The history of modern biotechnology began around four decades ago, with the invention of genetic engineering. In this piece, we explore the story of how Genentech, one of the fundamental companies of this field, helped to set many trends for modern biotech companies today.
Biotechnology, the exploitation of living organisms and their products, doesn’t necessarily involve labs — in fact, humans have been using forms of biotechnology for millennia, for example, in alcohol breweries.
However, the type of biotech that we are referring to is modern biotechnology, involving genetic engineering and cell manipulation beyond what you could expect via breeding or fermentation. This is also distinct from pharmaceutical companies, which have been around for over a century, and generally use synthetic chemistry to make drugs, not living organisms.
Biotechnology gets modern
Modern biotechnology has been with us for roughly four decades. It was kickstarted in 1973, when scientists first genetically engineered colonies of Escherichia coli bacteria, making them express a foreign gene that let them resist an antibiotic.
To achieve this, the researchers used a process called recombination. They used proteins called restriction enzymes to cut bacterial DNA. The enzymes left uneven cuts on the molecule ends called ‘sticky ends’ where foreign DNA could be inserted. The bacteria could then start expressing the new DNA as if it were its own.
This new technology had the potential to revolutionize the way that we produce biological molecules. Instead of inefficient traditional methods such as deriving them from animals, you could cheaply mass produce your desired drug in fermentation vats of microbes.
However, the technology was still in the lab at this point. To get the revolution going, it needed to reach the market.
In January 1976, one of the authors of the paper, Herbert Boyer, received a phone call. It was from a young venture capitalist called Robert Swanson, then partner at the firm Kleiner & Perkins. Swanson was enthusiastic about the commercial potential of the recombinant bacteria, and persuaded the reluctant Boyer to meet up for a few minutes.
In the end, the meeting lasted for hours, and Swanson convinced Boyer to help found a new company that could make the technology pay. By the time it was over, the two had made an initial agreement to make an investment of $500 each (the equivalent of $1,729 or €1,518 today). Boyer also came up with a name for the company: Genentech, derived from the words Genetic Engineering Technology.
Genentech: the first publicly-owned biotech
Genentech was founded on April 7th 1976 with no assets, rented equipment, or even a secretary. Despite these humble beginnings, however, the company was able to use recombinant E. coli to produce the first human protein, somatostatin, as a proof-of-concept in 1977.
In 1979, the company managed to produce the human version of the hormone insulin with this technique, which was a huge breakthrough after decades of Eli Lilly harvesting the drug from cow and pig pancreases.
Hopes were riding high after these discoveries. In 1980, Genentech became the first biotech company to go public, raising $35M on its IPO ($114M or €100M today). After many years of getting drugs to the market, it was acquired by the Swiss giant Roche in 2009 for $46.3B (€40.5B).
Today, Genentech is a big company with over 15,000 employees. With several blockbuster drugs under its belt, it has 48 treatments bubbling away in the pipeline, and routinely collaborates with other players in academia and industry, such as with the companies Immunocore and Affimed.
Setting trends in biotechnology
Genentech’s story is only one case study in the sea of biotechs that sprang up in the early days. However, Genentech set many precedents for the biotech industry in the USA, Europe, and across the globe.
With their tiny initial investments, the co-founders of Genentech set the trend for obtaining the funding they needed to get started from venture capitalists. Like industries such as software, biotechnology is a field in which the costs and risks are high, making venture capital a common means for starting up a company.
Genentech was also one of the leaders in the shifting legal landscape of biotechnology, which was often based on patenting molecules found in nature. Particularly notable was Genentech’s UK fight to patent the recombinant version of a naturally-occurring protein, which it lost in 1987. In this complex field, the lines of where to draw patent limits can be hard to define even now.
Furthermore, Genentech’s eventual acquisition by the Swiss company Roche is a major success story. This has become much more commonplace today. Many small biotechs get enough capital funding to establish a proof-of-concept, and aim to partner with, or get acquired by, bigger companies to help push their projects to the finish.
Though modern biotechnology began in the US, it quickly gained traction in Europe. We have a thriving ecosystem of biotechs, many of which have made a big impact on the history of biotechnology. One example, Switzerland’s Actelion, focusing on treating orphan diseases, was acquired by Johnson & Johnson for €28B in 2017.
New biotechs are also joining the billion-euro club each year, including recent additions from Germany: MorphoSys, who focuses on antibody treatments, and the drug discovery company Evotec.
What’s next for the biotech field?
Since 1973, the advances in biotechnology have been impressive. In addition to recombinant technology, fields that have taken off in a big way include gene editing using CRISPR-Cas9, studies on the human microbiome, gene therapy, immunotherapy, cancer CAR-T cell therapy, and many more.
The science is advancing at such a rapid pace that it is hard to predict which technologies will revolutionize biotechnology in the next 40 years, and which companies are going to arrive on the scene. It’s likely, however, that those that do thrive will be inspired to do so by pioneers such as Genentech.
A Product Manager with expertise in pharma marketing and sales operations