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INSTITUTE FOR GENOMIC RESEARCH GETS $70 MIL. VENTURE CAPITAL COMMITMENT FROM HEALTHCARE INVESTMENT CORP.; NIH’s VENTER TO HEAD NEW GENE SEQUENCING FACILITY

Executive Summary

The venture capital group Healthcare Investment Corp.'s $70 mil. backing for the newly-organized Institute for Genomic Research will allow genome researcher Craig Venter, PhD, to as much as triple lab personnel from levels at NIH. Venter, a section chief and lab chief at the National Institute for Neurological Disorders and Stroke, has been a leader in the development of automated gene sequencing technology. He currently oversees 30 to 40 researchers in his lab at NIH, most of whom are moving with him to the new institute. All told, the Institute will have between 70 and 100 genetic scientists. With a promise of $70 mil. over 10 years from HIC, Venter said he will be able to expand his automated gene sequencing programs "10-fold." The new facility will have 30 gene sequencing instruments and an extensive computer facility, allowing scientists to sequence as many as 2,000 genes per week, Venter reported. Currently, NIH labs are able to sequence only about 1,000 genes per month. Venter said his institute could be expected to sequence as much as "50% of the human genome" over the next few years. The first privately funded and the world's largest gene sequencing establishment, the not-for-profit Institute for Genomic Research will be "devoted to increasing the understanding of human, animal and plant biology through the rapid sequencing and functional characterization of expressed genes," Venter said in a July 6 statement. He is set to begin work at the Institute the week of July 13. The actual funding for the Institute will come from Human Genome Sciences, a separate for-profit company set up by HIC to "foster the development of health care products from the basic research of the Institute." HIC Chairman and Founder Wallace Steinberg, a former research and marketing exec at J&J, is chairman of Human Genome Sciences. HIC President James Cavanaugh, previously president of Smith Kline & French Labs-U.S. and chief of the White House staff under President Ford, sits on the HGS board. HGS will be a "pretty sizable company," according to HIC, with staffing of 20 to 50 people in the first year and increasing rapidly thereafter. HIC says it is looking for a CEO to manage the business. HIC is not disclosing how HGS will deliver the $70 mil., whether through amortized grants over the 10-year period or larger initial cash infusions. Venter's funding at NIH was about $1 mil. a year, with an additional $400,000 a year from the Department of Energy. Previous HIC proteges include Genetic Therapy, Inc. and MedImmune. If GTI were taken as a benchmark, initial seed capital for the Institute could be in the $2.5 mil. to $4 mil. range. HIC says it is the "largest venture capital fund in the world devoted exclusively to private helath care investments," with a total capitalization exceeding $350 mil. HIC has funded more than 20 healthcare start-ups ("The Pink Sheet" Nov. 4, 1991, p. 9). While Venter and his colleagues will have complete freedom to publish their research results, all commercial products developed at the institute will be the exclusive property of HGS. Both HGS and the Institute will be located in Maryland's Montgomery County in the Washington, D.C. metropolitan area. According to Venter, he accepted the HIC offer after turning down several other private sector opportunities because the venture capital group will allow him "total independence" to guide the scientific and policy agendas of the institute. Both parties are emphasizing the hands-off nature of the relationship between HGS and the Institute. While HGS will have rights to commercialize the Institute's inventions, it will not have any representation on its board of directors or in its management structure, Steinberg said. "The institute will be a completely independent not-for-profit organization...free to accept grants from other sources from day one," he said. Since 1990, Venter has published information on more than 2,300 brain gene sequences, and attempts by NIH to patent these sequences have sparked an international debate over the appropriateness of patenting gene fragments that have an unknown function. It is not yet known whether Venter and his commercial partners will follow NIH's lead in attempting to patent partial gene sequences. At the present time, Venter commented, he is "leaning" towards not patenting such sequences until their function is known; however, he said, the Institute's final position will depend heavily on the decisions of NIH and the Patent & Trademark Office office. "About one third" of the Institute's staff and resources will be devoted to characterizing gene function, Venter noted. While the Venter deal is the highest profile gene sequencing deal to come to fruition, other prominent genome researchers have expressed interest in the private sector. An article in the Feb. 6 issue of Nature reported that entrepreneur Frederick Bourke was wooing leading gene scientists to join a startup company in Seattle. While that venture apparently has not yet gotten off the ground, HIC's Steinberg said he expects the gene sequencing field to become "very, very crowded."

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