ZymoGenetics Will Be Missed. How Seattle Biotech Can Recover and Thrive


I agree with Carl Weissman’s recent Xconomy column about the ZymoGenetics acquisition when he says that Seattle needs to be a place where biotech startups thrive. Unfortunately, his column didn’t put forth any novel solutions for making this happen (I know this wasn’t his point in writing the article). I am also in agreement that hand wringing doesn’t help ease the loss, but a moment of reflection here is certainly called for. I will admit to being saddened by the Bristol-Myers Squibb acquisition of ZymoGenetics and the potential loss of some 300 plus jobs from the local biotech scene. I felt just as bad (actually, worse, being a scientist myself) when their research group was previously shut down and the scientists were let go. I haven’t heard anyone suggest that the latest biotech buyouts (Trubion Pharmaceuticals and ZymoGenetics) are harbingers of doom, though they may seem that way to those who lose their jobs. However, it is naïve to think that they won’t have a negative impact in the short term. Ted’s comment in response to Carl’s piece did a fine job of capturing the painful impact that may await many of those employees.

Biotech advances flow from the well of scientific discovery. Individuals who haven’t worked in a biotech setting don’t always grasp the synergistic benefits of putting together a research team that recombines individual talents to innovate fantastic discoveries that lead to new drugs. This doesn’t happen often in the industry and is a rare and valuable thing. Many of us who competed against ZymoGenetics over the years would acknowledge that they had assembled such a team. ZymoGenetics own website points out that products that they discovered or developed (and which are currently marketed by other companies) have combined yearly sales of over $3 billion. Another example: look at the articles that have been written chronicling how Roche has bent over backwards not to perturb the research culture of the recently acquired Genentech. They recognize their valuable investment and the need to protect innovation. They are hopeful that the Genentech group will continue to produce novel drugs at their industry-leading pace. Making money investing in biotech, whether as a VC or as a stock market investor, is certainly very demanding. However, actually developing a novel drug and getting it on the market is significantly more difficult. There are numerous examples of companies that have been acquired (thereby returning money to their investors) but the drugs that they were purchased for didn’t pan out.

A quick look at the WaBio website shows only about 33 job openings at local biotech companies, with about an equal number of jobs listed for academic and other institutions. Since 2002, when Amgen bought Immunex, there have been over 3,200 layoffs at local biotech companies (not including any upcoming layoffs at ZymoGenetics or Trubion), and I would wager that a lot of these folks were unable to find employment locally. Taking their skills elsewhere did not benefit us here in Seattle. The loss of ZymoGenetics may indeed lead to new companies being formed by those with an entrepreneurial spirit, as Carl suggested. However, it will take years (if ever) for these putative new companies to employ the number of individuals who typically are let go in these acquisitions. This also assumes that these companies get VC or other financial backing, which in the current economic climate is far from guaranteed. Also, Carl suggests that acquisitions recycle liquidity to investors, but how many of those investors are actually here in Seattle? Won’t most of that money go to support ventures (and not necessarily biotech) in other parts of the U.S. and, indeed, the world?

Many of us who work in the industry use the term “biotech anchor tenant”, but the phrase is often employed without benefit of a clear definition. Given that this term may mean different things to different people, I will offer one. A biotech anchor tenant for a city or a region, to my mind, is a company that meets two general criteria: (1) it is a near constant source of at least some jobs, owing to it’s relatively large size, rate of employee turnover, growth rate, or combination of these factors, and (2) is stable in the region and is not likely to close, relocate, or be acquired. This second criteria is getting harder and harder to meet. Even Big Pharma has closed down a number of its research facilities in the past year, with significant negative effects on the communities involved. For example, Pfizer abandoned its New London, CT research campus (and moved 1,400 jobs) leaving the town devastated. And even Big Biotech (e.g. Genentech), as we now know, was not too big to be acquired. Amgen’s Helix campus here in Seattle would meet this general definition as an anchor tenant, but more significantly, I would argue that Dendreon is currently functioning in this capacity as well. Their hiring surge in the past few years has been a tremendous boon for biotech employment and image in the region. Interestingly, the unconventional nature of Dendreon’s first “drug” Provenge (an individualized treatment for prostate cancer) has held potential acquirers at bay while they struggle to understand the business model and gauge its success. It has also goosed a renaissance in immunotherapy research in the biotechnology community.

I guess I look at the ZymoGenetics acquisition in the same way that people in Cleveland look at the loss of LeBron James to the Miami Heat. They spent years watching him develop his game to the highest level, only to see him depart just when they were hoping for greatness. Yes, it was his decision to leave, but would the fans be less upset if he had been traded to Miami for a second round draft choice just so the team could save payroll? Publicly traded biotechs are supposed to be acting in the best interests of their shareholders, but this may not align with the best interests of their employees or the greater public at large. To throw in one more sports analogy, the Green Bay Packers thrive in the smallest market of any team in professional sports. However, because the people in Green Bay actually own the team, they never have to worry about them leaving town for a bigger market. Could such a model work in biotech?

Carl is right when he says biotech is a risky business due to the possibility of being either shut down or acquired. It is not for the timid. However, I can envision a different scenario, not one of growth, acquisition, and reinvention, but of growth and expansion. PATH, Seattle BioMed, Seattle Children’s Hospital, and the Fred Hutchinson Cancer Research Center are all organizations that have grown tremendously in recent years. Seattle is now recognized as a world leader in global health as a result of the strong efforts of some of these groups along with significant funding from the Gates Foundation. Why not have as a goal doing the same thing here on the biotechnology side? In an Xconomy piece I wrote last year, I put forth two proposals for stimulating the local biotech industry. These were (1) the attraction of anchor tenant(s) to stabilize jobs, and (2) to establish a non-profit biopharmaceutical organization that could not be acquired. The response I received on these suggestions was uniformly positive. Focusing on the second proposal, take a look at organizations like the Aeras Global TB Vaccine Foundation in Rockville, MD, the Institute for One World Health in San Francisco, the Sabin Vaccine Institute in Washington, DC, and Cancer Research Technology Ltd. in the UK. Though they are structured differently and work in distinct areas, they are all focused on creating new treatments for diseases within an organizational structure that is meant to keep them independent. Not being publicly traded, they are not available to be sold, which, on the employment side of the ledger, is a tremendous advantage. Maybe we could create a similar type of institution here? This is something else that we can reflect on as the ZymoGenetics acquisition sorts itself out in the days and weeks ahead.

Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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