Biotechnology uses living organisms or their components to create products that have reshaped modern medicine and industry. The field was commercially pioneered by Genentech, a company established in 1976. Genentech translated the science of genetics into a viable business, proving that life’s building blocks could be harnessed to develop novel therapeutics and setting the precedent for a new industry.
The Scientific Foundation
The biotechnology industry is built on recombinant DNA technology. This method allows scientists to transfer genetic material from one organism to another, acting as a biological “cut and paste” tool. A specific gene is isolated from one organism’s DNA and inserted into the DNA of a simpler one, instructing the host to produce a foreign protein.
In 1973, scientists Stanley Cohen and Herbert Boyer demonstrated this technology by inserting a gene from an African clawed frog into E. coli bacteria. The bacteria then replicated, producing the corresponding frog protein. This experiment confirmed that genes from a complex organism could function inside a simple one, establishing the method for genetic engineering and the scientific basis for commercial biotechnology.
The Founding of Genentech
Genentech was formed through a partnership between venture capitalist Robert A. Swanson and Dr. Herbert W. Boyer, one of the scientists behind the recombinant DNA breakthrough. Swanson recognized the commercial possibilities of Boyer’s research and in 1976, cold-called Boyer’s lab at the University of California, San Francisco.
Though Boyer initially agreed to only a brief meeting, Swanson’s vision for commercializing the technology was persuasive. Their discussion extended into a three-hour strategy session. Following the meeting, they each invested $500 to form a partnership named Genentech—an abbreviation for Genetic Engineering Technology.
This collaboration was novel, bridging the separate worlds of academic science and venture capital. It created a business model that would define the biotechnology sector.
Genentech’s First Major Breakthroughs
Genentech’s first success came in 1977, in collaboration with researchers at the City of Hope National Medical Center. The company synthesized the human hormone somatostatin in E. coli bacteria. This was the first time a human protein had been produced via recombinant DNA technology, serving as an important proof-of-concept.
Genentech next targeted human insulin. At the time, diabetics used insulin from cows and pigs, which could cause allergic reactions and had a limited supply. The company aimed to create a pure, unlimited source of human insulin to overcome these drawbacks.
By 1978, Genentech scientists constructed a plasmid with the genetic code for human insulin and inserted it into bacteria. To handle drug development and distribution, Genentech partnered with the pharmaceutical company Eli Lilly. This collaboration led to the 1982 market approval of Humulin, the first recombinant DNA drug.
The Birth of an Industry
Genentech’s success culminated in its Initial Public Offering (IPO) on October 14, 1980. The company’s stock price surged from $35 to a high of $88 per share within the first hour of trading. This event signaled to the financial world that biotechnology was a promising field for investment.
This IPO was a catalyst that sparked a wave of investment and fueled the creation of a new economic sector. It inspired scientists and entrepreneurs to form their own companies to apply genetic engineering to problems in medicine and agriculture. By 1985, the industry had attracted over $3 billion in capital.
Genentech’s story proved that academic research could be transformed into valuable commercial products that addressed societal needs. The company did not just create the first biotech product; it provided the blueprint for an entire industry. Its legacy is establishing biotechnology as an engine of both scientific discovery and economic growth.