Qualifications: Cash, More Cash, Creativity, And The Courage To Fail

Chemist George Rathmann is a scientist entrepreneur with not one, but two successful startups to his credit. Ten years ago, in early 1981, Rathmann and his colleagues were successful in raising $19 million to launch Amgen Inc. of Thousand Oaks, Calif., which in 1989--the year in which its flagship product, erythropoietin (a red blood cell stimulator), was approved by the Food and Drug Administration--recorded sales of $192 million. Last July, Rathmann resigned as chairman of Amgen (he remains on the company's board of directors) to launch another new biotech company, Seattle-based ICOS Corp., which, like Amgen, focuses on recombinant DNA technology and was launched with venture capital--$30 million. In the following excerpts from a recent interview, Rathmann, a former vice president of R&D at Abbott Laboratories of North Chicago, Ill., discusses the similarities and differences between the biotech industry of today and that of 10 years ago. He also offers some advice to today's would-be scientist entrepreneurs. --Julia King Q In the early 1980s, venture capitalists were eager to invest in startup biotechnology companies like Amgen and Genentech. What is the attitude of the venture capital community today? A It was certainly common throughout the 1980s for venture capitalists to approach scientists. Today, contacts between scientists and venture capital companies still represent some of the earliest contacts in the formation of a new [biotech] company. But because there is more awareness on the part of scientists, most of these contacts today are being initiated by the scientists. I think there is a somewhat more limited amount of funds available from venture capitalists than there used to be, but it remains a very productive way to start. Q Just a few months ago, I read that you expect there will be more independent biotechnology companies in the year 2000 than there are today. Do you expect there will be a corresponding increase in the number of new scientist entrepreneurs, or will there be an increase in scientists like yourself, who have more than one startup company to their credit? A I assume the bulk of these new companies will be started by fresh people. Today, there is a substantially lower reluctance to taking a shot at starting a company because there are so many success stories. My feeling is that the major source of new biotechnology companies will be the very same kind of phenomenon we talked about before--scientists getting together with venture capitalists or another source of venture money. Already, it is going on at a tremendous pace. At a recent meeting in San Francisco, 30 new companies were being talked about. There is still a flux of new companies. We're not just talking about recombinant DNA. Every aspect of new science is being applied to getting some kind of a product to market. Q Must a scientist entrepreneur create a company in order to be successful in commercializing his or her discoveries? A With recombinant DNA, the incredible complexity of the science requires that you make a significant investment. Because you have to have a significant investment, you have to be able to sell product in order to give a return to your investors. You can't simply be what was referred to in the 1980s as a "research boutique." Every successful biotechnology company found that it had to develop and build a complete infrastructure--accounting, clinical, medical, regulatory, legal. They had to create a company and had to put all the pieces of the company together to bring a product to market. It's really rather dramatic to think that you have to create the full infrastructure of a corporation to bring out one product, one product. You'd think that would be so inefficient and that you'd be beaten 100 times over by a bigger company with that infrastructure already in place. But that's not true. It has turned out that most of the new biotechnology products--at least those based on recombinant DNA--have been discovered and pushed by a biotechnology company. While biotechnology companies are discovering products they also have to be creating a full corporate structure. Today, for example, Amgen has every element of a Pfizer or another pharmaceutical company. In the early days, there were biotechnology startups that didn't realize they had to start a whole new company and thought they could remain research boutiques. But as they moved ahead, they realized that the only way they could give a return to their investors was to retain some of their products and take them all the way through the regulatory, clinical, manufacturing, and marketing stages. Otherwise, the boutique could have its jewels purchased at a very low cost, and there was not much return to the investors. Q Could you compare and contrast the economic and social conditions that existed when you started Amgen to those that exist now? A It is tougher today to get the quantities of money needed. It's tougher for small companies to get enough cash so they can take a dramatic step. Most people have felt that the thing to do is to parcel out money, that you don't need a big slug of money at one time, but that's not true. You do need a big slug of money to get things going and so you aren't living hand-to-mouth. Many of the new companies have accepted a path of living hand-to-mouth on financing, which means that every time they want to get more money, they have to achieve a milestone. If they don't get that milestone, and they are due to put more money into the company, they have a lot of pressure on them. I think most companies today are under more severe financial pressure than was true in the early 1980s. Even though we all lived a perilous existence back then, I think the opportunity was there if you worked hard to get more than enough money about every other year. Now, and for a couple of years, there hasn't been a period in which you could get more money than what you needed. You could only get almost exactly what you need, and that means you're constantly under extreme pressure to get more money. I think most of the small companies are under that pressure, but they are surviving. They still manage to get by even though they have less reserve and can't get the big slugs of money very easily. Q What advice do you have for would-be scientist entrepreneurs today? A I'd give them the same advice that companies like 3M and others try to give to their people to stimulate new creations. That is, first, don't be afraid to fail. There is nothing wrong with that if you give it all you got. Being a risk taker is part of that advice. Also, what you gain by trying creations is an experience that you just can't match in any other part of so-called normal business. I think that going out on your own and finding yourself fully committed to something, whether it succeeds or you've got yourself a very disappointing career path for a while, is something that is wonderfully toughening and inspiring. It is a learning experience you can't match any other way. If you have the good fortune to accomplish something, you know it would never have been accomplished without those efforts. That is pretty satisfying. The payoff is enormous in terms of what contributions you make and the satisfaction that you can get. I would encourage anybody to take a flier any time, to take a shot at something they think really has some potential. I'd tell them to go ahead and try to figure out how to put it all together. If you make it, you've done something really remarkable. If you don't, you've still learned a lot and gained a lot.

Qualifications: Cash, More Cash, Creativity, And The Courage To Fail

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