Future of S.D. Biotech Looking Like a Billion : Science: As industry continues to prove its worth, investors and new companies line up to take part.

If you can bear with him, allow Inder Verma to first rattle off, in scientifically matter-of-fact terms, where the future of biotechnology rests:

* With gene therapy, in which the human DNA molecule is restructured to fix this or that disease.

* With biomodulators, to stimulate the growth of beneficial cells or the death of destructive ones.

* With so-called “information molecules,” to direct the healthy growth of otherwise diseased cells.

* With designer drugs crafted on computers, to attack highly specific diseases at the molecular level.

Now let Verma cut to the quick on how he really feels about biotechnology.

“Every day you open the newspaper, you’re reading about some new treatment. Every day there is something new,” said Verma, a professor of molecular biology and chairman of the faculty at the Salk Institute for Biological Studies.

“I must say, I’m in a great field,” he pronounces unabashedly.

Even if hometown boosterism is discounted, there seems little doubt that biotechnology in San Diego is rooted and is moving toward a promising future.

As local scientists identify, design and develop futuristic medicines and procedures to produce better diagnoses, they are forcing San Diego to accommodate a new industry.

Lawyers, accountants, public relations specialists and other professionals are adjusting to a new lexicon and business form as they begin to tap San Diego’s newest billion-dollar, high-spec and high-tech industry.

Developers, property managers and architects now talk about things such as waste disposal drums for experimental chemical compounds and the construction of vivariums--holding areas for lab animals.

UC San Diego is establishing a center for gene therapy to develop what may be the ultimate cure-all for human disease, and is developing new partnerships with other basic research institutions in San Diego as well as with private biotech firms to hasten the development of medicines from the basic research lab to the bedside.

Conscious of the ethical concerns of biotech’s promises--and abuses--the Salk Institute has established a Center on Bioethics to debate how and when to apply their own breakthroughs.

As biotech advances continue to prove their worth in laboratories and clinical trials, investors and outside companies are expected to pump an additional $3 billion to $5 billion into San Diego biotech companies during the rest of the 1990s.

And the commercial biotech industry in town is headed into a major transition, from research and development and its attendant high-end employment force, to a broader-based, vastly enlarged and more rank-and-file work force that will handle the manufacturing, sale and distribution of its product lines.

Indeed, some companies that specialize in diagnostic procedures have already sent their products--cancer and pregnancy detection kits, for example--to market. The grandfather of these companies, 800-employee Hybritech, has generated more than $100 million in sales alone.

A dozen or more other companies say they are within a few years of winning U.S. Food and Drug Administration approval for their proposed medicines. If successful, they can be expected to tap marketplaces even more lucrative than their diagnostic cousins, and will make the turn from cash-draining research and development to the cash cow of medical sales.

The maturation of San Diego’s biotech community signals more than just the potential of million-dollar payoffs for the companies and their speculative investors. It will also mean thousands of new jobs in a high-tech industry, from assembly line workers to salespeople.

Civic leaders are calling biotech San Diego’s new sunrise industry, a high-tech alternative to tuna fishing and shipbuilding.

“The industry has come of age,” said Tom Adams, founder and president of Genta, a private company working to develop “antisense technology,” a technique for halting disease at the genetic level that is being studied at only a handful of companies nationwide. “The technologies people were wondering about 10 years ago are now being applied.”

Ted Greene, who has helped start nine local biotech companies--including Hybritech--compares San Diego’s biotech industry to Silicon Valley’s legendary upstart computer industry.

“We’re where the computer industry was in the 1960s,” Greene said. “This (biotech industry) is what America will lead the world in for several decades.”

And San Diego is claiming its role:

* Cures for AIDS are being researched at the Salk Institute, Agouron Pharmaceuticals, Viagene, Immune Response and Lidak Pharmaceuticals, which has developed its own colonies of mice implanted with human immune systems to further its research.

* Cures for cancer are being sought at, among other places, the renowned La Jolla Cancer Research Foundation and IDEC Pharmaceuticals and the brand-new San Diego Regional Cancer Center, which was founded by Ivor Royston, a UCSD professor who began Hybritech.

* Cures for influenza and herpes, and maybe even the common cold are being studied in the labs of Genta Inc. and Isis Pharmaceuticals, where research is under way to rewrite chemically based genetic messages.

* Medicines to cure diabetes and obesity are being researched at Amylin; Cytel and Immune Response are studying ways to modulate the human immune system to bring an end to, among other things, arthritis.

* Corvas is working to stop unwanted blood clotting; Gensia is working to minimize the damage caused by heart attacks; Telios Pharmaceuticals is developing medicines to better treat skin wounds, and, across the street, Marrow-Tech is working to clone human skin for use in transplantations and toxicology testing, and Ligand is looking to cure osteoporosis.

“A lot of companies are in Phase 2 or Phase 3 (the testing of proposed drugs on humans, to determine toxicity and dosage levels) of their clinical trials,” said David Hale, president of two San Diego biotech firms, Gensia and a spinoff company, Viagene. “In the next couple of years, we’ll see some of these products hit the market. That will finally demonstrate the impact the industry is having.

“And one of the things that we’ll see in San Diego is the transition from research and development to manufacturing and selling,” he said. “When that happens, the number of employees in biotech will increase significantly. There are probably 5,000 people working in biotech in San Diego right now, and, by 1995, I bet there will be 10,000.”

Martin Nash of La Jolla, president of the Assn. of Biotechnology Companies and a biotech consultant, predicts not only growth in the biotech employment base in San Diego, but in the number of new companies as well.

From San Diego’s point of view, biotech money is new money.

Most of the venture capital used to finance the biotech start-ups, Nash noted, comes from New York or San Francisco. Most of the domestic corporate money invested in the local firms--in terms of corporate sponsorships, licensing agreements, marketing and distribution rights and the like--comes from New Jersey, home of most of the pharmaceutical giants in this country.

In addition, millions of dollars have been invested in San Diego by pharmaceutical companies in Europe and Japan as they sign their own pacts with local firms.

“Biotechnology as a San Diego industry certainly has had a favorable trade balance for the region,” Nash said. “It’s brought in outside money, created jobs, helped fill buildings and paid taxes. It’s a strong, net positive cash flow.”

The largest single cash influxes into San Diego have come from outright purchases of home-grown biotech firms by outsiders, led by Eli Lilly’s $490-million cash-and-stock purchase of Hybritech, and the $100-million purchase of Gen-Probe, a manufacturer of tests for sexually transmitted diseases, by Chugai Pharmaceuticals of Japan.

San Diego State University management professor Daryl Mitton estimates that an additional $482 million has been pumped into San Diego biotech firms over the years by outside companies, for research, marketing, licensing, manufacturing and equity rights of local firms.

Nearly $400 million has been invested in local biotech by private, start-up investors and longer-range venture capitalists, Mitton estimated.

All told, about $1.37 billion has been raised so far in getting San Diego’s biotech business rolling.

“The reason people are putting this kind of money into San Diego biotech is because they expect payoffs. They wouldn’t nurture biotech firms for six or seven or 10 years if they didn’t expect a harvest for their investors. They see this as a real growth industry,” Mitton said. “Everyone who examines these companies and who is in the know continues to pour more money into them.”

To that point, Bill Otterson, director of UCSD’s Connect program, which promotes high-tech entrepreneurship, estimates that another $3 billion to $5 billion will flow into San Diego biotech’s coffers by the year 2000.

While San Diego firms are enjoying relative success in tapping research money and investment capital to develop their compounds, cures and diagnostic devices, their executives complain of bottlenecks at the back door of their trade.

They grumble about the three-year waiting list for review of patent applications--and wonder how many competitive ideas are in the pipeline ahead of theirs. They also complain about the time it takes to win FDA approval of new drugs.

Still, the early success and growth of biotechnology in San Diego has continued to attract firms from outside the area as well as locally.

A major attraction for start-up biotech firms is the presence of such research icons as UCSD, the Salk Institute, the Scripps Clinic and Research Foundation and other renowned, albeit smaller and more specialized, institutions such as the La Jolla Cancer Research Foundation.

“The talent pool locally is much less of a concern for San Diego than it is elsewhere in the country, since UCSD is the life sciences headquarters for the UC system,” Nash said. “We have enough home-grown talent, and station wagons full of talent still come out here in June because they want to get jobs out here before winter sets in.”

With the changing demands and complexity of biotech, the old-timers are adjusting accordingly.

Dr. Gerard Burrow, dean of medicine at UCSD, sees the role of the university changing in coming years, to encourage even greater interaction between his campus and the rest of San Diego’s biotech community.

Already, UCSD is home to Connect, which has developed a successful record as a matchmaker between scientists and investors.

The university is also planning a graduate program whose enrollees will not only study in the School of Medicine but in the departments of biology and chemistry, as well as off-campus at Salk, Scripps and the La Jolla Cancer Research Foundation.

Burrow hopes there will also be some loosening of restrictions so that more of his faculty--now numbering about 500 members--can champion their own discoveries in the commercial arena without having to leave their campus posts.

Too many scientists feel they must outright leave campus in order to shepherd their ideas into and through commercial development, because of campus guidelines regarding conflict of interest, Burrow said. A better system than what now exists needs to be defined, he said.

For instance, UCSD molecular genetic scientists Theodore Friedmann and Fred Gage have founded their own biotech company, GeneSys, to exploit their findings on gene manipulation. Gage, a neuroscientist, and Friedmann worked in grafting genetically altered cells into the brains of rats as part of their research into Parkinson’s disease.

It’s that kind of research that raises eyebrows among critics who wonder whether science should be tinkering with life’s building blocks, also known as the DNA molecule. The issue is not lost on local scientists.

Skeptics raise the specter of political and discriminatory abuse that could arise from biotechnology’s advances--for instance, screening people to determine whether they have genetic traits that employers or insurance carriers might consider liabilities. They debate whether biotech advances may be more expensive to the public--and offer no greater remedies--than more traditional, and proven, medical cures.

To that end, the Salk Institute in December established its own bioethics center, where scientists, public policy-makers and others can debate the ethical issues of biological research.

But, for people such as Friedmann, research--even at the level of rewriting the body’s genetic instruction--is a necessity if medical scientists are to play out their role to logical conclusion, from the research lab to commercial development.

“I’m medically trained and have a moral obligation to deliver therapy,” Friedmann said. “But I can’t do that in a university setting. I don’t have a penny to take some of our findings and do the developmental work that turns a finding here into a drug or therapy. In our society, it can only be done with the infusion of massive amounts of money.”

Friedmann suggests that the pace of basic biotech research has outstripped the capacity of American business to develop it--and that bringing the development sectors of biotech up to speed may be one of biotech’s most pressing challenges.

“We are not yet coping with this flood of (basic research) information as well as we could, to bring it to fruition, for the welfare of people,” he said. “After all, we’ve only been in the midst of this biotech revolution for a decade or two.

“It takes a long time to build a structure to deliver it,” he said. “That’s the structure you see being built now--the biotech industry. It is responding to the needs and opportunities to deliver the discoveries of biology and biomedicine and genetics.”