convinced that it shouldn’t be.

Several voiced concerns about conflicts of com-mitment. How, they asked, could a scientist fully discharge academic obligations (which included, in Royston’s case, research, teaching, clinical care, and administrative service) while running a business on the side? “There was a backlash,” Ivor recalls. “Some people were disgruntled. They asked, ‘How can you possibly do both?’” The university faculty huddled to determine a course of action: “They learned,” says Royston, “that I hadn’t done anything wrong, so there was nothing they could do. I had disclosed it

all to the administration.”The close links between Royston’s lab and Hy-

britech’s R&D operations also generated suspicion among the UCSD faculty. From 1980 to 1985, Royston received more than $1 million in grants from Hybritech to test the company’s monoclonal antibodies in the clinic. The arrangement raised conflict of interest questions. Some at the univer-sity were afraid that the lure of profits would erode the integrity of the scientific process by encourag-ing secrecy, fraud, and the exploitation of graduate students.

The UCSD administration didn’t share the con-cerns of ivory tower purists on the faculty. Under the leadership of Chancellor Richard C. Atkinson, the university had begun actively to encourage faculty involvement in industrial projects. Dr. Robert Petersdorf, Dean of the School of Medicine defended the policy and expressed confidence in the adequacy of oversight: “There have been people with industrial ties and they have been carefully examined. If we had a messy situation, we’d know

Left to right:Ivor Royston, Hy-

britech Vice Presi-dent of Therapeu-

tics R&D Dennis Carlo, Brook Byers,

Hybritech Presi-dent David Hale, Howard Birndorf

Hybritech leaders, 1984


about it.”When asked by a journalist to comment, Royston

defended his contract research as a legitimate means of advancing the school’s institutional mis-sion: “The research we are doing has been judged by the university to be a contribution to society, even if there is a benefit to Hybritech and me.” Eventu-ally, Royston became inured to criticism: “It comes with the territory,” he said at the time. “Most people don’t believe you can serve two masters.”

After his involvement with Hybritech had been reviewed and approved by university committees, Royston assumed that his academic career would proceed without lasting injury. He carefully followed the university’s rules governing faculty participa-tion in industry. He scrupulously disclosed required information concerning compensation, equity hold-ings, and research support, in order to avoid any appearance of impropriety. Eventually, though, he realized that his assumption was mistaken.

Several years later, John Mendelsohn, the origi-nal director of the UCSD Cancer Center, resigned, creating a vacancy. Royston says he would have entertained the idea of serving as Mendelsohn’s replacement, but he was never considered as a can-didate for the job. The idea of directing a research organization designated by the National Cancer Institute as one of a select group of Comprehen-sive Cancer Centers held some appeal for him, but his perceived waywardness had exacted a cost. “I found,” Royston says, “that I was not taken seri-ously at the time because they felt uncomfortable about somebody who was so entrepreneurial, and so involved with business. I paid the price.”

The hybridoma makerBy 1981, the commercialization of the life

sciences was no longer the exclusive province of en-trepreneurial professors. It was being orchestrated by university provosts, chancellors, and trustees. The U.S. Congress had passed the Bayh-Dole Act, giving academic institutions incentives to move deeper into the intellectual property business. Elite research universities began to promote faculty patenting and technology licensing, and to identify themselves as engines of economic growth.

In this environment, it became routine for faculty members to disclose inventions, but there remained uncertainties regarding the status of biological materials as commodities. Life scientists were inventing objects and processes that created legal puzzles. The University of California had to deal with a problem of this sort when Royston and three colleagues invented a process for creating hybridomas of human origin. Hybridomas are fused cells that manufacture monoclonal antibodies. At the time, most available hybridomas came from mice or rats.

Royston had been pursuing this line of work because, all else being equal, human antibodies would be preferred in the treatment of cancer to those derived from rodents. Unlike murine anti-bodies, human immunoglobulins don’t produce allergic ‘HAMA’ reactions (the generation of human anti-mouse antibodies) when injected into patients. Therapeutic uses of murine antibodies were limited. The creation of human antibodies was potentially an important step forward.

When Royston began trying to fuse human cells, no dependable method had been described in the

Hybritech Headquarters, La Jolla, California, 1981


scientific literature. Human cells are notoriously uncooperative in the labora-tory; they are difficult to maintain in culture, and they usually perform poorly in hybridization procedures. Royston’s group, however, had discovered a lym-phoblastoid B cell line (‘immortalized’ by infection with the Epstein-Barr virus) that worked consistently. They called it UC-729-6.

Cells from the line grew rapidly and fused well with both normal and malignant human B lymphocytes (antibody-producing cells). Because they were immortal, they could be main-tained indefinitely in culture and used to manufacture antibodies. In 1983, an independent review of ‘immortalized’ human cell lines published in the Journal of Immunology ranked UC 729-6 as the best available.

When Royston fused UC 729-6 with antibody-secreting B lymphocytes harvested from cancer patients, he found that monoclonal antibodies secreted by the resulting human hybridomas reacted with cancer cells – some were specific to particular cancers, others reacted across a range of different tumor types. Cancer patients generally do not raise immune responses against malignancies, but their B-cells are primed nonetheless to produce anticancer antibodies.

Royston hoped that experimenta-tion with these antibodies would show him how malignancies evade detection and attack by the immune system, and, perhaps, how new immunotherapies might be developed. When the cell fu-sion process had been made reliable, he informed the university administration. A patent was filed.

The reluctant claimantA dispute about the ownership of

human hybridomas and their antibody products arose during the course of this research in 1982, when Ideaki Hagiwara, a post-doc from Japan working in the UCSD biology department, approached Royston about the possibility of learn-ing how to make human monoclonal antibodies in his laboratory. Hagiwara’s mother in Japan was suffering from metastatic cervical cancer. Hagiwara proposed that he travel home to Japan in order to obtain tumor and lymph specimens from his mother for use as research materials.

Royston agreed to take in the tissues. Since the work was to be conducted in-house, in Royston’s laboratory, no writ-ten agreements were drawn up. Hagiwara returned to UCSD with the samples. B cells from the lymph were fused with UC

729-6. Two of the resulting hybridoma cultures produced functional monoclonal antibodies and were selected for further study. One of them especially interested Royston because it produced antibodies that reacted with several human malig-nancies – the antibodies fastened to anti-gens found on lung, prostate, and blood cancer cells in addition to the cervical cancer of Hagiwara’s mother.

Hagiwara deemed both hybridoma cultures worthy of interest, for his mo-tivations were personal and not merely academic or professional. Without the consent of either Royston or the Uni-versity of California, Hagiwara took the cells back to Japan in order to treat his mother. He hoped that the administra-tion of monoclonals would stimulate a cell-mediated immune response against the tumors. Royston believes it was a medical landmark, the first in vivo use of

Antibodies are part of the body’s natural defenses. The Y-shaped proteins bind to foreign and potentially dangerous molecules, in order to neutralize them, or mark them as targets for attack by other components of the immune system.

With the invention of hybridoma technology by César Milstein and George Köhler in 1975, biologists acquired the ability to make unlimited amounts of monoclonal antibodies (Mabs) – genetically identical clones of specific antibodies. Research on therapeutic uses commenced shortly thereafter. Through the 1980s, however, most monoclonal antibodies came from mice or rats. When injected into human beings, they often produced allergic reactions. Therapeutic applications of murine antibodies were limited.

In the 1990s, genetic engineering techniques facilitated the invention of chimeric, humanized, and fully human monoclonal antibodies. The problem of immunogenicity was solved. Prior to 1994, the FDA approved a single thera-peutic Mab, for use in immune-suppressed patients. Since 1994, the agency has approved 29 chimeric, humanized, or human monoclonal therapies. Today, genetically-engineered human antibodies are manufactured in transgenic mice or phage display libraries.

Antibody Engineering


a monoclonal serotherapy.The results were never publicly released. Mrs.

Hagiwara later died, reportedly due to causes unre-lated to her cancer. The case was complicated by the fact that Hagiwara’s father was a bioscientist and the director of the Hagiwara Institute of Health in Japan. When the university learned of the situation, it asserted its ownership rights to UC 729-6 and any goods derived from it.

An agreement was reached that permitted the Hagiwaras to use the cells and antibodies for medi-cal and scientific purposes on the condition that they would not commercialize the materials. Later, however, the Hagiwaras amended their position. They claimed co-ownership of the hybridomas be-cause the immortalized hybrid cells propagated Mrs. Hagiwara’s genes and gene products.

According to Royston, “Neither side was anxious to spend a great deal of time and money in litiga-tion over a cell line of questionable significance.” The case was settled when the university granted the Hagiwaras an exclusive license for use of the technology in Asia, and the Hagiwaras agreed to pay royalties to the university on the sales of any products.

University counsel Allen B. Wagner acknowl-edged that there was no obvious answer to the question of ownership (which remained unresolved in principle): “The law in the case of Royston and Hagiwara is not as clear as one would hope. It seems as though rapid movement in biomedical science has outstripped the law’s ability to keep up.”

Royston adopted a pragmatic approach to the policy dilemma. He advised that existing rules for protecting human subjects and determining the status of ‘discarded tissues’ provided sufficient guidance in most cases. He also recommended that researchers be excused from time-consuming meet-ings with attorneys and university officials when existing rules did not suffice: “If the patient does not wish to waive his rights I would have to ask the University to negotiate an agreement with him so that my time will not be taken up in subsequent litigation.”

In the early 1980s, academic life scientists had

begun to accept patenting as something that was done at universities as a matter of course when re-search generated marketable products. The further question of how to transform human tissues into intellectual properties was unresolved. Conflict and controversy were part and parcel of biomedical research in the early 1980s.

The subject of investigationHybritech was acquired by Eli Lilly & Company

in March of 1986 for an estimated $480 million. At the time, it was the highest price ever paid for a company in San Diego County. Royston had origi-nally started the company to develop antibodies for use in cancer research at UCSD. By 1986, his inves-tigations were focused on lymphoma. Following the acquisition by Lilly, it became clear that Hybritech wouldn’t be working on the disease. “Lilly said no to lymphoma,” says Royston, “so I started another antibody company.”

With Birndorf and Byers once more, and with Stanford cancer researchers Ron Levy and Richard Miller, Royston founded Idec Pharmaceuticals. As with Hybritech, Ivor served as a consultant, but was never a full-time employee. “I was an academic scientist, publishing papers, trying to discover new things, and particularly trying to develop new treat-ments for cancer using antibodies. My goal was to cure cancer.”

Nevertheless, Royston ran into more trouble on the job. The problem had to do again with his multiple roles as a faculty member at the univer-sity and consultant, director, and shareholder at Idec. Royston’s research projects at UCSD included federally-funded clinical trials of antibody therapies developed by Idec. He was compensated by the com-pany for consulting services, received free techno-logical assistance, and held a 5% ownership share in

The UCSD Medical Center in the Hillcrest section of San Diego


Idec and a seat on the company’s board of directors.In September of 1987, Royston’s association

with the company came to the attention of the National Cancer Institute (NCI), the agency funding the UCSD trial. A team of three auditors from the NIH Division of Management Survey and Review traveled to San Diego from Maryland with ques-tions about how Royston’s company business was to be distinguished from his university research.

The inquiries were triggered by an anonymous letter to the NCI that accused Royston of impro-prieties – misuses of federal funds. To this day, Royston doesn’t know who sent the letter, but he says: “It was somebody within the system, some-body at the university. I got the letter under the Freedom of Information Act. I know it wasn’t an on-cologist, because the name of the NCI director was misspelled. But it was somebody in the university system that really had a problem.”

Royston’s was one of five federal grants at UCSD that simultaneously became subjects of the NIH investigation. His was the largest, by far. Royston

was set to receive $870,495 from the NCI to conduct research on anti-cancer monoclonal antibodies. Royston denied any wrongdoing, as did the other sci-entists. He told the San Diego Union: “I am not worried. Any allegations are false. I try hard to operate in a conflict-free, above-board manner.”

With the NIH investigation un-derway, the university also decided to

look into arrangements between Royston’s lab, the Cancer Center, the School of Medicine, and the Idec Pharmaceuticals. The UCSD Office of Business Af-fairs determined that Idec’s product liability insur-ance was inadequate and that intellectual property matters in the collaborative project were poorly defined. Renegotiations ensued. Eventually, the legal questions about the UCSD/Idec relationship were settled to the satisfaction of the university.

No one in the administration made any criti-cism of the manner in which Royston had managed his research or his laboratory. The NIH auditors reviewed all of the pertinent records, conducted a series of interviews, and then left town. In Decem-ber, the agency released a report on the findings of its investigation, and an NIH spokesman issued a summary statement: “Nothing has been found by the inquiry to support the allegations of improper actions on the part of any investigators.”

When asked for a response, Royston said, “You know, it was always above board. It was investigated and I was exonerated.” To critics voicing concerns about university faculty members starting compa-nies, Royston said: “If you get lymphoma, you’ll be

glad I started Idec.”

The foundation directorAs the 1980s drew to a close, Royston became in-

creasingly disenchanted with routines at the Cancer Center and the School of Medicine. He felt that the university was moving too slowly toward a ’trans-lational’ model of research. His experiences with Hybritech and Idec had exposed him to alternative modes of organizing scientific work: “I realized that the convergence of business and medicine was a way to accelerate discovery and accelerate the flow of ideas from the lab to the clinic and into the market-place in order to benefit patients.”

Royston thought UCSD could do better. He en-visioned a comprehensive cancer center that would integrate biomedical research, clinical testing, and clinical care synergistically. He wanted to advance understandings of cancer, treat patients with cutting-edge therapies, and speed the development of the next generation of cancer-fighting tools. But he didn’t want to wait twenty years to see it happen.

When a friend, local oncologist Tom Shiftan, called to talk about starting an independent cancer clinic and research institute, Royston was prepared to consider it. Shiftan introduced him to Alan Good-man, a San Diego heart surgeon who had lost a son to leukemia. Goodman felt that the available cancer care in San Diego was inadequate, and that the city should have a world-class clinic. The trio met at Busalacchi’s Ristorante in the Hillcrest section of the city, and agreed to proceed.

Royston left the university in 1990, and with his partners, established the not-for-profit San Diego Regional Cancer Center (SDRCC) – even as the director of the heavily-research focused UCSD Cancer Center described the project as “unneces-sary.” Initial funding for the startup was drawn from personal lines of credit taken out by each of the three founders. Royston transferred his NIH grants from university, enjoyed success in fundrais-ing and recruiting top investigators, and began work on gene therapies and immunotherapies for cancer. The SDRCC grew rapidly.

Royston had escaped the university bureaucracy, but he hadn’t managed to give the slip to contro-versy. In 1992, SDRCC researchers were working on a novel gene therapy approach. They were retrieving mouse colon cancer cells, transducing interleukin-2 (IL-2) genes, and returning the cells to the mouse. Interleukin-2 is a cytokine, an immune system signaling molecule. The objective was to stimulate an immune response to the tumor. The experimen-tal therapy yielded promising results and generated some buzz in the local news media.

“If you get lymphoma, you’ll be glad I started Idec.”


The compassionate experimentalist

Royston received a call from a San Diego man named James Hewitt whose wife was suffering from glioblastoma, a brain tumor. He wanted to know whether the SDRCC’s experimental gene therapy could be used to treat his wife. Royston said no. He explained that his team had no data on glioblas-toma, and no data on human beings. Hewitt was insistent. He said that his wife had been through doses of radiation, three rounds of chemotherapy, an experimental monoclonal antibody therapy at Duke University, and two brain surgeries. She was scheduled for a third surgery to reduce the bulk of the brain tumor.

Hewitt asked if Royston would accept cells from the tumor and transduce them with the IL-2 gene. Royston agreed: “I said, ‘OK, send the cells.’ I was just trying be nice.” He went ahead with the transduction, and soon had cells from the patient’s glioblastoma pumping out copious amounts of IL-2 in his laboratory. Hewitt called the SDRCC every week to inquire about progress. “I couldn’t lie,” Ivor says. “I told him, ‘The cells are producing IL-2.’”

Hewitt pressed Ivor to treat his wife. Royston said that he had no idea whether it work, and that it probably wouldn’t work. He explained that any use of an experimental gene therapy would have to run through a gauntlet of federal approvals beginning with the Recombinant DNA Advisory Committee (RAC), moving to the National Institutes of Health (NIH), and ending with the U.S. Food and Drug Administration (FDA). The request was for a single

patient, there was no supporting data to present, and not a single gene therapy had been approved for use in human beings. Given the early stage of the research, Royston judged the chances of approval to be nil.

To Royston’s astonishment, Hewitt called back the next day to say he had arranged an appointment with FDA officials. Ivor soon learned that Hewitt was a former Washington, D.C. attorney who had been appointed to various positions in government service, including Vice-Chair of the Security and Exchange Commission, by four different adminis-trations: “This was clearly a man with connections.” Royston went to Washington to visit the FDA. The agency requested a single patient IND [investiga-tional new drug] protocol, and suggested that it was likely to be approved.

As a result of Hewitt’s intervention, Royston be-gan moving through the approval process in reverse order. He requested an audience with Bernadine Healy, Director of the NIH, to ask for an approval for the treatment, and, in addition, a promise not to pull Royston’s NIH grants for becoming embroiled in this highly irregular business, and using viral vec-tors to transduce tumor cells without first submit-ting a protocol to the RAC, and receiving authoriza-tion from the NIH. Healy did not grant either of Royston’s wishes, but said that she would convene a special meeting of the RAC to consider the protocol and the administrative complications. Royston had a lot riding on the meeting.

The hearing was held in a large conference room in Building 31 on the NIH campus in Bethesda,

The SDRCC, later renamed The Sidney Kimmel Cancer Center


Maryland. The top leaders of the nation’s biomedical establishment were on hand. Healy attended. High-ranking FDA officials were there. Samuel Broder, Director of the National Cancer Institute (NCI) was present. The head of every NIC division had a seat.

The press had gotten wind of the unusual event, and bright television lights illuminated the scene. The members of the RAC filed in – leading scientific experts who had been called in from all around the country to decide on a trial for a single patient with-out relevant data to examine. “They were frowning,” Royston says. “They looked really upset.” He remem-bers some hostility in opening remarks. “I thought to myself, ‘What have I done?’”

The meeting went on for hours. By the end of day, Royston felt that the plea for compassion had made an impression. Healy called a week later to inform him that the protocol was approved. The treatment appeared to have some effect, but did not ultimately save Mrs. Hewitt. Publicity from the RAC hearing drew the attention of a Philadelphia businessman, Richard Butera, who called Royston about treating his daughter. The girl was dying from a rare form of sarcoma. Butera was impressed with Royston’s efforts. He said, “You stood up to the government. You fought for the patient. I want you to meet a friend of mine. His name is Sidney Kim-mel.” In 1996, the SDRCC was renamed the Sidney Kimmel Cancer Center after a large gift from the clothing magnate.

The venture capitalistWhile putting the cancer center together, Ivor

began dabbling in venture capital “as a hobby.” “I de-cided that I enjoyed the whole start-up process,” he says. Royston had long been fielding calls from pro-spective bioentrepreneurs, dispensing advice, and making contacts. The idea came to him to do more: “I got calls every month from scientists at UCSD or Salk or Scripps saying, “I have this great idea, who should I talk to?” I’d say, ‘Call Brook Byers at Kleiner Perkins.’ Eventually, I realized I was missing out on interesting opportunities.”

In 1993, Royston officially started Forward Ven-tures, a small firm with one other partner that spe-cialized in seeding biomedical start-ups. Royston’s role was technology assessments. The firm has raised five funds, and can boast some major success stories. As one of his favorites, Royston identifies TargeGen, a San Diego-based maker of small mol-ecule drugs for blood cancers that was purchased in 2010 by Sanofi. Contingencies could eventually lift the sale price to $560 million.

Royston left the Sidney Kimmel Cancer Center in 2000, retired from science, and entered the venture capital business on a full-time basis: “What I do now,” he said in 2003, “is to use my experience from a quarter century of being involved with the biotech industry to help other scientists develop their ideas and transfer technology out of institutes and uni-versities into companies.” Forward Ventures became the largest dedicated life sciences fund in San Diego County.

Ivor Royston’s contributions to San Diego extend beyond science, technology, and medicine to cultural enrichment. He has become well-known in the city as a philanthropist and a patron of the arts. Since 1987, Ivor and wife Colette have managed the Ivor and Colette Carson Royston Advised Fund at the San Diego Foundation. The fund has supported a wide range of organizations including the Sidney Kimmel Cancer Center, the Mu-seum of Contemporary Art, the Jewish Community Center, Congregation Beth Israel, the San Diego Opera, and the La Jolla Playhouse.

As a diverting sideline, Ivor has be-come involved in several film and theater projects. In 2005, he saw the musical ‘Jersey Boys’ at the La Jolla Playhouse. He

thought, “This is absolutely terrific.” He got on the phone with the producers in New York producers to see how he could get involved. He learned that one of the co-producers had dropped out, and the group needed help. Immediately, Royston said, “I’ll do it!” He formed a partnership called the Pelican Group that invested in the show. When the show became hit on Broadway and won a Tony award

Royston became involved in the arts because they served as a retreat. Partici-pation in theatre and film was a means of alleviating the emotional stress of work-ing as an oncologist: “As an oncologist, you see a lot of people dying. You need an occasional escape from that. For me, theater and film provided it.”

The philanthropist and

patron of the arts


“When I started Hybritech, there was nothing here. San Diego is now one of the top regions for biotech.”

Trials, travails, and lasting achievements

The invention of recombinant DNA and hybridoma technologies and the formation of the biotech industry in the late 1970s and the early 1980s precipi-tated rippling waves of change in the sciences, higher education, and several important industries – pharmaceuticals, medical diagnostics, and agriculture, for example. Technological innovations created the need for painful institutional adjustments. Ivor Royston was one of the catalysts.

As a pioneer in the field, and a visible symbol of change at the University of California, San Diego, Royston bore the brunt of conservative reactions against the commercialization of academic research. It was difficult – he was a suc-cess in science, medicine, and business, yet had to endure the opprobrium of his peers. “I can laugh about it now,” he says, “but at the time I was horrified. I think it was more envy than anything else.”

Ivor Royston’s career traversed an unstable institutional landscape. Before molecular scale biotechnologies ap-peared on the scene, life scientists at elite research institutions held industry in contempt. ‘Industrial biology’ was understood as prosaic engineering, and some idealists in the ranks considered the worlds of science and business

wholly discrete and antithetical.In a relatively short period – less than

thirty years – both notions were turned on their heads. As Royston observes, “Everything has changed. People now understand the importance of the indus-try.” What was once condemned is now commended.

It is difficult to overstate the im-portance of Hybritech and Idec in the history of San Diego biotechnology. Hybritech was the first biotech company in the city, and it became a great success. Following the acquisition by Eli Lilly & Co. in 1986, a cadre of serial entrepre-neurs exited the upper reaches of the firm. Suddenly wealthy, they were ready to explore fresh opportunities. Most remained in San Diego and started new biomedical enterprises.

Today, the city features the third larg-est concentration of biotechnology com-panies in the world, and an impressive number of them – over 170 according to a recent tally – can trace ties back to Hybritech. Royston derives satisfaction from the fact: “When I started Hybri-tech, there was nothing here. San Diego is now one of the top regions for biotech. I’m pleased to have played a role in that. It’s exciting to look back and see that we were part of that whole movement.”

Royston’s companies also impacted the practice of medicine. Hybritech revo-lutionized prostate cancer care when it introduced the prostate specific antigen (PSA) diagnostic test that enabled early detection. Idec went on to produce a blockbuster lymphoma drug. Rituxan®, developed in collaboration with Genen-tech, was approved by the FDA for the treatment of non-Hodgkin’s lymphoma in 1997. It was the first anticancer monoclonal antibody therapy to reach the medical marketplace. The drug has saved thousands of lives.

Royston wasn’t directly involved in the research that led to the development of either product, but he takes great pride in his companies’ accomplish-ments: “In 1978, I said to Brook Byers, ‘You know, I think we can use monoclo-nal antibodies to treat cancer.’ That has now come to fruition.”

Royston is still in the innovation business, but times are currently tough for the biotech industry, and for venture capitalists who would like to invest in it. Pools of capital that once existed for discovery-stage startups have dried up. Royston isn’t gloomy, but cognizant of the challenges. It’s not clear how in-novation will be sustained through the drought.

“I wonder if a Hybritech or an Idec would get funded in this environment. I’d like to hope so,” he says. “I want to be in early-stage discovery opportunities. We need to be more creative about fund-ing them.” The trials and travails go on.

San Diego, California


Biotech Bookshelf

In The Creative Destruction of Medicine: How the Digital Revolution Will Create Better Health Care, cardiologist and geneticist Eric Topol takes readers on a tour of our medical future. Mixing technical explanations with personal anecdotes, he describes digital tools that will soon change how life scientists conduct biomedical research, how doctors collect and make use of medical and genomics data, and how patients think about and care for themselves as they manage their own electronic health records. According to Topol’s timetable, smartphones will soon detect cancer cells in the blood, send alerts about impending heart attacks, and remotely monitor blood glu-cose levels, heart rhythms, and brain waves. Dr. Topol explains why troubled healthcare systems need to “reboot,” and why patients, providers, and policy-makers need to take seriously break-throughs in mobile, digital, biomedical technologies. As the costs of sustaining medical infra-structures continue to rise and patient outcomes hang in the balance, new digital instruments, databanks, and networks can introduce efficiencies to healthcare delivery, facilitate patient access to medical services, improve the quality of medical care, and save lives. These gains will be realized, Topol warns, only if consumers insist on the adoption of democratizing health technol-ogies in clinical settings. Topol’s book is an informative and entertaining guide to technologies that will revolutionize the monitoring and management of medical conditions, and transform understandings of health and illness.

To open The End of Illness, oncologist David Agus challenges readers to imagine the cause of their death. In all likelihood, they will cite leading killers in modern industrial and post-industrial societies – cancer, Alzheimer’s, heart disease, and so on. Agus, however, entreats his audience to imagine a different end-of-life scenario. What if we could live full, long lives, and die peace-fully in our sleep, without pain or prolonged suffering? Agus suggests that we can realize better health, longer lives, and an end to illness, if we critically rethink our understandings of health in relation to the pills we ingest, the foods we eat, the daily rituals we observe, and the medical treatments we seek. Dr. Agus argues that conventional health wisdom is too often based on a “one-size-fits-all” medical model that fails to account for the complexity of the human body and the play of unique genetic endowments in variable environmental contexts. Agus is a myth-buster. His book is replete with startling facts that may uproot everything readers thought they knew about good health. The information won’t rhyme (remember “an apple a day keeps the doctor away”?), but it may make us think twice about vitamins, high heels, ‘health foods,’ and desk jobs. The End of Illness is a rousing read, a fascinating guidebook for a better health future.

The Creative Destruction of Medicine: How the Digital Revolution Will Create Better Health CareEric TopolBasic Books, 2012. 320 pp. $17

The End of IllnessDavid B. Agus Free Press, 2011. 320 pp. $26


The diagnosis and treatment of cancer has changed dramatically in the past fifty years. In Cancer on Trial, historians Peter Keating and Alberto Cambrosio trace the history of clinical trials in oncology, and shifting relationships over time among cancer patients, medical professionals, academic research institutions, and the pharmaceutical industry. Keating and Cambrosio discuss three historical periods: 1) the emergence of clinical research from 1955 to 1966, before oncol-ogy was officially recognized as a medical specialty ; 2) the proliferation of trials and testing centers in the years between 1965 and 1989, a phenomenon that generated an “avalanche of numbers” – an abundance, if not a glut, of clinical trial data; and 3) the era of targeted thera-pies from 1990-2006, when decades of research in molecular genetics and immunology came to fruition in oncology and extended doctors’ therapeutic repertoires beyond ‘cut, poison, and burn.’ This recent period also saw the emergence of a new and complex division of labor among academic research institutions, contract research organizations (CROs), and pharmaceutical companies. The text treats the rise of the clinical trial as the basis for a new style of medical practice and a reconfiguration of “oncopolitics,” the space in which researchers, physicians, pa-tients, policymakers, private companies, and investors meet to determine the manner in which cancer therapies will be developed, tested, and delivered to the medical marketplace. Cancer on Trial provides a clear picture of the actors, institutions, and chains of events that elevated the clinical trial to its current stature as the ‘gold standard’ of knowledge in oncology and pharma-ceutical development.

Cancer on Trial: Oncology as a New Style of Prac-ticePeter Keating & Alberto CambrosioUniversity of Chicago Press, 2012. 424 pp. $40

The Life Sciences Foundation (LSF) has been established to record, preserve, and make known the story of biotechnology — that complex mixture of brilliant science, daring entrepre-neurship, and socio-political realities that has become central to human hope in the new millennium.

Looking back is a means of understanding the present and

acquiring wisdom with which to move forward. LSF dissemi-nates the lessons of the past by acting as a clearinghouse for materials and information. The Foundation aims to collect and curate the historical record, enrich it through research and publication, and share it with institutions and organizations engaged in complementary heritage projects.

About LSF

G. Steven Burrill, Chair Burrill & Company

Frederick Frank Peter J. Solomon Company

Dennis Gillings Quintiles Transnational

John Lechleiter Eli Lilly & Company

Phillip Sharp MIT (Academic Advisor)

Henri Termeer Genzyme Corporation

Arnold Thackray Chemical Heritage Foundation

Executive Committee

Telling the Story of Biotechnology

Life Sciences FoundationOne Embarcadero Center, 27th FloorSan Franciosco, CA 94111

Joshua Boger Vertex Pharmaceuticals

Carl Feldbaum Biotechnology Industry

Organization

Daniel Adams Protein Sciences

Sol Barer Celgene

James Blair Domain Associates

William Bowes U.S. Venture Partners

Brook Byers Kleiner Perkins Caufield &

Byers

Ronald Cape Cetus Corporation

Robert Carpenter Hydra Biosciences

Marc Casper Thermo Fisher Scientific

Nancy Chang Orbimed

Jay Flatley Illumina

Martin Gerstel Compugen

Joseph Goldstein UT Southwestern

James Greenwood Biotechnology Industry

Organization

Harry Gruber Tocagen

David Hale Hale BioPharma Ventures

William Haseltine Access Health International

Paul Hastings OncoMed Pharmaceuticals

Susan Desmond-Hellmann

University of California

Perry Karsen Celgene

Arthur Levinson Genentech

Greg Lucier Life Technologies

Joel Marcus Alexandria Real Estate

Equities

John Martin Gilead Sciences

Alan Mendelson Latham & Watkins

Fred Middleton Sanderling Ventures

Tina Nova Genoptix

Stelios Papadopoulos Exelixis

Richard Pops Alkermes

George Poste Arizona State University

William Rastetter Receptos

Roberto Rosenkranz Roxro Pharma

Ivor Royston Forward Ventures

William Rutter Synergenics

George Scangos Biogen Idec

Steven Shapin Harvard University

Stephen Sherwin Ceregene

Jay Siegel Johnson & Johnson

Vincent Simmon Genex Corporation

Mark Skaletsky Fenway Pharmaceuticals

Thomas Turi Covance

J. Craig Venter J. Craig Venter Institute

LSF Board of Trustees

*One affiliation past or present

In Cooperation with the Chemical Heritage Foundation

LSF Magazine Summer 2012

Documents

Transcript of LSF Magazine Summer 2012