LSF Magazine: Summer 2012
Trials and Travails of a Biotech Pioneer
In the late 1970s, bioentrepreneur Ivor Royston had one foot in the academy and another in business. Dual allegiances of this sort were unusual in the life sciences. Royston became a lightning rod for controversy. His story offers a window on institutional changes wrought by the commercialization of new biotechnologies.
When we left off Ivor Royston’s story in our last issue, he had just co-founded Hybritech, Inc., the world’s first monoclonal antibody company, in San Diego, in 1978. He didn’t yet know it, but he had embarked on an adventure not only in science and industry, but also in institutional politics.
Royston’s partners were Howard Birndorf, a lab technician at the University of California, San Diego (UCSD), and Brook Byers, junior partner in the San Francisco/Silicon Valley venture capital firm, Kleiner Perkins. Setting up the company was primarily Birndorf’s responsibility. He left his job at the university to secure lab space, hire staff, and manage the operation.
Byers commuted on a weekly basis from the Bay Area to guide the venture as the founding president. Royston served as an unpaid scientific consultant, spending one day per week on company business, while holding a seat on the board of directors.
Royston wasn’t hankering to establish a career in business. “I just wanted to manufacture antibodies,” he says. “I was excited because the technology was brand new, and perhaps a way to treat cancer.” He considered the business a sideline: “I was an assistant professor of medicine. I wanted to be tenured someday.”
Byers spent the last quarter of 1978 conducting due diligence on the technology and market opportunities. His investigations led to an important strategic shift. He saw that the market for research antibodies would remain limited, but he identified a market with far greater promise – in vitro diagnostics tests sold to clinical laboratories. Byers learned from experts in the field that monoclonal antibodies could significantly improve the accuracy, speed, and reliability of these products.
Royston credits Byers with recognizing that “the real power of the antibodies was to use them as ingredients in diagnostic kits.” Birndorf concurs: “We weren’t thinking as big as Brook and Kleiner Perkins. They were thinking in terms of a $100 million worldwide market.” Hybritech was redefined as a diagnostics company.
Developing an antibody against hepatitis became the first project, because it would enable a move into blood screening. Largely due to Birndorf’s efforts, the company achieved the milestone in four months. “Kleiner Perkins was very pleased,” Royston recalls. “They pumped in more money – millions.”
Over the next several years, Hybritech’s founding team recruited scientific talent from San Diego’s world-class academic research institutions, including UCSD, the Salk Institute for Biological Studies, and the Scripps Research Institution. They brought in experienced managers from the pharmaceutical and medical diagnostics industries to scale up production and oversee organizational expansion.
The company put diagnostic products on the market and commenced research programs on cancer therapeutics. After an initial public offering of stock in 1981, Hybritech began to grow explosively. By 1984, the company employed hundreds of people, and that year turned a profit – making it a rarity among biotechnology firms. Only Genentech had managed to report profits on a consistent basis.
The institutional provocateur
Through it all, Royston carried on with his work at UCSD. When he first started moonlighting at Hybritech, there was some confusion at the university about how to regard his commercial ties and activities. At the time, owning and operating a business was virtually unheard of among life science, clinical research, and medical teaching faculties at elite research universities. Many of Royston’s colleagues weren’t sure that it was allowed; some were convinced that it shouldn’t be.
Several voiced concerns about conflicts of commitment. How, they asked, could a scientist fully discharge academic obligations (which included, in Royston’s case, research, teaching, clinical care, and administrative service) while running a business on the side? “There was a backlash,” Ivor recalls. “Some people were disgruntled. They asked, ‘How can you possibly do both?’” The university faculty huddled to determine a course of action: “They learned,” says Royston, “that I hadn’t done anything wrong, so there was nothing they could do. I had disclosed it all to the administration.”
The close links between Royston’s lab and Hybritech’s R&D operations also generated suspicion among the UCSD faculty. From 1980 to 1985, Royston received more than $1 million in grants from Hybritech to test the company’s monoclonal antibodies in the clinic. The arrangement raised conflict of interest questions. Some at the university were afraid that the lure of profits would erode the integrity of the scientific process by encouraging secrecy, fraud, and the exploitation of graduate students.
The UCSD administration didn’t share the concerns of ivory tower purists on the faculty. Under the leadership of Chancellor Richard C. Atkinson, the university had begun actively to encourage faculty involvement in industrial projects. Dr. Robert Petersdorf, Dean of the School of Medicine defended the policy and expressed confidence in the adequacy of oversight: “There have been people with industrial ties and they have been carefully examined. If we had a messy situation, we’d know about it.”
When asked by a journalist to comment, Royston defended his contract research as a legitimate means of advancing the school’s institutional mission: “The research we are doing has been judged by the university to be a contribution to society, even if there is a benefit to Hybritech and me.” Eventually, Royston became inured to criticism: “It comes with the territory,” he said at the time. “Most people don’t believe you can serve two masters.”
After his involvement with Hybritech had been reviewed and approved by university committees, Royston assumed that his academic career would proceed without lasting injury. He carefully followed the university’s rules governing faculty participation in industry. He scrupulously disclosed required information concerning compensation, equity holdings, and research support, in order to avoid any appearance of impropriety. Eventually, though, he realized that his assumption was mistaken.
Several years later, John Mendelsohn, the original director of the UCSD Cancer Center, resigned, creating a vacancy. Royston says he would have entertained the idea of serving as Mendelsohn’s replacement, but he was never considered as a candidate for the job. The idea of directing a research organization designated by the National Cancer Institute as one of a select group of Comprehensive Cancer Centers held some appeal for him, but his perceived waywardness had exacted a cost. “I found,” Royston says, “that I was not taken seriously at the time because they felt uncomfortable about somebody who was so entrepreneurial, and so involved with business. I paid the price.”
The hybridoma maker
By 1981, the commercialization of the life sciences was no longer the exclusive province of entrepreneurial professors. It was being orchestrated by university provosts, chancellors, and trustees. The U.S. Congress had passed the Bayh-Dole Act, giving academic institutions incentives to move deeper into the intellectual property business. Elite research universities began to promote faculty patenting and technology licensing, and to identify themselves as engines of economic growth.
In this environment, it became routine for faculty members to disclose inventions, but there remained uncertainties regarding the status of biological materials as commodities. Life scientists were inventing objects and processes that created legal puzzles. The University of California had to deal with a problem of this sort when Royston and three colleagues invented a process for creating hybridomas of human origin. Hybridomas are fused cells that manufacture monoclonal antibodies. At the time, most available hybridomas came from mice or rats.
Royston had been pursuing this line of work because, all else being equal, human antibodies would be preferred in the treatment of cancer to those derived from rodents. Unlike murine antibodies, human immunoglobulins don’t produce allergic ‘HAMA’ reactions (the generation of human anti-mouse antibodies) when injected into patients. Therapeutic uses of murine antibodies were limited. The creation of human antibodies was potentially an important step forward.
When Royston began trying to fuse human cells, no dependable method had been described in the scientific literature. Human cells are notoriously uncooperative in the laboratory; they are difficult to maintain in culture, and they usually perform poorly in hybridization procedures. Royston’s group, however, had discovered a lymphoblastoid B cell line (‘immortalized’ by infection with the Epstein-Barr virus) that worked consistently. They called it UC-729-6.
Cells from the line grew rapidly and fused well with both normal and malignant human B lymphocytes (antibody-producing cells). Because they were immortal, they could be maintained indefinitely in culture and used to manufacture antibodies. In 1983, an independent review of ‘immortalized’ human cell lines published in the Journal of Immunology ranked UC 729-6 as the best available.
When Royston fused UC 729-6 with antibody-secreting B lymphocytes harvested from cancer patients, he found that monoclonal antibodies secreted by the resulting human hybridomas reacted with cancer cells – some were specific to particular cancers, others reacted across a range of different tumor types. Cancer patients generally do not raise immune responses against malignancies, but their B-cells are primed nonetheless to produce anticancer antibodies.
Royston hoped that experimentation with these antibodies would show him how malignancies evade detection and attack by the immune system, and, perhaps, how new immunotherapies might be developed. When the cell fusion process had been made reliable, he informed the university administration. A patent was filed.
The reluctant claimant
A dispute about the ownership of human hybridomas and their antibody products arose during the course of this research in 1982, when Ideaki Hagiwara, a post-doc from Japan working in the UCSD biology department, approached Royston about the possibility of learning how to make human monoclonal antibodies in his laboratory. Hagiwara’s mother in Japan was suffering from metastatic cervical cancer. Hagiwara proposed that he travel home to Japan in order to obtain tumor and lymph specimens from his mother for use as research materials.
Royston agreed to take in the tissues. Since the work was to be conducted in-house, in Royston’s laboratory, no written agreements were drawn up. Hagiwara returned to UCSD with the samples. B cells from the lymph were fused with UC 729-6. Two of the resulting hybridoma cultures produced functional monoclonal antibodies and were selected for further study. One of them especially interested Royston because it produced antibodies that reacted with several human malignancies – the antibodies fastened to antigens found on lung, prostate, and blood cancer cells in addition to the cervical cancer of Hagiwara’s mother.
Hagiwara deemed both hybridoma cultures worthy of interest, for his motivations were personal and not merely academic or professional. Without the consent of either Royston or the University of California, Hagiwara took the cells back to Japan in order to treat his mother. He hoped that the administration of monoclonals would stimulate a cell-mediated immune response against the tumors. Royston believes it was a medical landmark, the first in vivo use of a monoclonal serotherapy.
The results were never publicly released. Mrs. Hagiwara later died, reportedly due to causes unrelated to her cancer. The case was complicated by the fact that Hagiwara’s father was a bioscientist and the director of the Hagiwara Institute of Health in Japan. When the university learned of the situation, it asserted its ownership rights to UC 729-6 and any goods derived from it.
An agreement was reached that permitted the Hagiwaras to use the cells and antibodies for medical and scientific purposes on the condition that they would not commercialize the materials. Later, however, the Hagiwaras amended their position. They claimed co-ownership of the hybridomas because the immortalized hybrid cells propagated Mrs. Hagiwara’s genes and gene products.
According to Royston, “Neither side was anxious to spend a great deal of time and money in litigation over a cell line of questionable significance.” The case was settled when the university granted the Hagiwaras an exclusive license for use of the technology in Asia, and the Hagiwaras agreed to pay royalties to the university on the sales of any products.
University counsel Allen B. Wagner acknowledged that there was no obvious answer to the question of ownership (which remained unresolved in principle): “The law in the case of Royston and Hagiwara is not as clear as one would hope. It seems as though rapid movement in biomedical science has outstripped the law’s ability to keep up.”
Royston adopted a pragmatic approach to the policy dilemma. He advised that existing rules for protecting human subjects and determining the status of ‘discarded tissues’ provided sufficient guidance in most cases. He also recommended that researchers be excused from time-consuming meetings with attorneys and university officials when existing rules did not suffice: “If the patient does not wish to waive his rights I would have to ask the University to negotiate an agreement with him so that my time will not be taken up in subsequent litigation.”
In the early 1980s, academic life scientists had begun to accept patenting as something that was done at universities as a matter of course when research generated marketable products. The further question of how to transform human tissues into intellectual properties was unresolved. Conflict and controversy were part and parcel of biomedical research in the early 1980s.
The subject of investigation
Hybritech was acquired by Eli Lilly & Company in March of 1986 for an estimated $480 million. At the time, it was the highest price ever paid for a company in San Diego County. Royston had originally started the company to develop antibodies for use in cancer research at UCSD. By 1986, his investigations were focused on lymphoma. Following the acquisition by Lilly, it became clear that Hybritech wouldn’t be working on the disease. “Lilly said no to lymphoma,” says Royston, “so I started another antibody company.”
With Birndorf and Byers once more, and with Stanford cancer researchers Ron Levy and Richard Miller, Royston founded Idec Pharmaceuticals. As with Hybritech, Ivor served as a consultant, but was never a full-time employee. “I was an academic scientist, publishing papers, trying to discover new things, and particularly trying to develop new treatments for cancer using antibodies. My goal was to cure cancer.”
Nevertheless, Royston ran into more trouble on the job. The problem had to do again with his multiple roles as a faculty member at the university and consultant, director, and shareholder at Idec. Royston’s research projects at UCSD included federally-funded clinical trials of antibody therapies developed by Idec. He was compensated by the company for consulting services, received free technological assistance, and held a 5% ownership share in Idec and a seat on the company’s board of directors.
In September of 1987, Royston’s association with the company came to the attention of the National Cancer Institute (NCI), the agency funding the UCSD trial. A team of three auditors from the NIH Division of Management Survey and Review traveled to San Diego from Maryland with questions about how Royston’s company business was to be distinguished from his university research.
The inquiries were triggered by an anonymous letter to the NCI that accused Royston of improprieties – misuses of federal funds. To this day, Royston doesn’t know who sent the letter, but he says: “It was somebody within the system, somebody at the university. I got the letter under the Freedom of Information Act. I know it wasn’t an oncologist, because the name of the NCI director was misspelled. But it was somebody in the university system that really had a problem.”
Royston’s was one of five federal grants at UCSD that simultaneously became subjects of the NIH investigation. His was the largest, by far. Royston was set to receive $870,495 from the NCI to conduct research on anti-cancer monoclonal antibodies. Royston denied any wrongdoing, as did the other scientists. He told the San Diego Union: “I am not worried. Any allegations are false. I try hard to operate in a conflict-free, above-board manner.”
With the NIH investigation underway, the university also decided to look into arrangements between Royston’s lab, the Cancer Center, the School of Medicine, and the Idec Pharmaceuticals. The UCSD Office of Business Affairs determined that Idec’s product liability insurance was inadequate and that intellectual property matters in the collaborative project were poorly defined. Renegotiations ensued. Eventually, the legal questions about the UCSD/Idec relationship were settled to the satisfaction of the university.
No one in the administration made any criticism of the manner in which Royston had managed his research or his laboratory. The NIH auditors reviewed all of the pertinent records, conducted a series of interviews, and then left town. In December, the agency released a report on the findings of its investigation, and an NIH spokesman issued a summary statement: “Nothing has been found by the inquiry to support the allegations of improper actions on the part of any investigators.”
When asked for a response, Royston said, “You know, it was always above board. It was investigated and I was exonerated.” To critics voicing concerns about university faculty members starting companies, Royston said: “If you get lymphoma, you’ll be glad I started Idec.”
The foundation director
As the 1980s drew to a close, Royston became increasingly disenchanted with routines at the Cancer Center and the School of Medicine. He felt that the university was moving too slowly toward a ’translational’ model of research. His experiences with Hybritech and Idec had exposed him to alternative modes of organizing scientific work: “I realized that the convergence of business and medicine was a way to accelerate discovery and accelerate the flow of ideas from the lab to the clinic and into the marketplace in order to benefit patients.”
Royston thought UCSD could do better. He envisioned a comprehensive cancer center that would integrate biomedical research, clinical testing, and clinical care synergistically. He wanted to advance understandings of cancer, treat patients with cutting-edge therapies, and speed the development of the next generation of cancer-fighting tools. But he didn’t want to wait twenty years to see it happen.
When a friend, local oncologist Tom Shiftan, called to talk about starting an independent cancer clinic and research institute, Royston was prepared to consider it. Shiftan introduced him to Alan Goodman, a San Diego heart surgeon who had lost a son to leukemia. Goodman felt that the available cancer care in San Diego was inadequate, and that the city should have a world-class clinic. The trio met at Busalacchi’s Ristorante in the Hillcrest section of the city, and agreed to proceed.
Royston left the university in 1990, and with his partners, established the not-for-profit San Diego Regional Cancer Center (SDRCC) – even as the director of the heavily-research focused UCSD Cancer Center described the project as “unnecessary.” Initial funding for the startup was drawn from personal lines of credit taken out by each of the three founders. Royston transferred his NIH grants from university, enjoyed success in fundraising and recruiting top investigators, and began work on gene therapies and immunotherapies for cancer. The SDRCC grew rapidly.
Royston had escaped the university bureaucracy, but he hadn’t managed to give the slip to controversy. In 1992, SDRCC researchers were working on a novel gene therapy approach. They were retrieving mouse colon cancer cells, transducing interleukin-2 (IL-2) genes, and returning the cells to the mouse. Interleukin-2 is a cytokine, an immune system signaling molecule. The objective was to stimulate an immune response to the tumor. The experimental therapy yielded promising results and generated some buzz in the local news media.
The compassionate experimentalist
Royston received a call from a San Diego man named James Hewitt whose wife was suffering from glioblastoma, a brain tumor. He wanted to know whether the SDRCC’s experimental gene therapy could be used to treat his wife. Royston said no. He explained that his team had no data on glioblastoma, and no data on human beings. Hewitt was insistent. He said that his wife had been through doses of radiation, three rounds of chemotherapy, an experimental monoclonal antibody therapy at Duke University, and two brain surgeries. She was scheduled for a third surgery to reduce the bulk of the brain tumor.
Hewitt asked if Royston would accept cells from the tumor and transduce them with the IL-2 gene. Royston agreed: “I said, ‘OK, send the cells.’ I was just trying be nice.” He went ahead with the transduction, and soon had cells from the patient’s glioblastoma pumping out copious amounts of IL-2 in his laboratory. Hewitt called the SDRCC every week to inquire about progress. “I couldn’t lie,” Ivor says. “I told him, ‘The cells are producing IL-2.’”
Hewitt pressed Ivor to treat his wife. Royston said that he had no idea whether it work, and that it probably wouldn’t work. He explained that any use of an experimental gene therapy would have to run through a gauntlet of federal approvals beginning with the Recombinant DNA Advisory Committee (RAC), moving to the National Institutes of Health (NIH), and ending with the U.S. Food and Drug Administration (FDA). The request was for a single patient, there was no supporting data to present, and not a single gene therapy had been approved for use in human beings. Given the early stage of the research, Royston judged the chances of approval to be nil.
To Royston’s astonishment, Hewitt called back the next day to say he had arranged an appointment with FDA officials. Ivor soon learned that Hewitt was a former Washington, D.C. attorney who had been appointed to various positions in government service, including Vice-Chair of the Security and Exchange Commission, by four different administrations: “This was clearly a man with connections.” Royston went to Washington to visit the FDA. The agency requested a single patient IND [investigational new drug] protocol, and suggested that it was likely to be approved.
As a result of Hewitt’s intervention, Royston began moving through the approval process in reverse order. He requested an audience with Bernadine Healy, Director of the NIH, to ask for an approval for the treatment, and, in addition, a promise not to pull Royston’s NIH grants for becoming embroiled in this highly irregular business, and using viral vectors to transduce tumor cells without first submitting a protocol to the RAC, and receiving authorization from the NIH. Healy did not grant either of Royston’s wishes, but said that she would convene a special meeting of the RAC to consider the protocol and the administrative complications. Royston had a lot riding on the meeting.
The hearing was held in a large conference room in Building 31 on the NIH campus in Bethesda, Maryland. The top leaders of the nation’s biomedical establishment were on hand. Healy attended. High-ranking FDA officials were there. Samuel Broder, Director of the National Cancer Institute (NCI) was present. The head of every NIC division had a seat.
The press had gotten wind of the unusual event, and bright television lights illuminated the scene. The members of the RAC filed in – leading scientific experts who had been called in from all around the country to decide on a trial for a single patient without relevant data to examine. “They were frowning,” Royston says. “They looked really upset.” He remembers some hostility in opening remarks. “I thought to myself, ‘What have I done?’”
The meeting went on for hours. By the end of day, Royston felt that the plea for compassion had made an impression. Healy called a week later to inform him that the protocol was approved. The treatment appeared to have some effect, but did not ultimately save Mrs. Hewitt. Publicity from the RAC hearing drew the attention of a Philadelphia businessman, Richard Butera, who called Royston about treating his daughter. The girl was dying from a rare form of sarcoma. Butera was impressed with Royston’s efforts. He said, “You stood up to the government. You fought for the patient. I want you to meet a friend of mine. His name is Sidney Kimmel.” In 1996, the SDRCC was renamed the Sidney Kimmel Cancer Center after a large gift from the clothing magnate.
The venture capitalist
While putting the cancer center together, Ivor began dabbling in venture capital “as a hobby.” “I decided that I enjoyed the whole start-up process,” he says. Royston had long been fielding calls from prospective bioentrepreneurs, dispensing advice, and making contacts. The idea came to him to do more: “I got calls every month from scientists at UCSD or Salk or Scripps saying, “I have this great idea, who should I talk to?” I’d say, ‘Call Brook Byers at Kleiner Perkins.’ Eventually, I realized I was missing out on interesting opportunities.”
In 1993, Royston officially started Forward Ventures, a small firm with one other partner that specialized in seeding biomedical start-ups. Royston’s role was technology assessments. The firm has raised five funds, and can boast some major success stories. As one of his favorites, Royston identifies TargeGen, a San Diego-based maker of small molecule drugs for blood cancers that was purchased in 2010 by Sanofi. Contingencies could eventually lift the sale price to $560 million.
Royston left the Sidney Kimmel Cancer Center in 2000, retired from science, and entered the venture capital business on a full-time basis: “What I do now,” he said in 2003, “is to use my experience from a quarter century of being involved with the biotech industry to help other scientists develop their ideas and transfer technology out of institutes and universities into companies.” Forward Ventures became the largest dedicated life sciences fund in San Diego County.
Trials, travails, and lasting achievements
The invention of recombinant DNA and hybridoma technologies and the formation of the biotech industry in the late 1970s and the early 1980s precipitated rippling waves of change in the sciences, higher education, and several important industries – pharmaceuticals, medical diagnostics, and agriculture, for example. Technological innovations created the need for painful institutional adjustments. Ivor Royston was one of the catalysts.
As a pioneer in the field, and a visible symbol of change at the University of California, San Diego, Royston bore the brunt of conservative reactions against the commercialization of academic research. It was difficult – he was a success in science, medicine, and business, yet had to endure the opprobrium of his peers. “I can laugh about it now,” he says, “but at the time I was horrified. I think it was more envy than anything else.”
Ivor Royston’s career traversed an unstable institutional landscape. Before molecular scale biotechnologies appeared on the scene, life scientists at elite research institutions held industry in contempt. ‘Industrial biology’ was understood as prosaic engineering, and some idealists in the ranks considered the worlds of science and business wholly discrete and antithetical.
In a relatively short period – less than thirty years – both notions were turned on their heads. As Royston observes, “Everything has changed. People now understand the importance of the industry.” What was once condemned is now commended.
It is difficult to overstate the importance of Hybritech and Idec in the history of San Diego biotechnology. Hybritech was the first biotech company in the city, and it became a great success. Following the acquisition by Eli Lilly & Co. in 1986, a cadre of serial entrepreneurs exited the upper reaches of the firm. Suddenly wealthy, they were ready to explore fresh opportunities. Most remained in San Diego and started new biomedical enterprises.
Today, the city features the third largest concentration of biotechnology companies in the world, and an impressive number of them – over 170 according to a recent tally – can trace ties back to Hybritech. Royston derives satisfaction from the fact: “When I started Hybritech, there was nothing here. San Diego is now one of the top regions for biotech. I’m pleased to have played a role in that. It’s exciting to look back and see that we were part of that whole movement.”
Royston’s companies also impacted the practice of medicine. Hybritech revolutionized prostate cancer care when it introduced the prostate specific antigen (PSA) diagnostic test that enabled early detection. Idec went on to produce a blockbuster lymphoma drug. Rituxan®, developed in collaboration with Genentech, was approved by the FDA for the treatment of non-Hodgkin’s lymphoma in 1997. It was the first anticancer monoclonal antibody therapy to reach the medical marketplace. The drug has saved thousands of lives.
Royston wasn’t directly involved in the research that led to the development of either product, but he takes great pride in his companies’ accomplishments: “In 1978, I said to Brook Byers, ‘You know, I think we can use monoclonal antibodies to treat cancer.’ That has now come to fruition.”
Royston is still in the innovation business, but times are currently tough for the biotech industry, and for venture capitalists who would like to invest in it. Pools of capital that once existed for discovery-stage startups have dried up. Royston isn’t gloomy, but cognizant of the challenges. It’s not clear how innovation will be sustained through the drought.
“I wonder if a Hybritech or an Idec would get funded in this environment. I’d like to hope so,” he says. “I want to be in early-stage discovery opportunities. We need to be more creative about funding them.” The trials and travails go on.