Gene Blues

Delay in the big lab payoff

When stock in Cetus Corp., one of the world's four major genetic engineering firms, was offered to the public three months ago, investors eagerly bought 5.2 million shares at $23, but the price has since declined to $19. Just a half year earlier, shares of competing Genentech jumped within minutes on the first day of trading from $35 to a stratospheric $89. But now Genentech stock is selling for only $37 a share. Has the genie gone out of genetic-engineering companies?

This new industry, which manipulates the genetic code by splicing strands of DNA, still looks like one of the fastest growing businesses of the 1980s. After a long study, the Office of Technology Assessment concluded: "Genetic technologies may contribute to filling some of the most fundamental needs of mankind --from health care to supplies of food and energy." Yet both Wall Street and the public are taking a longer-term view of the potential profits from recombinant DNA research. Says Richard B. Emmitt, vice president of research for F. Eberstadt of New York: "Most people have been too optimistic about the size and commercial payoff of these companies.

Wall Street has lost money before by betting on long shots."

One reason for the current caution is the difficulties researchers are encountering in perfecting the use of interferon as a possible cure for cancer. After well over a year of testing on human patients, "interferon hasn't yet done anything better than any other anticancer drug," says Frank Rauscher, senior vice president for research of the American Cancer Society.

Like executives at the other major firms in the industry, Cetus President Peter Farley is dampening public expectations about interferon. Says he:

"This development is going to take years and years of major tests." But the Berkeley, Calif, company is still moving ahead.

It says it can now produce 6,000 daily patient doses of interferon in just 15 hours, which is faster than any other company has publicly claimed.

Across the Bay Bridge in South San Francisco, Genentech is in the midst of a $20 million expansion. The firm's gene-spliced insulin, which is thought less likely to produce an allergic reaction in some diabetics than the animal insulin usually used, is now in the final phase of certification by the Food and Drug Adminstration. It could be put on the market perhaps by late 1982. But Genentech is .rying to iron out some difficult problems with the human growth hormone used to treat dwarfs. Patients at Stanford University's hospital a few weeks ago developed fevers after taking the new drug. Concedes Marketing Manager Gary Hooper: "The product wasn't at a stage where we would have liked it to be.' Executives at Genex, the Rockville, Md., gene-splicing firm, expect to double its million-dollar business this year Genex is currently seeking outside capital for a major research project: developing a bacterial organism that would convert biomass like wood or grass into ethanol, which is used in the production of industrial chemicals. The company is also accelerating research into the mass production of vitamins and amino acids used to enrich foods. Success could cut the cost of additives in feed corn from $50 to as low as $2 a pound.

Biogen S.A., whose headquarters are located in Geneva, plans to open its first U.S. laboratory this fall, in Cambridge, Mass. Last month Biogen announced that it was beginning production of genetically engineered vaccines to combat foot-and-mouth disease, as well as a particularly nasty type of hepatitis. Recently, the company signed contracts with large commercial firms in the U.S. and Europe for the production of gene-spliced insulin and animal growth hormones.

Bioengineering firms are silent about :he prospects for future profits. Genex President J. Leslie Glick warns that projecting the eventual market for recombinant DNA technology is "like seeing at night blindfolded." But some industry analysts still believe that these pioneers of gene splicing, plus other new companies entering the field such as California-based Armos, AMGEN and DNAX, could be producing products with DNA worth as much as $40 billion by the end of the century.

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