Higher Salaries, Stock Options, And Glory: Fun And Profit In The Skin Trade

Fun And Profit In The Skin Trade From deep biology to Epidermis Inc., another tale in the merchandising of science CAMBRIDGE, MASS--Jeff Morgan and Brad Guild moved into their new office on the opening day of baseball season this April. The space was small: a single room with built-in desks lining opposite walls and barely enough room to swivel their chairs. The pair stacked boxes and unpacked a few books. And Guild took up a blue magic marker and scrawled the business’s first official insignia on the whiteboard lining one wall: "Somatix Corporate Headquarters." The two men are more than simply the company’s first full-time employees. Both hold doctorates in biology and are former researchers at the prestigious Whitehead Institute for Biomedical Research, an affiliate of the Massachusetts Institute of Technology. Like a growing number of their colleagues, they have deserted academe for the promise of higher salaries, stock options, and glory of forming a company based on technology they helped pioneer. This flow of professors out of universities has become a cause celebre. College administrators are continuously bemoaning their in-ability to keep U.S.-born Ph.D.s, and the National Science Foundation and industry leaders are working overtime to find ways to make academia more attractive. So MIT’s administrators ought to be apoplectic at losing Morgan and Guild. But far from being upset, MIT actually encouraged the "theft." After all, Somatix had been founded by MIT’s own Richard Mulligan—a 33-year-old Whitehead whiz kid who had won the MacArthur genius award while still in his twen- ties, and that too had happened with the university’s blessing. Why would a university, even one with a talent pool as deep as MIT’s, let faculty whizzes go without a fight? Over the past two years, MIT has recognized a growmg need for U.S. industries and universities to cooperate more actively in the face of stiff international competition. In response to this threat, the university has embarked on a promotional campaign to market the research its people produce. So in the name of patriotism, MIT has decided that if it can’t beat industry, it will spawn it. Much of the MIT entrepreneurial push plays out in high visibility areas like superconductivity and parallel computing. But Somatix has grown out of an area of research that, though barely known to the public, has scientists tingling, skin. MIT holds about 20 patents, a quarter of which have come in the last year, related to the skin and the more general field of organ regeneration. "Any high temperature superconductor is probably hotter," proclaims director of technology licensing John Preston, who says MIT will help form at least eight companies this year. "But skin is a very hot area." So hot that, besides Somatix, at least two other firms are looking to turn skin into gold. Three years ago, MIT helped launch Organogenesis Inc., another Cambridge firm that produces an artificial skin for burn victims. And, last year a group of Harvard researchers, using some technology licensed from MIT, formed BioSurface Technology Inc. This new venture takes patches of a burn victim’s own healthy skin cells and grows them in culture into large sheets. The goal is to then spread the sheets over the patient’s damaged skin; since the new skin would be the victim’s own, it would not be rejected. While the skin startups’ science is praised, it’s too soon to tell whether they will succeed. Organogenesis went public in late 1986 but has not yet turned a profit. And BioSurface, still in its infancy, remains private. Somatix may be even more of a gamble for its eager young scientists. It plans to go one step farther than its predecessors, turning healthy skin into an on-site drug factory to deliver important genetic products like insulin or human growth hormone in steady, measured amounts. If the genes coding for vital proteins such as these are mutated or missing, serious diseases, diabetes and hemophilia, for instance, result. With the majority of such diseases still uncured, the potential payoff of such a facile delivery system is tremendous. The scientific gambler behind the venture is, of course, whiz kid Richard Mulligan, Morgan and Guild’s former boss at MIT Mulligan is not a skin specialist, but a virologist who has long been interested in making the concept of gene therapy a reality. Mulligan’s original goal was to use retroviruses to insert genes into blood stem cells, then transplant the cells into laboratory animals deficient in the genes’ products. Mulligan’s crew had mastered this technique, successfully introducing new genes into cell cultures nearly 100% of the time. But then Mulligan heard of, Howard Green and got the germ of a new idea. A Harvard Medical School researcher, Green was developing the technique of growing sheets of skin cells that was to lead to the founding of BioSurface Technology, Inc. Mulligan recognized that if his viral system could insert genes into skin cells as efficiently as into blood stem cells, he would have a very powerful therapeutic tool: Curative genes potentially could be delivered to a patient via a simple skin graft instead of a laborious bone marrow transplant. The first step, Mulligan explains, was to ask whether, "foreign genes could be introduced into [skin] cells and whether those cells would now express those genes even after transplantation." To address these questions, Mulligan’s lab began working with the gene for human growth hormone, a protein secreted from pituitary cells. The scientists were able to insert the gene into skin cells and induce the cells to make growth hormone in this new environment. Even more exciting, when the group took the cultured cells and grafted them onto a mouse, the cells continued to make the hormone. Morgan realized that there was an obvious potential market for the technique, since nearly everyone with a genetic disease might benefit. So he began talking to his boss about a company. Much of the talk was informal, over beers in a local pub. But it took little to convince Mulligan, who recognized the potential impact of their work. Besides, Mulligan felt that the work was bogging down, moving away from pure "deep biology," as he calls it, toward technical areas that required the more focused attention and resources of a company. Explains Mulligan, "This was really as far as we could productively go in an academic setting— because there were now a number of technical questions and issues that had to be pursued that were not particularly of interest biologically but were of great practical import” in developing the technology into a marketable product. But the biologists had only a hazy idea of how to form a company. A catalyst proved to be MIT professor David Houseman, who teaches an undergraduate biology class with Mulligan. Houseman already had one start-up under his belt— Integrated Genetics, so Mulligan sought his advice. Houseman was quickly convinced the concept had merit. He introduced Mulligan to IG board member David Anderson, a partner with Sutter Hill Ventures in Palo Alto. Anderson brought two other IG colleagues, Bob Carpenter and Gordon F. Kingsley, into the fold. Scenting something hot, both men agreed to invest. Six months ago, the team took the big plunge and formally set up the new company. The initial commitment from Sutter Hill’s partnership pool is $650,000. That money should last Somatix nine months to a year, as it builds to around 10 staffers. Provisions were also made for a second round of financing down the road. As the first two full-time employees, Morgan and Guild were given salaries arid a generous stock plan. They won’t discuss details, but Guild says the pay is "competitive." And with the added benefit of stock, which is vested on a monthly basis over a five-year period, it seemed like a great chance to make money and pioneer a new field. In addition, to giving its blessing to the venture, MIT granted exclusive license on several patents— held by the Whitehead but developed in Mulligan’s lab, for using retroviruses to genetically modify skin cells and other cell types. In exchange, the university got cash, a share of any royalties, and equity participation in the new firm. For lab space, Mulligan turned to Repligen, another Cambridge biotech firm with roots at MIT. A plan was worked out whereby Repligen would supply the space, with an option to convert any rent owed to equity in Somatix. Besides their tiny office, Morgan and Guild have half a Repligen lab in which to toil. "The initial goal isn’t so much to develop technology for a specific market, but, to advance the science and decide where it might be applied," explains Kingsley. "This means increasing the levels of gene expression in skin cells and demonstrating the release of various hormones into the circulation of skin-patched animals. Only then can the researchers begin to really plan for using the, skin as a commercial drug delivery system." Still, Morgan and Guild don’t have far to look for potentially lucrative, markets. If the gene for clotting factor VIII could be introduced into the skin of hemophiliacs, and expressed in sufficient quantities' the disorder could be completely cured. Or genes could be inserted that produce a continuous source of insulin to control diabetes. But the potential for Somatix goes far beyond skin cells. Mulligan theorizes that other cell types, like the endothelial cells lining the inside of major blood vessels, could be used as pumps to release something into the bloodstream. Or, genes might be delivered to specific sites, like the liver, and serve to intrinsically cure genetic defects. After all, he notes, with the exception of the eggs and sperm, the term "somatics" represents every type of cell in the body. And that’s why the company name was chosen. Bob Buderi is a freelance writer in Cambridge, Mass.

Higher Salaries, Stock Options, And Glory: Fun And Profit In The Skin Trade

Interested in reading more?

Become a Member of