If it weren’t for the grace of one company’s successes , as well as its failures , San Diego’s multi-billion-dollar biotechnology industry may not exist.
But the founding fathers of the biotech scene that now employs more than 39,000 people locally are modest about their hand in creating the local biotech foundation.
They shouldn’t be: A 2003 economic report by the San Diego Chamber of Commerce said then that the industry employed more than the telecommunications, software or aerospace/defense sectors. It generates $5.8 billion in the metropolitan area annually , 5.3 percent of the region’s gross metro product, according to a 2004 Milken Institute Study.
“If Hybritech hadn’t been the first biotech firm in San Diego, some other one would have been,” said Ivor Royston, 60, who co-founded the company, with Howard Birndorf, 55, in 1978 that eventually became known for its test for prostate cancer.
But a blend of creativity and entrepreneurial spirit among the employees at Hybritech Inc. left San Diego with a wealth of nationally recognized scientific think tanks working on drugs for diseases such as cancer, diabetes, osteoporosis and others.
Rolling The Dice
More than 60 biotechnology companies can trace their roots to Hybritech , a company that Royston, then an assistant professor at UC San Diego, and Birndorf, his research assistant, formed using a “how-to” book. The two were lucky enough to gain $300,000 in funding back then from Kleiner, Perkins Caufield and Byers, the now well-known Silicon Valley venture group. Royston’s wife had known one of the group’s members, and the investors took a chance.
After Indianapolis-based pharmaceutical giant Eli Lilly and Co. purchased Hybritech in 1986 for more than $400 million, making many ordinary scientists multimillionaires, the creative environment at the startup became spoiled by red tape and cookie-cutter policies, said Birndorf. After starting several other biotech firms, Birndorf founded and currently serves as chief executive officer of San Diego-based Nanogen, Inc., a global supplier of molecular diagnostic tests for the medical community.
Hybritech, which started with Birndorf as its only employee and had nearly 1,000 at its peak, never accomplished what it had initially set out to do, which was to sell monoclonal antibodies to researchers. The scientists and executives who made Hybritech a “magical place” left because of the stifled atmosphere, said Royston and Birndorf. But the companies they would form created the boom that is today’s biotech community in San Diego.
“I don’t know if the company made entrepreneurs or if the entrepreneurs made it magical, but they realized that they could go off and do it again,” Birndorf said.
And they did. Former Hybritech executives such as Howard “Ted” Greene, David Hale, Tina Berger Nova, David Kabakoff, Cam Garner, Dennis Carlo and Tom Adams started their own biotech companies. Many of them were successful, including one of the nation’s largest, Idec Pharmaceuticals, now Biogen Idec Inc., along with Amylin Pharmaceuticals Inc. and CancerVax Corp.
Royston went on to found the Sidney Kimmel Cancer Center and Forward Ventures, a venture capital firm that funds biotech startups.
And Then There Were 500
While San Diego regularly ranks in the top five cities for biotechnology in the country, it wasn’t until 1981 that biotech firms began to proliferate here. Today, the city boasts more than 500 biotech firms, according to Biocom, the industry’s regional trade association, which represents more than 450 member companies in Southern California.
San Diego competes with Boston, Philadelphia, San Francisco and the New York region, among others, for achieving the most conducive environment for business-minded scientists to attempt to market their products.
But San Diego wasn’t always so competitive. The terms “biotechnology” and “life sciences” were little understood, and investors had difficulty seeing promise in spending money to convert a building into lab space, Birndorf said.
“We had to beg, borrow and steal to get people to build labs for us,” he said jokingly.
San Diego is now more nurturing toward biotech companies because of the collegiality among the now-dispersed former executives from Hybritech, as well as collaboration among the Sidney Kimmel Cancer Center, the world-renowned Scripps Research Institute and UCSD.
Ten San Diego companies received about $252 million in venture funding in the second quarter of this year, up by $100 million from the first quarter, according to the latest survey released by Ernst & Young LLP and Venture One. About half were biopharmaceutical or medical companies. However, nationally, funding was down by 11 percent.
‘No Better Place To Build’
“We attracted some of the leading managers in biotech to come to San Diego , people who wouldn’t have come here otherwise,” Royston said. “There’s no better place to build a biotech company than San Diego.”
Biocom CEO Joe Panetta says the city’s appeal continues to grow.
“This is where ideas are spawned,” Panetta said. “It’s hard to imagine a biotech culture in San Diego if there hadn’t been a Hybritech.”
In late 1981, Hybritech went public. Its sales peaked at $160 million in 1991. After Eli Lilly purchased Hybritech, and most of the staff turned over, the company’s sales dwindled to $50 million in 1995 as competition increased from Abbott Park, Ill.-based Abbott Laboratories. That year, Lilly sold the firm for a fraction of its purchase price to Beckman Coulter, which still owns the company today.
“When I look back at all that history, (Eli Lilly’s) purchase turned out not to be successful, but it was a tremendous catalyst for growth,” Royston said.
Still, the humble pioneers believe a bustling biotechnology scene would have found its way to San Diego regardless of the Hybritech foundation and eventual demise.
“Because of the concentration of technology and educational institutions here, like UCSD and Scripps, it would have sprung up in San Diego. It’s a perfect spot for it because of the institutions,” Birndorf said. “But I’m not sure it would have grown as fast.”