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Microgenesys Triumph Good For Sufferers, Unsettling For Investors With AM-AIDS-Microgenesys

August 20, 1987

NEW YORK (AP) _ A small Connecticut company’s surprise showing in the race for an AIDS vaccine is good news for medical research but unsettling for investors trying to peg a corporate winner in the life-saving contest.

Microgenesys Inc. of West Haven, Conn., gave heart this week to people waiting for weapons against AIDS by showing that important advances can come from out-of-the-way places.

Microgenesys (pronounced micro-genesis) has only 30 employees and shares a building with a furniture warehouse and a helicopter parts supplier. Nevertheless, it was selected recently by the Food and Drug Administration to be the first to test an experimental AIDS vaccine on people.

Doing so, it beat out such world-class competitors as Genentech Inc., Chiron Corp. in collaboration with Ciba-Geigy Corp., Repligen Corp. with Merck & Co., and Cambridge Bioscience Corp. with Institut Merieux of France.

Microgenesys also got a jump on two others that have applied for FDA approval to begin human clinical tests: the Oncogen division Bristol-Myers Co. and the Houston-based Institute of Immunological Disorders in collaboration with George Washington University.

While an advance for medicine, the Microgenesys development upset the calculations of investors who have been trying to figure which companies will strike it rich some day with an AIDS vaccine.

″How a company like this one comes out of nowhere - I don’t know,″ said Gary Hatton, a life sciences analyst for Granahan Investment Management Inc. of Waltham, Mass.

″The fact that one company can come out of nowhere means all the cards aren’t on the table,″ Hatton said.

Worldwide, there are 39 research organizations and 36 companies working on AIDS vaccines, according to Manny Ratafia, president of Technology Management Group of New Haven, Conn.

Microgenesys proved that any one of them can jump into the lead with the right combination of hard work, insight and luck.

Venture capitalists and stock market players in the AIDS business are sometimes seen by critics as vultures. But in fact, the dollars they put into biotechnology companies are what pay for the research that could some day cure or prevent the disease.

Hatton advises investors it is too risky to pick companies solely on the basis of their work on an AIDS vaccine. He advises them to look at a company’s entire product mix. So does Lynne Pauls, an analyst for E.F. Hutton & Co.

″If you start at point one and you have a mass immunization program at point 10, right now we’re somewhere between point one and point two,″ Ms. Pauls said. ″There’s still 90 percent of the road to go.″

The clinical trial of the Microgenesys vaccine is to measure the safety of the vaccine and see if it produces an immune response. A test to see if it actually protects against AIDS will come later, and a working vaccine may still be a decade away, federal health officials say.

Still, the Microgenesys first is important from a scientific as well as a business viewpoint, especially if it somehow manages to hold its narrow lead.

″Getting the first product out for something like an AIDS vaccine is a major advantage. The first one out tends to garner a large part of the market,″ Ratafia said.

Some analysts say the smallness of Microgenesys may actually have been an asset. The company does not have to answer to stockholders because it is privately held. Franklin Volvovitz, the 38-year-old chairman and president, has not revealed who the owners are.

Keeping the highly productive, imaginative atmosphere of a small ″skunk works″ is a constant struggle for biotechnology companies as they grow.

″Science is so important in our company, keeping that creative spirit and atmosphere, so it’s something we keep at, even though we have 1,300 employees now,″ Genentech spokeswoman Carol Crawford said.

Chiron’s scientific spirit is actually stronger since the company’s dramatic increase in size, according to Dina Dino, director of virology research at the Emeryville, Calif.-based company. Its workforce has grown about 50 percent over the past year and now has just under 300 employees.

″It’s easier to mobilize overnight what you need to get something done,″ Dino said. ″I don’t think we’ve become entangled in our own bureaucracy yet.″

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