Our New Business Models

While scientists toil away in their offices directing the bachelor degreed underlings to run western blots and ELISAs in their laboratories, the businessmen have been trying to solve even bigger problems. How to make money from the directing and toiling.

A few business model concepts were discussed on Xconomy this week. Stewart Lyman and Connie Wong both had interesting articles.

My own take on what is going on these days comes from the lessons learned from Amgen. The book, "800 Million Dollar Pill" begins with a discussion of how Amgen began. It tells the story of the discovery of erythropoietin, or EPO by Eugen Goldwassser. After pitching his product to numerous companies, Applied Molecular Genetics finally bought in, which they advanced by cloning the first cell line that produced recombinant EPO. Prior to the Amgen deal in 1983, Goldwasser spent 25 looking for and researching EPO. The discovery was the result of a government-funded research that began as a Cold War experiment to cure radiation sickness. According to Goldwasser,

Private companies rarely support that kind of research. It takes too long, and the odds of success are even longer.

How did Amgen and Goldwasser come to the conclusion that this product could be used for anemia? GoozNews.com (Merril Goozner, author of 800 Million Dollar Pill) posted a brief history of Goldwasser upon his death in 2010. One commenter, Phil Peckham, pointed out the work of two other scientists whom advanced Goldwassers research into the realm of a marketable drug candidate.

In the basement of the first outpatient kidney center in Seattle, Joseph Eschbach and John Adamson do experiments on sheep. As I understand it they exsanguinated one set of sheep thereby inducing amemia. They then collected the EPO rich plasma from the sheep with induced anemia and infused it into a a sheep (I believe named Dolly) that they had induced anemia by removing the kidneys and then sustained via dialysis.

The EPO rich plasma reversed the anemia in Dolly.

Sheeps urine plays a role too but I am not exactly sure – one reason I’d love to read the order of events after an actual journalist looked into it – but this was all happening in ’70s. I suspect that their experiments with sheep, if nothing else, gave the green light to Goldwasser to use his precious sample.

One thing to note is that Eschbach had a large practice during the day. He was the Medical Director of the first home hemodialysis program at Northwest Kidney Centers and followed many patients through his practice at Minor and James a large Seattle medical practice. Imagine your doctor working nights to solve a problem that plagues you and everyone else on dialysis. And then succeeding.

I would love to see an authoritative version of the story. In 2007 Kirin Amgen (I think they initially funded Amgen) established the Joseph W. Eschbach Endowed Chair in Kidney Research at the University of Washington.

The story is one of science that dates all the way back to 1906, if one wanted to write this story.

Amgens success was the result of so many factors it is hard to imagine reproducing that success story. Remove one the many pieces of the puzzle and maybe you don't get the success. It would be like removing a piece of the puzzle from a Sherlock Holmes novel. There are many logical errors found in Sherlock Holmes novels that are elementary logical fallacies. Which brings us back to biotechnology business models.

In Stewart Lymans piece he talks about our ecosystem. One of the members of our ecosystem are the businessmen, who get to make the big decisions. The story of Goldwasser highlights how several groups of businessmen (companies) passed on this opportunity. In my opinion businessmen are businessmen. They excel at talking in meetings and advancing their own careers. Scientists, another part of the ecosystem are different than the businessmen, or at least they used to be. Many of the businessmen today are PhD'd and/or M.D.d individuals. They get to make the big decisions because they have studied how to use the big words that come out of science. But not scientifically. In our ecosystem, the businessmen should listen to the scientists, not tell them what to do.

In Connie Wongs piece she talks about sharing "the words" that come from scientists. The Amgen story is about people, dating back to 1906, who ran experiments and came to the conclusions needed to make Amgen a drug. The science decisions were not business decisions. Part of the Amgen success story is science. There are many branches on this family tree, most of which lead to nowhere. But through the persistence of the scientific process, EPO emerged. Through technology, a recombinant form of the protein emerged that could be manufactured and administered by doctors into patients, two more members of our ecosystem. The businessmen, yet another piece of our ecosystem, made some pretty shrewd, although underhanded, deals with the government that led to the most successful biotech company in our history. All of the branches of the tree succeed by building off of the information of others.

When we look at the work put into making Amgen who they are today, we see that many people are involved. Luck is involved. Randomness, as always, rules our lives. Business models are best described by the ideas put for in "A Drunkards Walk". Perhaps we need to abandon business and once again get back to researching the cell and the human body, without dreaming of fortune and fame. One group studies function, the next studies an application, the next manufacturing, the next clinical and so on. The businessmen are merely one piece of the puzzle. They have a long history of making more bad decisions than good. One of the decisions has been to create a minefield in the career paths of those who conduct the scientific research that leads to products like EPO.

To use another analogy stemming from the biotech ecosystem, I think of the industry like a field of soybeans. The soybeans cannot grow without trees that prevent soil erosion and cleanse the air. Only the soybeans can be sold on the market however. After the harvest the farmer drives his soybeans into town and sells them. He sits at the bar counting his annual pay. It's never enough. He decides to remove the trees to make room for more soybeans.