Friday, September 21, 2007
The "holy land" of biotech – the birthplace of the entire sector – is quite literally a city within a city.
Nestled on the banks of the San Francisco bay, the Genentech (DNA) campus covers several acres and boasts more than 50 buildings. Massive billboards with the faces of Genentech's success stories stare down passing cars...
Joel, Rituxan, Non-Hodgkin's lymphoma patient, volunteer firefighter, and school board member committed to his community.
Ina, Xolair, an interior designer excited about her newly opened gallery.
Last month, for the first time, analyst George Huang and I took a pilgrimage the world's first biotech company... Pulling into the parking lot of Building 42, we stepped out into a perfect early fall breeze, a vista of planes descending over the bay into the nearby SFO airport, and clear views of three freshly finished research centers.
Our tour guide, a research scientist in Genentech's genomics division and a friend from our grad school days, came strolling out of the building with a big smile on his face... "Not a bad view, huh?"
The walk around the hallowed grounds was impressive. He pointed out the gourmet cafeteria, an exercise path along the water, bus stops where free shuttles take employees in and out of the city, and the multibillion-dollar drug-manufacturing buildings where access is strictly limited.
The pristine high-rise that houses long-time CEO Art Levinson's office towered near the main gate. Dr. Levinson still attends company brainstorming sessions, where budding scientists present new ideas.
Our friend explained how 25% of his work schedule is dedicated to the pursuit of "side projects" with a generous budget and complete creative freedom. The company's top-selling cancer drug, Avastin, sprung from this corporate initiative. Today, the drug nets more than $2 billion in annual sales.
The company's scientists, who publish more academic papers than any other company in the drug industry, stick close to Genentech's scholastic beginning... In 1976, venture capitalist Bob Swanson sat down for a beer with Herbert Boyer, a UCSF biochemist, at a San Francisco pub... and the rest is history.
This founding myth is clearly an important part of the company. It's captured by a 600-pound bronze statue situated in the heart of campus. As you can see, the financier hunches over the table in the middle of his elevator pitch, while the conservative academic sits back, pensive, with a pint in one hand and his chin in the other.
On campus, the bronze beer glasses overflowed with pennies, nickels, dimes, and quarters. Apparently, company scientists drop spare change in the cups for good luck when passing by.
But while Genentech's scientists may pay lip service – and spare change – to the company's nimble, entrepreneurial roots, this prototypical biotech's uber-growth heyday has passed.
That's not to say that the sun has set on the company... it's just moved past its high-noon peak. Now, Genentech is closer to a Big Pharma company, once the antithesis to the biotech industry.
The evidence lies in the Genentech research and development efforts. For the first time, the company is actively racing Big Pharma to produce lifestyle drugs – compounds to treat ocular disease, cardiovascular disease, and immune problems – rather than the cancer drugs that made it famous.
So, I would recommend a visit to biotech's sacred city, but only for posterity's sake... After some on-the-ground due diligence, we think that Genentech may be headed for the same kinds of problems beleaguering its Big Pharma brethren. Investors beware.
Gold at $745 and still climbing... Meridian Gold, Lihir Gold, Rangold Resources, Rio Narcea, Agnico-Eagle, Kinross Gold, and three gold ETFs hit fresh highs
Everyone wants missiles... Raytheon at seven-year high.