'Designer Genes' Perk Up British Biotechnology

A veterinary pathologist’s odyssey out of academia to become CEO of one of Europe’s hottest startups On the wall of Keith McCullagh’s office hangs a framed picture showing one of his company’s advertisements. “British biotechnology has come a long way since 1953,” says the legend above a picture of Francis Crick and James Watson, the discoverers of the double helix structure of DNA. For McCullagh, the snappy slogan has a double meaning. As it happens, British Biotechnology Ltd. is the name he grandiosely— and perhaps playfully—gave his stunningly successful startup back in December of 1986. And indeed, both British biotechnology at large and the little company that aims to epitomize it have come a long way in what for each of them is a very short time. In just 18 months, BBL has come from a venture capital dream to one of Europe’s fastest growing biotechnology companies—perhaps the fastest—with capitalization totaling $17.9 million and stocks in trade including a potential AIDS cure and a world-leading line of laboratory products it calls “Designer Genes.” At 44, McCullagh has come a long way too. A long way from studying elephants in the wilds of Africa and atherosclerosis in a Cleveland lab. A long way from being an academician at the University of Bristol and an industry researcher for G.D. Searle. At the end of this odyssey, McCullagh, who is BBL’s chief executive, has finally, he feels, found himself—in the business of science. McCullagh started his professional life as a veterinary pathologist, gaining his Bachelor of Veterinary Science degree at Bristol University in 1965. He then migrated to Africa to study diseases in large mammals, which led to a growing interest in atherosclerosis in humans. (“You might say that it was elephants that got me started,” he jokes.) His doctorate in comparative atherosclerosis was completed while he was a member of the Department of Pathology at Cambridge University. From there McCullagh journeyed to Cleveland, where he continued his research at the Cleveland Clinic Foundation. It was here, through friendships with U.S. colleagues, that McCullagh claims to have acquired his first taste for the entrepreneurial way of life. But first, he was to return to the University of Bristol where, in addition to teaching, he recruited bright people to his lab, built up consultancies with industry, and achieved, he says, his goal of establishing a team with a successful reputation. Somehow, though, life within the university system did not satisfy him. “Scientists on the whole put up with a very raw deal,” says McCullagh. “Their work is often undervalued by society. They are often not given responsibility commensurate with their intellectual skills. Certainly in this country [Great Britain], science is very poorly funded and very poorly regarded. Many scientists have the ability to lead and to manage but are not provided the chance.” So McCullagh made his own chance: In 1980 he took a job as senior director of research in the new biotechnology lab at G.D. Searle & Co., where, as the number two man in the division, he found that he enjoyed management more than he had anticipated. He recalls: “I was managing the varied activities of 150 people with the complexity of a reporting structure above me that meant I had both U.K. and U.S. bosses to meld together.” Management, he discovered, “is as much about managing what is above as below you in an organization.” At the same time, McCullagh had a feeling that he was “building experience for something more entrepreneurial later on.” When it happened, McCullagh’s push into the entrepreneurial world came as a hard one—from behind. In 1986 Monsanto purchased G.D. Searle—and within a few months McCullagh’s lab was abolished. During the courting period, Monsanto had dubbed the biotechnology laboratory “a jewel in the crown.” Yet three months later, the lab had lost favor. As McCullagh puts it, “It was not wanted on voyage.” Together with Dr. Brian Richards, his boss, McCullagh reviewed the options. The obvious choices were to seek other employment or to take the team they had built up over five years to another pharmaceutical giant. Instead, they chose to gamble their future on their own new company, taking with them the members of their G.D. Searle team most suited to an entrepreneurial culture. Their goal was to build a company that would emulate, in most important ways, the R&D division of a full-scale pharmaceutical concern: making salable products from the outset, but dedicating fundamental research to seeking genuinely novel products in the health care sector. It is some measure of the pair that they chose what in Britain is a difficult route—to seek venture capital. Perhaps a result of traditional British character, venture capitalists in the U.K. are less prepared to take a risk on high-tech ventures than are their U.S. counterparts. As McCullagh describes it, one of the first venture financiers who liked their ideas stipulated that they should cede management control to a nonscientist. They sent him packing. Their confidence in such a bold action stemmed from Keith McCullagh’s faith in his own ability to manage, and from his desire to be good at business as well as science. “Management,” says McCullagh, “is really the intellectual analysis of what needs to be done and the common sense about implementing it in the best way. It’s very simple. You just have to decide what the problem is, decide how to resolve it, and then go away and do it.” “If that sounds arrogant,” he adds, “I don’t mean it to be.” Arrogant or not, it worked. In December 1986, McCullagh and Richards convinced a consortium of British and U.S. venture capitalists to invest $3.9 million in a seed round of financing. With these funds and their core of Searle researchers, McCullagh and Richards founded BBL. McCullagh took the title of CEO, and Richards became chairman. The company’s modest charter: to “pursue new and better molecules for the treatment of disease and the advancement of science.” BBL’s long-term strategy is to merge the disciplines of synthetic organic chemistry, computer modeling of molecular structures, and genetic engineering for the purpose of designing and synthesizing drugs for the treatment of coronary heart disease, rheumatoid arthritis, cancer, and viral diseases. To fund this major effort, the BBL team hit upon a novel idea: They had been synthesizing genes for use in their own research at Searle, but realized soon after their departure that such products could provide a base for a healthy business in their own right. And right they were. In May 1987—just five months after the company was conceived—the BBL team launched their first line of products: Designer Genes. The genes, currently 25 in number, can be ordered from a catalogue to be delivered worldwide in 48 hours— an idea that caught on like wildfire among research scientists. Within the first 12 months of operation, the laboratory products grossed $500,000, and in the fiscal year that ended this past April 30, sales totaled $1 million. McCullagh anticipates that the product line will become profitable by the end of the current fiscal year. He notes that the import of profitability for the company is not limited to financial matters. “It also gets us experience in sales, marketing, product manufacturing, packaging, advertising, all those things,” says the scientist-businessman. And it has lent BBL credence with major pharmaceutical firms and led to several collaborations with the larger companies in basic research efforts as well as licenses to market BBL’s line of products around the world (see box). This line now includes a group of syn thetic carbohydrates, of use to researchers in blood group testing, cancer research, and in the understanding of tissue growth and differentiation. A joint research effort with the University of Oxford has produced a process for building fake viruses—of potential use in developing an AIDS vaccine. Ultimately, of course, BBL’s aim is to match the market might of Genentech. That kind of growth, McCullagh forecasts, will stem from the research side of the company producing novel products and taking them through clinical trials before deciding whether to manufacture the product or license it to others. To that end, BBL this spring raised a further $14 million by placing its shares with 10 new investors as well as the original four. All but one are pure venture funds (the exception is Johnson & Johnson Development Corp.) and five of the 10 are U.S.-based. So now the scientist with a Ph.D. in comparative atherosclerosis is CEO of one of the fastest-growing high-tech startups in Europe. He is making deals with pharmaceutical giants like SmithKline Beecham and, of all things, employs an advertising agency. It’s another part of his management style, McCullagh explains, that the proffle of the company should be just right. The company has a racy logo (“although not everybody likes it”), seeks publicity thoughtfully, and in general gives the impression that it means to go places. Not McCullagh. He finally seems to have found his niche in the business of science. And though he puts in longer hours now than when he was an employee, he finds, he does not miss his days at the bench. “I am building and creating the best company that I know how to for the future. That is what I enjoy.” And it gives him a satisfaction he thinks all scientists should have the opportunity to experience. “When I started in science, my main motivation was to be the best scientist in the field that I had chosen, and to be recognized as such. It was only as time went on that I realized that by being the best, others follow, and so you start to develop an experience of management and leadership. I think many scientists are like me: They could take that plunge, make that transition if they had the opportunity and they were pushed a little bit.” John Stansell writes for the Sunday Times in London.

'Designer Genes' Perk Up British Biotechnology

Interested in reading more?

Become a Member of