Capitalists Dream of Genes

After the initial burst of public fascination that accompanies most new ventures into high technology, the recombinant DNA industry has slipped from the front pages faster than news from Iran. Instead of sparking continued debate on corporation-university relations, DNA companies have become just another group of high risk investments in a portfolio manager's inventory.

But this is not to say that there haven't been developments within the labs. Indeed, the next 18 months will be a critical period for many of the firms struggling for a place in a market that has yet to manufacture a saleable product.

Genetic engineering, an ensemble of techniques to join bits of DNA and insert them into bacteria to make large quantities of potentially valuable proteins, made a great splash last year when stock from Genentech Inc. went public and jumped $45 per share during its first day on the market. The slightest technological advance still sends prices leaping. Genentech jumped $7 in one day two weeks ago when workers announced a new process to make interferon, a supposed cancer-fighting protein. Genentech will now use yeast to produce the human protein rather than bacteria. It doesn't seem like a major change, but two advantages come with this adjustment. First, yeast are especially suited to high-volume production (they have been used to make beer for hundreds of years). Also, yeast don't produce a toxic substance as bacteria often do in side reactions. Nevertheless, only investors listening hard for good news can take an advance such as this so seriously.

This technological advance becomes more attractive to Genentech stockholders when you realize that the company began human clinical trials of interferon two months ago in conjunction with the pharmaceutical house Hoffman-Larouche. Eight advanced cancer patients in Houston are now being treated with interferon under the aegis of the National Cancer Institute.

Similar trials of recombinant DNA-produced human growth hormones received FDA approval and began in February at Stanford Medical School. This protein, with its potential for curing dwarfism and possibly fractured bones, will first be tested for safety in 20-day trials on adult volunteers and then in a one-year study of effectiveness that will follow.

But for all the attention given to interferon, insulin and human growth hormones, the company Cetus will probably market the first gene-splicing product when it comes out with an animal vaccine that will prevent the disease which breeders say kills 10 per cent of all pigs. Such vaccines, vitamins and antibiotics will be the first generation of genetic engineering products of a business less than two years old.

With all the dazzling dollars being invested in new commercial firms (E.F. Hutton just sunk $50 million of its investors' money into DNA Science Inc., a New York-based biotechnology firm), the nation's universities may have the most to gain from the explosion of interest. The first U.S. patent covering techniques of recombinant DNA was awarded to Stanford University in January. Stanford, which pursued that patent through the courts for six years, is now entitled to royalties from any commercial company that uses its techniques. Fortunately for them, the patented procedure covers methods that nearly all companies will use. With royalties between 0.5-5 per cent of sales, it means big money. "We think this might be Stanford's big hit." William Massey, university vice president for business and finance, said. The hundreds of millions it could bring in will help future research and replenish sagging budgets. The biggest problem Stanford faces includes enforcing its patent as companies will certainly try to circumvent the direct applications of the procedure.

All of these companies remain interesting investments although many will fold over the next few years. For the moment, big money is keeping them afloat, and Cambridge and Somerville will not receive potential income from taxes if they refuse to allow these industries to settle here. But besides the economic wheeling and dealing, who knows, maybe they'll make something useful?