When Amgen, Inc. was founded in 1980, biotechnology was an uncharted scientific frontier. Cetus Corporation, the world’s first biotechnology company was struggling under poor management, and William Bowes, financial manager and board member, was becoming frustrated.
Bowes left the board of Cetus to found Applied Molecular Genetics (Amgen). Bowes hired Winston Salser, a UCLA scientist, to collaborate with him at the new company.
Salser began recruiting a formidable scientific advisory board. With influential advisory board members in place, Bowes was able to raise $200,000 in seed capital from six venture capitalists.
With this funding, Amgen recruited the former chief of Abbott Laboratories’ diagnostics division, George Rathmann, to be CEO of the new company. Rathmann immediately set out to raise a large round of private equity funding to begin operations.
At first, venture investors were hesitant to invest significantly in a new company in a relatively unknown industry. At the time, insulin was the only genetically engineered substance approved for human use, and an investment in biotechnology was seen as incredibly risky. To solve the problem, Rathmann approached potential strategic investors and successfully secured private equity funding from Abbott Laboratories and Tosco Corporation.
With the financial endorsement of these large companies, Rathmann was then able to make his case to the venture capitalists who made up the remainder of the $19.4 million round. At the time, it was one of the largest private placements ever for a company focused on genetic engineering.
In 1982, Amgen tendered an IPO raising $42.3 million. This came on the heels of a remarkably successful IPO by rival Genentech, which created a short-lived biotech frenzy on Wall Street.
One of the greatest initial challenges at Amgen was to select which products to develop. The company recruited big-name researchers from leading pharmaceutical companies in order to create a panel qualified to evaluate different potential directions for research and development.
By 1983, Amgen had grown to 185 employees who battled for lab space in the company’s cramped offices in Thousand Oaks, California. Amgen was spending a lot of money and had yet to come up with a product for the human market. Instead, Amgen had focused on designing growth hormones for livestock, detergent enzymes, and other profitable offerings that could help stem the outflow of cash.
Rathmann was a business-minded scientist who ran the company’s R&D operations with strict timetables and goals. While other biotech companies were spending millions to identify and develop a whole array of new compounds with little regard for market potential, Rathmann insisted that Amgen target only products with large potential markets.
The company eventually identified five therapeutic products that showed promise, then narrowed its focus down to one. Amgen wanted to isolate and clone the erythropoietin (EPO) gene responsible for stimulating red blood cell production. In October of 1983, pressured by Rathmann to either succeed or shut down his research, Amgen scientist Fu-Kuen Lin finally isolated the EPO gene and successfully cloned it using the ovarian cells from a Chinese hamster.
Having raised enough early funding to prevent the company from having to license away its best discoveries, Amgen survived the lengthy FDA approval process and, in 1989, was granted the right to begin selling Epogen, their EPO drug. Four years earlier, Amgen had formed a joint venture with Kirin Brewery.
From Kirin, Amgen gained access to critical manufacturing technology for their new drug in exchange for some international marketing rights. Because Rathmann had invested early and heavily in manufacturing and marketing, betting the company on a $20-million production facility fully three years before Epogen was approved by the FDA, Amgen was well positioned to take advantage of the uncontested market for EPO-based products.
Amgen began as a little-known drug developer based in the outskirts of Los Angeles. Thirty years later, the company earns US$15 billion in annual revenues and employs 14,000 across North America, Europe, Asia, Australia and the Middle East. Amgen’s visionary founders succeeded in bringing breakthrough therapeutics to the market at a time when both venture-capital financing and biotechnology were new to the world.
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