The biotechnology industry will come of age tomorrow.
For an industry that has failed to live up to Wall Street's expectations, the good news couldn't come any sooner. In the decade since breakthroughs in genetic engineering spurred biotech firms to cluster around San Francisco, Boston and Washington, the Food and Drug Administration has approved for market only 11 biotechnology-based drugs and vaccines developed by a small number of companies.
But tomorrow and Tuesday, an FDA advisory committee will vote on whether four biotech drugs are ready to be placed on the market. Though the FDA must grant final approval, the decision of the advisory committee, a panel of outside biotech experts, is considered to be the last major obstacle for the drugs.
That so many drugs will be considered in such a short period of time is a landmark event that is almost certain to boost investor confidence in the industry, according to analysts and biotech officials.
"To my mind, it means the industry has finally arrived," said Stuart Weisbrod, a biotech analyst at Prudential-Bache Securities Inc. in New York. "The industry is entering the age of commercialization. It's possible the FDA could approve 20 products in the next two years."
That would be welcome news for an industry that has seen only lean times in recent years. Venture capitalists who once flocked to biotech start-ups have grown disenchanted with the estimated eight to 10 years needed to bring a drug to market.
"The biotech industry right now is faced with financial impediments. The financial community is not committed to investing in biotechnology because of what they see as a lag in getting the products out," said Bruce F. Mackler, general counsel to the Association of Biotechnology Companies.
Investors are further discouraged by large losses that most biotech firms accumulate before their products reach the market. To offset the losses, small biotech firms typically enter into research and development partnerships with much larger companies. Of nearly 500 biotech companies developing products, analysts estimate that only a handful make a profit from product sales, most notably Genentech Inc. in San Francisco -- considered the father of biotech companies.
A few more companies could be headed that way. The years of research, development and clinical trials are beginning to pay off for small biotech start-ups that began developing drugs in the early 1980s. Fourteen biotech drugs now are in the final stages of FDA clinical trials, and nearly 80 drugs are in various stages of FDA testing.
With so many drugs nearing completion, biotech companies are again a hot property on Wall Street, according to analysts.
"Biotech stocks have had tremendous performance this year for the top companies in the sector," said Linda Miller, an analyst with PaineWebber Inc. in New York.
With the possibility that four more drugs could get approved soon, many analysts are predicting that biotech firms will begin to see a wider pool of investors emerge, including conservative mutual funds and pension funds.
For the companies with drugs under review tomorrow and Tuesday -- Cetus Corp., Immunex Corp., Schering Corp. and Genentech -- there's more at stake than investor confidence. Getting the drugs on the market means substantial revenue.
Tomorrow, the FDA advisory committee will discuss Genentech's Interferon gamma, a drug to treat a rare inherited disease of the white blood cells, and Cetus Corp.'s Interleukin-2, a drug for kidney cancer. The discussion Tuesday will center on Schering Corp.'s Interferon alpha-2b for a chronic strain of hepatitis, and Immunex Corp.'s treatment for graft failure in bone marrow transplants.
Cetus and Immunex will be the most closely watched companies. Both companies are trying to get their first biotech product on the domestic market.
Immunex, with headquarters in Seattle, is counting on strong sales for a product that will be the first in a competitive market. Estimated revenue for the drug, called GMCFS for granulocyte macrophage colony stimulating factor, could top $100 million, depending on when Immunex's competitors reach the market, analysts said.
Anticipating its drug will be approved, the company has begun recruiting a sales force and manufacturing experts.
"We're dealing with the fact that we're going to be a pharmaceutical company in the not-so-distant future," said Stephen A. Duzan, Immunex's chief executive.
Most biotech firms, though, have some time to go before they find themselves in Immunex's position. Cetus, based in the San Francisco Bay area, remains typical of a majority of biotech firms relying on their first product to help them break out of the red.
"We're reporting losses currently," said Katharine A. Russell, senior vice president for corporate affairs. "We're depending on this drug to get more revenues into the company."
Cetus's product has a difficult road ahead. The drug, a treatment for kidney cancer, has caused some tumor shrinkage in about one-third of patients in trials. And it has not been selling well in Europe, where it already is on the market. "We've reduced estimates for U.S. sales from $39 million to $20 to $25 million," said Miller of PaineWebber.
For Genentech, profitable and established, tomorrow's hearings are hardly a milestone. Interferon gamma, for a disease afflicting 200 to 400 people, will be a minor companion to the company's two blockbuster drugs: Protopin, for children's human growth hormone deficiency, and Activase, a blood-clot-dissolving agent used to treat heart attacks.
As the pharmaceutical arm of Schering Plough Corp. of New Jersey, Schering Corp.'s financial stability is not riding on approval of Interferon alpha-2b. The drug, which already has been approved by the FDA for use in treating three diseases, is under consideration for treatment of a strain of chronic hepatitis.
Sales for all uses for alpha Interferon could top $100 million, said Richard Godown, president of the Industrial Biotechnology Association, a trade group.
On another front, industry officials and investors will be watching tomorrow's meeting for clues to the agency's regulatory policy toward biotechnology.
So far, industry officials say the FDA has moved biotech drugs quickly through the approval process. But considering the vast number of drugs in the pipeline, industry officials fear the FDA is headed for a backlog.
"There's a concern that the process is inundated with a substantial number of applications at various stages. We have seen a number approved, and given more resources I think the agency will be able to process them at a greater rate," said Mackler of the Association of Biotechnology Companies.
Mackler and others say the FDA needs more scientists, better equipment and, of course, more money to do its job right.
"There are 24 more biotech drugs in development this year than last year, yet we had one biotech product approved last year. Something is going to have to give to expedite these things through," said Thomas L. Copmann, assistant vice president for biotechnology and biologics at the Pharmaceutical Manufacturers Association.
But Henry Miller, director of the FDA's office of biotechnology, said the agency is gearing up for what it believes will be an influx of drugs.
"The best evidence that we are moving quickly is in the form of our approval times for biotech products, which are less that half that of other products," Miller said.