Scientific Methods
Genentech's steady focus on research yields a plump bottom line
Paul Moran's eyes light up as he points out the brand-new compound-screening machine at a 550,000-square-foot Genentech research center. The pricey apparatus resembles a phone booth and will be able to sift through over 1 million points of data in a day. It's just one of many indulgences the biotechnology company lavishes on its close to 1,000 researchers. The scientists not only have access to state-of-the-art equipment but can also spend work time on personal projects and attend seminars given by visiting scholars. "Here we have the luxury of checking out ideas," says Moran, a senior research associate.
Make no mistake, though. Genentech may have scholarly trappings, but there's nothing academic about its bottom line. While the drug development industry is plagued by myriad ills, the 31-year-old company, a biotech pioneer, has been churning out new therapies and expanding sales from its South San Francisco headquarters. Genentech has moved beyond its specialty of making gene-based cancer drugs, branching into immunology and tissue-growth therapies. In 2006, it won eight Food and Drug Administration approvals for new products and new uses for existing treatments, even as the agency has toughened standards. Last year Genentech earned $2.4 billion, up from $1.4 billion in 2005. Genentech is "the single most successful company in bringing new products" to market, says Steven Burrill, CEO of biotech investment firm Burrill & Co.
The $92 billion value of its shares in the market now places Genentech in the same league with drug giants like Merck, which often buy research rather than produce it. But Genentech has no plans to lose the intense focus on science that got it this far. It is stepping up basic science programs to make sure they don't get lost in the scramble for profit as it evolves into a bigger corporation. Meanwhile, the company is using newfound wealth to broaden its search for discoveries outside its Bay Area buildings. Staying hungry will "keep [Genentech] from stagnating," says Rodman & Renshaw analyst Michael King. "There are going to be some blowups, but that's where the big finds are-not in doing what the next guy is doing."
Genentech executives believe the company has prospered by writing its own rules. Many doubted that current CEO Arthur Levinson, who has a Ph.D. in biochemistry from Princeton and headed Genentech's research labs, could manage a huge company. And senior managers run their own labs. Having those dual roles is uncommon at major drug companies, but Genentech executives think "being in the trenches" puts them in the best position to make new discoveries. In contrast, Pfizer CEO Jeffrey Kindler has a law degree and previously led Pfizer's legal team.
Picky. Success has bred self-confidence in Genentech's science-based methods. Executives don't see growth impeding what they believe is a superior workplace culture. "I don't understand why it has to change," says Richard Scheller, executive vice president of research. "Research could have grown even faster if we found people to meet our standards." Overall, the company's ranks have swelled from 3,900 employees in 1999 to 10,500 this year. The company receives 15,000 unsolicited resumes a month but will leave positions open for months to find the right candidate.
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