Book Review: From Alchemy to IPO
by Cynthia Robbins-Roth. Review by Chris Barbey with media by Katie Rogers
From Alchemy to IPO describes the beginnings of the biotechnology sector and its progression into the almost modern era, spanning biotech’s inception in the 1970’s through the late 1990’s. While conceptually biotechnology is at least as old as the invention of agriculture, molecular-level research, development and commercial deployment is thoroughly contemporary. Author Cynthia Robbins-Roth describes first the early convergent inventions which allowed for the development and the large-scale production of recombinant proteins to be sold for therapeutic use. Robbins-Roth devotes special attention to the financial aspects of the early history of the sector, as biotechnology presents unique commercial challenges and requires huge amounts of capital investment. Creativity and tenacity in financing a biotech startup is every bit as important as the science itself, as Robbins-Roth shows.
The beginnings of biotech can be found in first-generation biotech firms like Genentech, cofounded by venture capitalist Bob Swanson and recombinant DNA expert Herbert Boyer. The company was conceived after Herbert Boyer and Stan Cohen recognized that several distinct molecular biology techniques, including Cohen’s creative use of restriction enzymes to cut and paste DNA, represented a collective potential to express foreign genes in microbes. Genentech, Cetus, Amgen, Biogen and other first-generation companies raced to find human genes coding for proteins of commercial importance. The first such recombinant protein was human insulin, developed by Genentech and licensed to Eli Lily. Others soon followed, such as the human growth hormone Protropin and the plasminogen activator Activase. Robbins-Roth devotes chapters to various specific biotech companies who specialize in other aspects besides cloning and expressing proteins of known therapeutic use. These include companies specializing in genomics tools, gene therapy, combinatorial chemistry, agricultural genetics and others. Unlike early software firms, for example, these products were almost exclusively the result of multi-million dollar capital investments with development cycles of many years or decades.
Biotech research is costly and slow, and thus the acquisition of funding is often the deciding factor in a company’s success. Robbins-Roth describes the tiered phases of company funding: an initial seed by the founders and/or a private venture capital, additional rounds of venture capital or private funding by investment banks, and all finally culminating in the initial public offering (IPO) of company stock to the wider public. Typically, progress in developing a clear path to market is required for the translation into the next step of funding, however early biotech was challenging to accurately value by investors. Early biotech IPOs were large, and the magnitude of its success sometimes depended more on fortunate timing of investor attitudes than they did on scientific merit. Early biotech was fashionable to investors, however many were not prepared for the long development times required for therapeutics. Biotech’s early days were subject to wide changes of fashion and trends of perception by the financial sector. In addition to these challenges, regulatory hurdles such as FDA approval for therapeutics can kill a company just as it is on the cusp of initial product release and potential profitability. Much of the middle section of Robbins-Roth’s history details the initial products of several specific companies, their efforts for capitalization, their path to market. Biotech remains to this day a lengthy, high-risk and high-reward investment.
Biotech is a relatively young technology sector that is undergoing constant change, both in terms of its products and structure. The perspective of Robbins-Roth’s chronicle is limited to the late 1990’s, and its attitudes and opinions must be seen through this lens. Then-current CEOs, as well as Robbins-Roth herself, are critical of the overly-broad focus which characterized early biotech firms. But is this an appropriate criticism? The period of the 1990s saw an increase in market competition in this sector, forcing companies to specialize in order to stay competitive. Before this period, with fewer companies competing for the same market share, these companies could afford to dabble in the search for low-hanging fruit. To this point, early biotech firms had almost no context for discerning between easy or difficult projects, and success and failure often depended upon unpredictable elements.
Some aspects of Robbins-Roth’s account reveal period-limited attitudes and perspectives. For example, Part I concludes with a statement on the irrational exuberance of Wall Street traders for the potential for biotech to rapidly transform society (subheading titled “Product Woes”). Unironically, Part II begins with a chapter (“Biotech Star Wars”) describing how biotech will conquer the challenges of space exploration in almost every aspect. As has been the recurring theme, the ability of both scientists and investors to correctly predict biotechnology potential is important, but severely limited.
Other aspects of Robbins-Roth’s history seem prescient. For example, Chapter 20 (“Corporate Partnerships and the Urge to Merge”) describes the then nascent trend for biotech companies to merge into larger entities in order to cut costs, attain higher economies of scale, and gain additional expertise and market access. This trend has massively increased, leading to the significantly consolidated modern biotech sector. A quick follow-up on the various lists of then-current industry leaders shows that a majority no longer exist in their current forms, having either been put out of business or (more commonly) swallowed by another entity. For example, biotech companies offering specialized diagnostic products or assays to other researchers are very likely to be purchased by larger commercial companies, as logistical barriers to product delivery are difficult for small start-ups.
For the researcher, From Alchemy to IPO represents a primer on the private sector and the translation of basic biological science into product. Cynthia Robbins-Roth communicates that this translation is impossible without the financial sector to find and fund the worthiest ideas.
Chris Barbey is a PhD Candidate at the University of Florida, researching strawberry flavor and disease resistance via quantitative genetics and biochemistry. Previously, Chris helped develop a commercial GE potato as a molecular biologist at Simplot Plant Sciences. In his free time, Chris plays rhythm guitar and bass in his all plant-scientist band, Wild Type.