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Cape of Cetus Corp. on the NIH Budget and Competitiveness

While working in his family's pharmaceutical business in Montreal in the mid-1960s, Ronald E. Cape was among those who saw commercial possibilities in the unfolding mystery of DNA. Cape, who had a B.A. in chemistry from Princeton University and an M.B.A. from Harvard University, decided to study biochemistry. After receiving a Ph.D. from McGill University, he did postdoctoral work in genetics at the University of California at Berkeley. In 1971 he co-founded Cetus Corporation and became its chai

March 9, 1987

While working in his family's pharmaceutical business in Montreal in the mid-1960s, Ronald E. Cape was among those who saw commercial possibilities in the unfolding mystery of DNA. Cape, who had a B.A. in chemistry from Princeton University and an M.B.A. from Harvard University, decided to study biochemistry. After receiving a Ph.D. from McGill University, he did postdoctoral work in genetics at the University of California at Berkeley.

In 1971 he co-founded Cetus Corporation and became its chairman, president and chief executive officer. The Emeryville, Calif., company was taken public in 1981 and has grown into one of the world's leading biotech firms, with 1986 revenues of $50 million. The therapeutic products it has been developing to combat cancer and infectious diseases include interleukin-2, beta interferon and tumor necrosis factor. In partnerships with other corporations, Cetus also is exploring bioengineering opportunities in food, agriculture, animal health care, instrumentation and diagnostics.

Cape, who relinquished his title of chief executive in 1983 is a past president of the Industrial Biotechnology Association. He was interviewed February 9 at The Scientist's Washington office by editor Tabitha M. Powledge. This is an edited version of their talk.


Q: You've been called the statesman of the biotech industry; what do you think that means?
CAPE: Well, that's one of those questions which is very difficult to answer with a straight face. For the last several years, I have been trying, without much success, to draw attention to some societal issues. I'm fortunate that my company has passed into the control of a new management team, which gives me the time to pursue this interest. There are a large number of issues—for example, the NIH budget and competition with the Japanese—that need attention. I've been talking and writing a lot about them. Maybe that's what the remark meant.

ROLE OF ACADEMIC RESEARCH

Q: Speaking of the NIH budget, you have been a strong supporter of academic research. Isn't that unusual for the head of a commercial organization?
CAPE: Biotech has grown in a unique way. It is built on the monumental investment of the American taxpayer over the last 40 to 45 years, an investment that has paid off handsomely. All the information deriving from it is public and has been extensively mined by the commercial sector. And this basic research is not tapering off. The new discoveries continue to be explosive. Under those circumstances, it seems only common sense that to see us level our expenditures for basic research is very upsetting to people who know anything about it.

Q: You're making quite a pragmatic argument for supporting academic research. Why do you think that people associated with other companies very often don't seem to be able to see that their self-interest, too, lies in that direction?
CAPE: I don't think anybody's going to disagree with the basic proposition that the underpinning of our industry was the explosion of exciting stuff that resulted in lots of Nobel prizes. But I think they'd say, "Yeah, I guess you're right, but I've got other things on my mind right now."

I'm being, as you say, pragmatic, but it's important that the people who make the financial decisions know this, because there's always the tendency to believe that the people who are proposing bigger and bigger increases in research are simply self-serving and aren't speaking for the public good. A recent newspaper editorial I read implied that the people who are pushing increased funding for AIDS now are simply opportunists who see a chance to get a little more equipment on the basis of a public scare. That seems to me an appalling assertion.

The point has to be made over and over again in pragmatic terms—because that's what congressmen can understand, and that's what the man on the street can understand—that it's an investment that's paid off handsomely. That has to be brought home. AIDS is the most dramatic recent example. It's important to point out to congressmen and to the people that if it weren't for the Nobel prize work done by David Baltimore and Howard Temin in the '60s, which was pure research unrelated to any conceivable practical outcome to them at that time, we'd be really up the creek today. As devastating as the epidemic is, the fact still is that the amount of progress and understanding of these viruses is unbelievable. That is a payoff that the people have staring them in the face.

ECONOMIC COMPETITION

Q: You've mentioned your interest in economic competition, particularly with Japan. Now that competitiveness is a fashionable buzzword and people on the Hill are talking more and more about it, do you see hope for that situation being dealt with legislatively?
CAPE: I don't know. I may come across as a, cynic about the Washington scene, but I do know, for example, that there have been at least two presidential commissions, one on competitiveness and one on innovation. They both came in with highly respected conclusions, and I believe that not one single move has been made to implement any of their recommendations. If I'm wrong, I'd be happy to know that I'm wrong. You wonder why people sit on commissions like this.

Any talk of protectionism is insane with respect to biotech, for a number of reasons. One is that, with biotech right now, everybody's thinking pharmaceutical applications. Unlike the chip industry, even if somebody in another country were to discover some wonderful new compound, it will mean several years of dealing with regulatory authorities there and here before they can get a product on the market. So there's a lot of non-tariff barriers built in already.

Also, unlike the case in other industries like cars, semiconductors and computers, neither country has really penetrated the other's market at all. There are a few exceptions, but by and large we're in the very early days of internationalization of competition in biotech. There is still 10 to 15 years before this field matures.

During that period, which may be as much as a generation, each side has something the other one very much wants and needs. I'm being glib, but the Japanese themselves say that they envy our basic research. We've got something they want. On the other hand they have a remarkable ability to combine everything from quality control to coordination of various aspects of society, to teach us a lesson time after time about how to commercialize something.

There are a number of things that we can do. One is cooperative research, basic to applied—such things as protein engineering, mammalian cell production systems, downstream purification systems. A similar example is the electronics industry cooperative research operation in Austin, Texas, headed by Bobby Inman for a number of years. It has been a model for some of us. Obviously, that might involve federal funding. I'm repeating myself, but it can't be said enough times: If nothing else were done other than increase the NIH budget 10 to 15 percent a year in real terms for the next 15 years, everything else would flow from it.

Some of the changes in the tax code are pretty shortsighted considering how important small companies are in competing with Japan. In both the semiconductor industry and in the biotech industry, the people who turned out to be the real champions in the field against Japan are not the old-line companies but the entrepreneurial new companies. It's hard now to talk about such giants as Intel and Fairchild as small companies, but in point of fact they were created in order to address semiconductor technology that you might have expected RCA and General Electric to do. By the same token, Cetus and Genentech and Amgen and Chiron and so forth are the companies that have led the revolution that you might have expected drug companies to lead. If the lesson has been demonstrated twice in this country that innovation and new technologies are pioneered by new companies, then why in the world pass tax legislation that is a disincentive to the formation of new companies, which doesn't give capital gains any preferential treatment, and which prevents them from motivating their employees with stock options, the principal means by which small companies get started when they're short of cash. The media are full of the multimillionaires at Genentech, superb basic scientists who were lured to Genentech with stock options. That can't be done any more.

INTERLEUKIN-2

Q: Let's turn to specifics about Cetus. Interleukin-2, which seemed so exciting a year ago, fell into disfavor a few months ago.
CAPE: In late fall, as you just mentioned, there was an unusually polemic discussion in the Journal of the American Medical Association and subsequently in the newspapers. It criticized the work of Steven Rosenberg at the National Cancer Institute with our interleukin-2.

With interleukin-2 there is, obviously, the question of the mode of administration. Problems of toxicity have been seen when very high dosages have been given. It's also true that lower or differently applied dosages of interleukin-2 have been reported by others with less toxicity. I'm not in any way trying to sweep the toxicity under the rug, but it should be seen in the context of the toxicities of other, chemotherapeutic, approaches, whose toxicity is just terrible. And it also should be seen in the context of responses in some cancers where there are no other therapies at all, like renal cell carcinoma.

Finally—and this is the most exciting thing that people shouldn't lose sight of— the results that interleukin-2 has shown, either in Dr. Rosenberg's protocol or in other protocols, did confirm the validity of stimulating the immune system as an approach to cancer. Now, obviously there are going to be many candidate molecules, maybe a cocktail of them, individually suited to each patient, that turn out to be the best way to treat cancer. But a unifying principle has suddenly appeared. The different cancers that interleukin-2 gets some response against are not related to each other at all. The only unifying principle is that the immune system seems to get a heightened ability to deal with them. We're still quite optimistic about interleukin-2. It's in late Phase II clinical trials in over a thousand patients in a couple of hundred different places. I think the continuing clamor by physicians to have us supply them with interleukin-2, which we only do under approved FDA protocols, indicates that the clinicians still regard it with a lot of optimism.

Q: It was originally scheduled to go on the market next year, I believe. Has that timetable been affected?
CAPE: I don't know. I can't say for sure. I would be inclined to say that we still are expecting to release it in late '88 or '89, but that's what the testing is all about. We won't know until we get into Phase III trials and see what the results are.

AIDS DIAGNOSTICS

Q: Last spring Cetus announced a promising new gene-probe test for the AIDS virus.
CAPE: I'm very excited about that. The technology has applications for any genetic probe diagnostic. With these diseases, the needle in the haystack metaphor is quite a valid one. Sometimes, even in a sick AIDS patient, only one T-cell in 10,000 may be affected with virus. It's remarkable considering the havoc they cause.

So how do you look for a needle in a haystack? Our answer, and perhaps it's rather obvious, is that before we go looking for the needles we multiply them a million-fold, and then we look. If you know the sequence you're looking for, and if you know the flanking sequences, you can use polymerase to continually make more and more of what it is you're looking for. If it isn't there, you won't be amplifying anything. But if it is there, you can amplify it a million-fold. Then you go in with your probe and see if you can find something.

When we first developed this, which we call the polymerase chain reaction, we were actually thinking about applications in genetic disease such as sickle cell. But suddenly, with AIDS, there's a far more dramatic application right, in front of us: not only testing people, but assuring a safe blood supply. With existing antibody-based tests there are many false negatives and false positives. That means that blood infected with the AIDS virus might slip through into the blood supply. Our tests should be much better, much more reliable. The work that has to be done between now and bringing this to market is to make it simple and easy to use. We've got to get something that's suitable for mass testing.

BIOTECH REGULATION

Q: You've been very involved in the attempts to devise a sensible regulatory structure for biotechnology. How happy are you with the new system proposed last year?
CAPE: Well, it's better than nothing. There was a time I said I wished they would hurry up and settle on something, so they did. It's almost impossible, if you don't have ground rules, to know how to go about doing what you have to do.

But, I do think it's quite upsetting to find two different government agencies—the Department of Agriculture and the Environmental Protection Agency—saying absolutely contradictory things as prologue. The Department of Agriculture says, and I believe most scientists would agree, that recombinant DNA is not a priori dangerous. That doesn't mean that it isn't a good idea that we have these regulations and that everybody is alerted. But on scientific principles, there's no reason to lose sleep—and I don't think anybody is losing any sleep, by the way. Then the EPA says exactly the opposite: namely, that recombinant DNA may be a priori alarming and cause for great concern.

They also confused two totally different issues which, even today, I have not heard anybody make clear to the public. They talk about kudzu, they talk about the gypsy moth, they talk about a number of environ-mental scourges. But those are examples of well-adapted organisms turned loose in environments where they have no natural enemies, and therefore just go wild. That sounds to the average person like the same thing, but it is absolutely not the same thing, as taking a product like corn, which is well-adapted in its own environment, keeping it in its Own environment and making one small, very precise change in that corn.

Q: What are some of the strengths, if any, of the new regulatory mechanism that's been proposed?
CAPE: It gives us a clearer understanding of where to go. The turf issues have been resolved, mostly. The various agencies have a clearer idea of what their responsibilities are.

I hope, although I've heard that it's not realistic to hope this, that—as with the NIH guidelines—there will be a gradual relaxation of the regulations if and when experience indicates it's appropriate. The reason I'm skeptical is that some of these regulations are based on nightmares that have very little basis in scientific fact. Most people don't realize that biotechnology is not analogous to, say, nuclear power. There is nothing in it like radioactive plutonium, nothing that's inherently dangerous.

The science itself does not generate the alarm. I think the alarm comes from the fact that we're talking about things that are enormously sensitive to human beings, having to do with their essence as people, having to do with their individuality, their genetics, their sex, their religion. It's even reflected in the fact that the scientists themselves were the ones who first decided to examine the technology, stop research on it for a while, talk about it. That was unprecedented. There is a feeling of unease without any specific underpinning to it.


Q: Have we learned anything about the regulatory process from the last 10 years of discussion? Are there lessons here that can be applied in other areas? Has it been a useful kind of exercise?
CAPE: I'm concerned with the wastefulness of what may be a trend, which is to develop NIH Recombinant DNA Advisory Committee-type bodies within each federal regulatory agency. We're in a period of budgetary constraints, but suddenly we're going to have contending and similar bodies in different government agencies.

One of the things that concerns me about EPA's response is that there is an enormous history of releasing organisms into the environment without any regulation at all. I'm not saying that no regulation is good, I'm just saying that nothing has happened to cause anybody any concern and yet they seem to be hell-bent on regulation. I'm speaking almost in the abstract. I have no particular complaint in terms of the agencies that dealt pretty nicely with us.


Q: But is there anything that we have learned about devising a regulatory process that might be applicable, not only to biotechnology in the future, but possibly in other areas too?
CAPE: Unfortunately, I have learned something. I've learned to be very cynical. It seems to me that underlying common sense is very frequently ignored in favor of the grandstand and the soapbox.

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