This post continues to describe how prospecting for microbial organisms can lead to products of very high value and is a good entrepreneurial opportunity. In the next post, I will get to my case about where this future lies.

Since there is a Canadian election coming, and there is no meaningful discussion of science and technology policy, examples in this post will be used to highlight some issues that successive Canadian governments have missed for decades. This is crucial to the future of international competitiveness.

If there is any doubt that prospecting for microbes has any value, we can start with the first cycle of innovation in this endeavour of bio-prospecting. It resulted in the most breath-taking development in the history of medicine.

The first cycle: antibiotics

In 1928, Alexander Fleming discovered penicillin while working at a hospital laboratory in London. Upon returning from summer holidays, he noticed an open petri dish on a window sill was contaminated with a fungus. All staphylococci bacterial colonies near that growing fungus were killed by something being secreted by that fungus, which turned out to be from the genus, Penicillium.

What is less described, but important to note from the commercialization perspective, was that Fleming could not grow enough of this fungus in large quantity to isolate enough of its antibacterial secretion for human testing. In fact, he eventually abandoned this line of research.

Two professors from Oxford university—Howard Florey and Ernest Chain—advanced its application over a decade after Fleming’s first discovery. In February 1941, Florey and Chain isolated enough of the crude extract from this mold to treat their first patient, a London police constable. The patient’s condition improved dramatically within 24 hours, but eventually relapsed and died, because there was not enough antibiotic to sustain treatment.

The yield of penicillin from the fungus was low, its isolation and extraction were difficult, the purification often failed, and there were no assays available. As we will see, how to overcome these hurdles is critical, not just medically but, ultimately, for a nation’s economic competitiveness. This is doing applied science, vs. the basic science of discovering penicillin.

The British research infrastructure was in ruins in the midst of the second World War (1939-1945). Florey and Chain went to the United States to find an American lab that could take on the effort of scaling up production. They met with the Office of Scientific Research and Development (OSRD), a U.S. federal agency for applied science.

American labs were also not experienced in growing microbes and extracting and purifying their active ingredients. In October 1941, OSRD met with four selected American drug companies with the most likely capability to take on this work, to encourage them to produce penicillin: Lederle Labs, Merck, Pfizer, and E.R. Squibb and Sons. All of them declined except Merck, a company whose commitment to fundamental scientific research and applied research continue to this day.

On March 14, 1942, just five months after that OSRD meeting, Merck had produced enough drug for human testing. Anne Miller had been dying of an acute streptococcal infection. The only available treatment at the time, sulfa drugs, had failed to improve her condition. Her fever had peaked at 106.5°F (41.4°C). Her bacterial blood count was “well over 50 per cubic centimeter.” At 3:30 pm Saturday afternoon, she received her first injection of Merck’s penicillin. By 4:00 am the next day, her body temperature had returned to normal. By Monday, her bacterial blood count was sterile. Ms. Miller lived to the age of 90.

By 1944, penicillin could be produced by fermentation and extraction at global industrial quantities.

In 1945, Fleming, Chain and Florey were award the Nobel Prize in Physiology or Medicine “for the discovery of penicillin and its curative effect in various infectious diseases.”

As is usually the case in science and technology, discoveries and technology trajectories do not occur in isolation. Other groups were actively engaged in prospecting for microbes that could kill bacteria.

For example, René Dubos, a microbiologist from Rockefeller University, started screening soil samples well before Fleming’s discovery. In 1927, Dubos started looking for a soil microbe that could kill the bacteria responsible for pneumonia.

In 1939, Professor Selman Waksman of Rutgers University started a large scale screening effort to find bacterial extracts that could kill virulent bacteria. He was the one to coin the term “antibiotics.”

Ironically, this type of applied research did not appeal to Rutgers University, who tried to fire him. With no sources of funding, he struck a deal with Merck, granting the company exclusive rights to all his discoveries.

In 1940, Waksman’s lab discovered their first antibiotic: actinomycin. It was too toxic as an antibiotic, but it is now used in cancer chemotherapy.

On October 19, 1943, Waksman’s lab discovered streptomycin, isolated from a bacterium in a soil sample collected from a “heavily manured field” from the New Jersey Agricultural Experimental Station.

This became the first antibiotic cure for tuberculosis (TB). Merck was now experienced in microbial fermentation, antibiotic isolation, extraction and purification. By February 1944, Merck produced enough streptomycin, in a record time of 4 months, for animal testing. In October 1944, a young woman with TB, hospitalized for over a year, was the first person to be administered streptomycin. The lesions in her lungs cleared within 6 months. 18 months later, her sputum was free of the mycobacterium responsible for TB. She was released from the hospital in 1947 and soon married and started a family with three children.

Worried about Merck’s exclusivity to such a valuable drug, Waksman appealed to Merck to release him from this exclusivity, to which Merck agreed. While Merck pioneered the development of penicillin and streptomycin, its magnanimity in relinquishing exclusivity resulted in Pfizer being the largest manufacturer of these medicines by 1947.

In 1952, Waksman was awarded the Nobel Prize in Physiology or Medicine for “ingenious, systematic and successful studies of the soil microbes that led to the discovery of streptomycin.”

Waksman used some of the royalties from streptomycin to found the Waksman Institute of Microbiology on the Rutgers University Busch campus, at the very university that tried to force him out for his work in this area.

The golden age of antibiotic discovery and development started in the 1950s and continued for over 20 years. Pharmaceutical companies, particularly Merck, Pfizer and Eli Lilly, started large scale prospecting efforts to collect soil samples from jungles, deserts, mountaintops and oceans in search of new antibiotics. Almost all of our antibiotics today derive from organisms procured in these efforts.

Government policy towards applied science

This golden age of antibiotic discovery was an important innovation cycle for the pharmaceutical industry. Apart from saving hundreds of millions of lives that would otherwise have died due to infection, this period provided income to sustain these pharmaceutical companies into the next innovation cycle, allowing them to develop new medicines for other conditions.

Of note for economic development, how the U.S. captured leadership at this point was due not just to the research infrastructure challenges faced by England during the war.

The U.S. government had an active role—at the time, through the Office of Scientific Research and Development (OSRD)—to facilitate and fund the development of technology for important applications.

Granted, this was a war time effort, but OSRD’s work with antibiotics (the full details of which are too policy wonky to describe here) is an early application of that philosophy.

OSRD was conceived and headed by Vannevar Bush, a former MIT professor, who is a giant in U.S. science policy. Prior to his time, government was not a significant funder of science. The experience with OSRD led to a seminal policy paper commissioned by Bush: “Science, the Endless Frontier.” It was released in 1945  and made the case for linking science and R&D to a country’s economic well-being and security. The ideas laid out there have led to important U.S. science policies that also support applied research, making the nation a global leader in technology today.

The nuance is how basic science vs. applied science are supported by the government. In the U.S. and a few other countries, policy practice has taken a form that supports applied science. The benefit of getting this nuance right is that the economies of the countries that support applied science, properly, feature companies with globally competitive technologies. Germany is an example. Singapore punches well above their population base.

Canada is not one of these countries. I have worked in economic development at the federal and provincial levels. All Canadian governments fund basic research, but consciously stay out of applied research as a matter of philosophy and policy. This is a mistaken path.

The antibiotic work that was supported by OSRD made its way to two pharmaceutical companies, Merck and Pfizer, whose labs sat halfway between New York City and Philadelphia. Their close proximity to Rutgers University allowed them to tap into the work at Waksman’s lab. This is the industry cluster effect, which further helps in economic development.

The economic results are that these companies provided jobs to highly skilled scientists and engineers ever since, and have been anchor companies in building an economically significant industry hub spanning between New York City and Philadelphia that endures to this day.

 The economic value of applied science

One important feature in the advancement of science and technology is that discoveries and technology trajectories never occur in isolation. Whatever new field it is, multiple groups from anywhere in the world are certainly doing the same thing and embarking on the same path, as exemplified previously in the practice of screening for antibiotics.

This is one of the reasons government support of applied research is important for economic development. If a company cannot capture leadership soon, it will be lost to another company in another country.

Penicillin was discovered in England through excellent basic science. Its commercial development was enabled by applied science that was done by American companies, supported by government policy. The long term jobs and government tax revenue were captured by USA.

As an another example, insulin was first extracted and purified successfully in Toronto Canada, and this is often cited by Canadians as a proud accomplishment of basic science.

The applied research was conducted by American company Eli Lilly, and later, by American company Genentech and Danish company Novo Nordisk, again supported by certain government policy instruments (such as SBIRs in the case of Genentech). The many jobs and tax revenues that came out of the applied science went to USA and Denmark, and these are economic benefits that continue to accrue over decades and generations.

As for the long term economic benefit of basic science, if the country that made the investment in the basic science does not continue to support the follow on of the applied science, the basic scientific discoveries become gifts to the world. The commercial economic benefits will be lost. What is left for that country are scientific accounts in fading text books and archived research journals which eventually become a footnote on Wikipedia. Nobel prize medals, if they are ever donated, will sit in museums viewed by paying tourists.

The second cycle: immunosuppressive drugs

Another important feature in the advancement of science and technology is that value in the next innovation cycle always shifts elsewhere.

The golden age of antibiotic discovery started around 1950, peaked in the 1960s, and started to fall off into a long tail, where fewer and fewer antibiotics were developed after the 1970s.

The methods of prospecting samples from all around the world, screening them, and conducting assays had been well developed during this period. This was an enormously expensive operation which could no longer be sustained as the antibiotic class of drugs became commoditized.

However, that does not mean that bio-prospected organisms have no further value. They do, but the value shifts to some other place.

  • Cyclosporine was isolated from a fungus obtained from a soil sample collected in 1970 in Norway near the Arctic Circle.
  • Sirolimus (rapamycin) was isolated from a bacterium in a soil sample collected in 1972 from Easter Island.
  • Tacrolimus was isolated from a bacterium in a soil sample collected in 1984 from a mountainside in Japan.

In these three examples, the value migration is to another set of medical conditions. This value is captured through application development. Though soil sampling and screening are essential, successful companies need to commoditize the soil sampling and screening steps into lower cost activities and focus on building other enabling capabilities.

  • Cyclosporine was discovered by scientists at Sandoz to be an immunosuppressant. It has since been approved for immunosuppression in organ transplantation and to treat various inflammatory conditions. First launched in 1983, it is now on the World Health Organization’s List of Essential Medicines.
  • Sirolimus’ development as an antifungal drug was abandoned in the mid 1970’s because its antifungal benefits were outweighed by its immunosuppressive toxicity. By the mid-1980’s advances in organ transplantation created a new need to treat transplant organ rejection. That was when a Wyeth-Ayerst scientist spotted the potential of sirolimus. By 2000, sirolimus received its first approval, for use in kidney transplantation.
  • Another set of scientists observed that transplanted rat hearts treated with sirolimus had clean coronary arteries instead of the usual  intimal thickening observed in heart transplantation. This led to the development of the first drug-eluting stent, where the stent is coated with sirolimus, to prevent restenosis of coronary arteries after coronary stenting. Johnson & Johnson’s Cordis division launched this product in 2002.
  • Tacrolimus was targeted by scientists at Astellas to be an immunosuppressant very early in its development, following the work of cyclosporine and sirolimus. This led to its first approval, in 1994, for treating organ rejection in liver transplantation.

None of the original companies that screened samples for antibiotics captured this second cycle of innovation. These products were developed and launched by a different set of companies.

The difference between these two sets of companies is that the former set of companies optimized their operation to work in an upstream part of the R&D process while the latter set of companies have operations to perform activities further downstream in the R&D process, where value in the new cycle of innovation is created.

Startup companies with technology from university labs also fall into this trap. Seeing the paradigm of the current or prior cycle of innovation, their tendency is to follow that paradigm—to “create a better mouse trap.” Being academic labs, there is no exposure to the real world commercial market to discern where commercial value has migrated, and to figure out where the future cycle of innovation lies.

This is one reason where funding of applied science properly requires a nuanced mechanism to allow for this real world feedback.

Having worked in economic development in Canada, I have seen first-hand that there is no input or partnership with industry. The only industry involvement is from a company’s government affairs staff, to lobby for advantages for the company.

How helpful is that for developing good R&D policy by the government?

Prospecting for microbes (part 2) and examples to address science policy
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