Year in review from Forbes
Looking Back
2001: The Year In Biotech
Matthew Herper, Forbes.com, 12.28.01, 5:47 PM ET
NEW YORK - For biotechnology, 2001 began with a hangover. The mapping
of the human genome had been an exuberant party that sent share prices
sky-high and raised new hopes that understanding biology would lead to
lucrative medicines and scads of cash. But as scientists unveiled their gene
maps in February, share prices were already earthbound, and the flood of
easy money from the public markets was drying up.
There was still light at the end of the tunnel: prescription drugs--some of the
most profitable products around. In a bid to turn themselves into grown-up
drugmakers, biotechs started looking beyond the genome--the recipe for all
the proteins that build and constantly rebuild the human body--and started to
do a merger dance that culminated in Amgen's (nasdaq: AMGN - news -
people) blockbuster $16 billion acquisition of Immunex.
The new year begins with biotechnology companies in a strong position--and
with the science that drives them marching on at the same inexorable pace.
2001's Biotech Highlights:
The Great Gene Debate | Plunging Into Proteomics | Justifying Their
Existence | Full-Fledged Merger Mania | Genes Yield Drugs
The Great Gene Debate
Scientists at the government-funded Human Genome Project and Celera
Genomics (nyse: CRA - news - people) were shocked by how empty the
genome seemed. Both found as few as 30,000 genes scattered among the
genome's 3 billion DNA letters. They had expected to find as many as
100,000.
It didn't take long for other scientists to start arguing that the genome
mappers couldn't count. William Haseltine, CEO of Human Genome
Sciences (nasdaq: HGSI - news - people), told us in February that he was
sure the groups had overlooked at least two-thirds of the genes in the
genome. "They miss a lot of genes we know make proteins," Haseltine said.
Since then, many scientists, including those at Incyte Pharmaceuticals
(nasdaq: INCY - news - people) and Lexicon Genetics (nasdaq: LEXG -
news - people) have settled on a number somewhere in between the original
prediction--perhaps counting 60,000 genes.
Plunging Into Proteomics
With the genome mapped, many researchers and investors started looking
for the next step. They found it in the so-called proteome, the universe of
proteins produced by genes. Compared to the genome, cataloging all of
these proteins is an even more gargantuan task. There are hundreds of
thousands, even millions, of these chemicals in the body.
That isn't stopping companies from trying, but most needed help from
computer firms that could provide them with machines powerful enough to
track such huge databases. Myriad Genetics (nasdaq: MYGN - news -
people), which is an early leader in the field, teamed up with Hitachi (nyse:
HIT - news - people) and Oracle (nasdaq: ORCL - news - people) for its
protein-mapping effort.
Meanwhile, IBM (nyse: IBM - news - people) backed Toronto's MDS
Proteomics, and Compaq Computer (nyse: CPQ - news - people)--which
made all the machines that mapped the human genome--teamed up with
Switzerland's GeneProt. But none of these companies, nor
come-from-behind candidate Large Scale Biology (nyse: LSBC - news -
people), made genome-sized headlines, captured the public's imagination or
really explained how soon they'd be able to develop actual products.
Justifying Their Existence
Consolidation was the watchword in 2001. In May, Merck (nyse: MRK - news
- people) bought Rosetta Inpharmatics--a small firm with a litany of
impressive publications in scientific journals--for $540 million in stock.
Rosetta was a genomics hothouse that made the genome more intelligible
(http://www.forbes.com/2001/10/17/1017nobel.html ) to scientists. But that
may not have been enough to sustain the company in its long quest to
produce drugs.
Rosetta may have been only one of a host of companies that would actually
work best as a part of larger, more powerful giants. "These are all
technologies that have value, but I think they are not broad-enough platforms
to sustain the company," says Michael L. Sjöström, chief investment officer of
Sectoral Asset Management.
Besides Merck, several smaller biotechnology companies bought other firms
not for products that were on the market but for their sets of drugmaking tools.
Celera, the gene-mapper itself, bought Axys Pharmaceuticals, and Vertex
Pharmaceuticals (nasdaq: VTRX - news - people) bought Aurora
Biosciences--another company with a collection of assays.
Full-Fledged Merger Mania
The biggest mergers in 2001 happened because biotechnology companies
wanted drugs they didn't have. Drugs, after all, are incredibly profitable
products. Even the middling ones can bring in hundreds of millions of dollars
in sales--and the biggest blockbusters bring in billions.
Of course, the 600-pound gorilla here was Amgen's $16 billion acquisition of
Immunex for anti-arthritis drug Enbrel. But Millennium (nasdaq: MLNM - news
- people), a leading genomics firm, bought COR Therapeutics (nasdaq:
CORR - news - people) only a few weeks before that big deal went down, for
similar reasons: Millennium wanted COR's cardiovascular drug, Integrilin.
And then there was MedImmune's (nasdaq: MEDI - news - people) $1.5
billion purchase of vaccine maker Aviron (nasdaq: AVIR - news -
people)--another attempt at fattening a drug pipeline.
Pipelines are not fattened only through outright mergers. On Sept. 19,
Bristol-Myers Squibb (nyse: BMY - news - people) announced that it would
pay as much as $2 billion for a new cancer drug developed by it's New York
City neighbor, ImClone (nasdaq: IMCL - news - people). "This is going to be
one of the biggest drugs in the history of oncology," ImClone Chief Executive
Sam Waksal predicted at the time.
Genes Yield Drugs
One of the biggest boons to biotech in 2001 came not from a biotechnology
firm but from a pharmaceutical giant: Novartis (nyse: NVS - news - people)
unleashed Gleevec, a small-molecule cancer drug derived from gene data.
The compound was amazingly effective at treating a cancer called chronic
myeloid leukemia.
Another new drug developed from a gene came from Millennium
Pharmaceuticals. The drug, for treating obesity, is the first to come from the
biotech's collaboration with partner Abbott Laboraties (nasdaq: ABT - news -
people). Like Gleevec, it is a small-molecule drug, the kind of chemical that
can be produced very cheaply and sold for a lot of money.
But genes may not be the only source of new drug research: The next big
thing may be neither genes nor proteins, but the chemical go-between the
body uses to transcribe protein recipes to factories found in every cell. This
year, scientists have made great strides toward understanding ribonucleic
acid, or RNA.
The journal Science pointed to the RNA work, which has received little
attention in the press, as one of the great breakthroughs of the year. It could
be the next hot area to watch in biotech.
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