In 1978, Ivor Royston, then a young assistant professor studying immunology at University of California, San Diego, drove four investors to the airport. He had given them a tour of his lab, shown them how he made monoclonal antibodies, and told them he believed these new tools could be the future of disease diagnosis.
When the investors asked him how much it would cost for him and his technician, Howard Birndorf (now CEO of Nanogen) to start a small, independent laboratory and make antibodies for commercially interesting purposes such as hepatitis testing, Royston had no idea. He asked for $200,000.
"[One of the investors] said, 'I don't believe you can do that with $200,000, so I'm going to give you $300,000.' So we said fine," Royston recalls. "And that was more money than we'd ever seen before. It's the only time in my experience in venture capital that the venture capitalist gave more money than someone asked for." That was the start of Hybritech, one of the first biotech companies in San Diego.
Little did Royston, Birndorf, and their investors know at the time, but this interaction helped start something much bigger than a single company. In the late 1970s, there weren't many venture capitalists funding companies in San Diego, and Hybritech was "really the breeding ground" for future venture capitalists and entrepreneurs of the biotech industry, says Joe Panetta, CEO of Biocom, a Southern California life sciences association.
Hybritech was one of the first to use monoclonal antibody technology, Panetta says, which became the basis for product development in other companies. So when senior-level executives left Hybritech, they immediately started their own companies. Royston himself started IDEC Pharmaceuticals (now Biogen Idec), life sciences venture capital firm Forward Ventures, Targegen, Genstar Therapeutics, and others. Today, about 150 companies (one-fourth of those in San Diego) have roots that can be traced back to Hybritech. "There wouldn't be a biotech industry" without Royston and others who went on to become venture capitalists and invested locally, says Pancetta. Even now, "I'm still meeting people who have started companies that go back to Hybritech," Panetta says. "It's amazing."
As with any type of growth, the beginning was somewhat painful. At the time, Royston was only 32 and a new faculty member at UCSD. Inspired by Georges Kõhler and César Milstein's 1975 study that first described the isolation of monoclonal antibodies (which eventually earned them a Nobel Prize), Royston found that the antibodies could be quite specific for leukemia cells in vitro. Royston started wondering about commercial applications, but when he started talking about the idea with pharmaceutical companies, "most people didn't know much about monoclonal antibodies. It was brand new."
His academic colleagues had a difficult time relating as well. As Royston stayed with UCSD and did consulting with Hybritech, "things did get a little dicey, because most of my academic colleagues were not involved with companies, and they couldn't quite understand that I could start a company and be a professor at a university," he says. The National Institutes of Health sent investigators to his lab to respond to anonymous claims that he had misused funds. (He was cleared from wrongdoing following an investigation).
Hybritech was first to do many of the diagnostic tests in humans (especially in diagnosing prostate cancer) that later led to commercial diagnostic products. "We were young and aggressive and we didn't accept no for an answer. If we made a mistake, we learned from it and moved forward," says Dennis Carlo, who led the in vivo testing of monoclonal antibodies at Hybritech and later founded Adamis Pharmaceuticals in San Diego.
Obviously, other factors helped San Diego's biotech community flourish. Research institutions such as the Salk Institute, Scripps Research Institute, and UCSD were founded between 1955 and 1965. Since the early 1980s, the region has built up a network of resources - venture capitalists, headhunters, and patent attorneys - that helped biotech thrive.
Tom Adams, who was chief technical officer at Hybritech from 1980 to 1984 and later founded Leucadia Technologies (sold to Iris International), says if anything, Hybritech's main mistake was not focusing on the therapeutic uses of monoclonal antibodies. Royston founded IDEC Pharmaceuticals in 1985 for this purpose, and in the same year Hybritech was sold to Eli Lilly for about $500 million. The dynamic of Eli Lilly clashed with Hybritech's employees, many of whom left. So "everybody there learned how to go about the business of starting new biotech companies," Adams says.
Royston has "been excellent at translatig clinical science to industry," says Edward Dennis, a biochemistry professor at UCSD who has known Royston for more than 20 years. "He has been very creative, and it's affected many companies."