A Booster For Gene Therapy

Like most of the biotech industry, gene therapy has had a wild ride on Wall Street. Advances in the ability to slip genes into cells have given rise to the tantalizing prospect of being able to fight everything from cancer to cystic fibrosis. But last year, the shares of the small companies trying to exploit the new technology plunged. Investors realized how daunting the road from lab to product is--and how hard it is to predict which company, if any, will end up owning key technologies and techniques.

Now, some of these issues are starting to settle out. On Mar. 21, the Patent & Trademark Office issued the first major gene therapy patent to three pioneering scientists at the National Institutes of Health. And under the terms of a 1990 technology-transfer agreement, the patent is automatically licensed to Genetic Therapy Inc. (GTI) of Gaithersburg, Md., one of the first--and largest--gene therapy companies. "This is the best thing that can happen to gene therapy," says lead inventor and GTI co-founder W. French Anderson. With patent protection in place, he predicts, "money will begin to flow back in."

Into GTI in particular. The patent is so broad that many experts are comparing it to the 1976 patent on gene splicing issued to Stanford University and the University of California at Berkeley. It covers all products based on so-called ex vivo therapy--the idea of taking cells out of the body, adding new genes, then putting the cells back in to tackle diseases. GTI's stock jumped 17.6%, to $10, on the day of the news--a sizable hike, though far from huge by biotech standards.

The reason: Many investors and GTI rivals still are unsure how big a victory GTI has won. "It's not as clear-cut as anyone would have you believe," warns Hal Broderson, co-founder of Rockville (Md.)-based gene therapy startup GenVec Inc. For one thing, the Patent Office has blundered recently, issuing broad patents for multimedia software and plant genetic engineering that, after strong protests, were withdrawn. CEO Robert T. Abbott of Viagene Inc., a San Diego gene therapy firm, suggests the GTI patent, too, may be so broad it's unenforceable. If so, he says, "the long-term commercial impact will be small."

Perhaps more important, research is rapidly evolving away from GTI's approach. Companies working on ex vivo approaches may have to license the GTI patent, but the industry is moving toward "in vivo" methods--injecting genes directly into the body. That isn't covered in the new patent.

The situation is complicated by patents already held on bits and pieces of gene therapy. Somatix Therapy Corp., for example, has rights to a few types of cells, and lots more patents are pending. By the time products come out, every company will have to assemble a portfolio of patents, some licensed from others, predicts Somatix Chief Financial Officer Mark N.K. Bagnall.

Still, many GTI rivals are happy the government is issuing broad patents for gene therapy--even if they mostly benefit GTI now. "It's a very positive signal," says Lisa J. Raines, vice-president of Genzyme Corp. in Cambridge, Mass. But given the continuing doubts about the implications of the GTI patent, the wild ride for investors may not be over.