Targacept CEO Addresses Audience of 1,000 at Winston-Salem Chamber of Commerce Annual Meeting
Winston-Salem, NC
November 14, 2001
J. Donald deBethizy, Ph.D.
President and CEO of Targacept, Inc.
Address to Winston-Salem Chamber of Commerce 116th Annual Meeting and Luncheon: "How Targacept and the Triad are taking their place in the global biotechnology industry"
We are living in a hostile world. Each day, we read or hear about some new aspect of global terror. Hijackings, car bombs, snipers and anti-aircraft missiles are the stuff of everyday news.
New words like bioterrorism and anthrax have suddenly become part of our daily vocabulary. We are also rediscovering some old, terrifying words like bubonic plague and smallpox. U.S. health officials have expressed their concern that hate-filled extremists may have access to rare samples of these diseases and may be developing new ways to spread them.
These are the events of our external world, and the biotechnology industry has been called into action as a result.
I was recently invited to a conference of over 200 CEOs from the biotechnology industry where Tommy Thompson, the Secretary of the U.S. Department of Health and Human Services, implored us to engage our companies in responding to these external threats. It’s clear that this new environment will demand new ways of thinking, and will challenge all of us in biotech to be even more adaptable and creative.
At the same time, the vast majority of biotech companies are, and will continue to be, focused on the events of our internal world. I’m referring to the diseases that may already be present inside our bodies and waiting for the opportunity to make their deadly strike.
Take Alzheimer’s disease as an example. Alzheimer’s is a front-line terrorist that attacks the brain’s nerve cells, destroying thought, memory and language.
Parkinson’s disease sets up roadblocks that prevent the brain from producing a vital chemical called dopamine. This roadblock causes deterioration in motor skills, affecting everything from swallowing to walking.
Ulcerative colitis invades the body’s immune system, triggering numerous debilitating effects on the intestines and colon.
The number of Americans who are falling victim to these terrible internal enemies is staggering. The U.S. government has estimated that there are up to four million people who currently suffer from Alzheimer’s disease alone, with about 360,000 new cases each year. The cost, both in terms of health care spending and human suffering, is astronomical.
But don’t let me ruin your lunch.
Actually, I am here today with a very optimistic message. The good news is we are fighting back against these and other enemy diseases, using the tools of science, technology and human ingenuity.
By "we," I mean the global, U.S., and the Piedmont Triad biotechnology industries.
I’m going to define the biotechnology industry as small to mid-sized companies that engage in research and development within the life sciences. Generally speaking, biotechnology companies work with cells and their molecules to create innovative products that add value to human, animal — and even plant — health.
Biotechnology has been around for a very long time. Edward Jenner introduced the first smallpox vaccine in 1797. Two hundred and three years later, the entire map of the human genome was introduced. In those 200 years, in the U.S., scores of new biotechnology drug products and vaccines were developed that helped over 250 million people worldwide.
Many more products are still being developed. According to the Biotechnology Industry Organization, commonly known as BIO, there are more than 350 biotech drug products and vaccines currently in clinical trials targeting more than 200 diseases.
So when U.S. health officials and government leaders call upon the biotechnology industry to respond to terrorist health threats with innovative vaccines, antidotes and test kits, this is exactly what the industry is set up to do.
At the present, there are nearly 1,300 biotechnology companies in the U.S., employing more than 150,000 people. Market capitalization, which is the amount of money invested in the U.S. biotechnology industry, increased more than 150 percent in one year, soaring from about $140 billion in 1999 to $350 billion in the year 2000. And revenues tripled in the past decade, increasing from $8 billion in 1993 to $22 billion in 2000.
According to the North Carolina Biotechnology Center, our state ranks among the top five biotechnology regions in the U.S., along with San Francisco, Boston, San Diego, and the Maryland area. North Carolina’s 138 biotechnology companies generate more than $1 billion in annual sales, which should go a long way in answering the critics who say the biotech industry doesn’t make any money.
In addition, the biotech companies in this state employ about 16,000 North Carolinians and represent an annual payroll of more than $800 million. By the way, we estimate that Targacept’s payroll next year will represent about one percent of that total statewide payroll.
In addition, North Carolina is home to hundreds of other organizations that support biotech, such as contract research organizations, lab service companies, pharmaceutical and biotech suppliers, law firms and accounting firms. Deloitte & Touche, Ernst & Young, Womble Carlyle, and Kilpatrick Stockton are some of the firms that are very actively involved in this area.
The biotechnology industry in North Carolina is growing 10 to 15 percent a year. Twenty-five years from now, as many as 125,000 North Carolinians are projected to work in biotechnology, and annual revenues should approach $24 billion. That would represent about 10 percent of the current North Carolina revenues.
Here in the Triad, we have more than 20 life science and biotechnology companies.
In High Point, there are four companies:
In Greensboro, there are six companies:
In Burlington, there are four companies:
And right here in Winston-Salem there are nine biotech companies:
So — not bad for a region that 10 years ago was struggling with the loss of RJR Nabisco to Atlanta and New York. Let’s give ourselves a round of applause.
It’s quite a list and I’ve probably left several more companies out. If I have, please let me know about it, because I’m on a personal mission to communicate the Triad biotech story to the world at large. I want the Triad to be recognized as a hotbed for biotech development.
I also want to mention the work going on at local universities that is helping to fuel biotech development. Excellent research is being done at North Carolina A&T, Guilford College, High Point University and Forsyth Tech. There are an additional three that I’d like to mention in particular.
Winston-Salem State University gets a special mention from me because they were one of the first organizations to become part of the Piedmont Triad Research Park, and they’re working hard to make the park contiguous with the university. I’m also impressed with the university’s commitment to training young people for the high-tech world. This is a theme that was re-emphasized by Harold Martin during his installation as Chancellor.
The University of North Carolina at Greensboro also gets a special salute for its biotech initiatives. Last year UNCG spun out Transgreenix, a new biotechnology venture that’s developing a green fluorescent protein isolated from jellyfish. The research from this venture could have practical applications such as a healthier, more abundant food supply and genetically modified plants that could assist in the location of buried land mines.
And, in my opinion, there’s the grand-daddy of them all, Wake Forest University, which engages in some of the most important life science research in the U.S. Wake Forest is a powerful economic engine for biotech development because it receives over $100 million a year in federal biomedical research money.
Just last month, the university announced that it would join with Virginia Polytechnic Institute to form the joint School for Biomedical Engineering and Sciences, which will begin enrolling students in fall 2002. The genomics revolution and the resulting field of bioinformatics have substantially increased the demand for biomedical engineers, and so this school will be a major asset to Wake Forest’s and the Triad’s life science and biotech development.
Two years ago, Wake Forest’s trustees approved a $67 million initiative to conduct new life science research. A major objective of this initiative was to continue to help drive local economic growth. Pilot Therapeutics, Amplistar, Point Dx and Kucera all originated from Wake Forest University research.
Also at Wake Forest, the Department of Physiology and Pharmacology has a significant presence in the biotech community at large. The department ranks second in the nation in funding from the National Institutes of Health, receiving over $13 million annually. This makes it possible for them to pursue research on central nervous system diseases.
Targacept is currently collaborating with Phys/Pharm on a $200,000 grant from the Golden Leaf Foundation to study how drugs like nicotine can treat schizophrenia. We look forward to being right across the street from the department when Targacept moves to the Piedmont Triad Research Park in the first quarter of next year.
By the way, Targacept would like to publicly thank Wake Forest University and the School of Medicine for making our move to the research park a reality. The University purchased and modified One Technology Place into the kind of facility we needed to support our mission.
We are also particularly grateful to Winston-Salem’s leadership for creating and maintaining a dynamic environment where companies such as Targacept — and the others I have mentioned — can flourish.
I should mention, though, that although we’ve made a good start at the research park, much remains to be done, particularly on infrastructure development and supporting services. But as they say, every journey begins with a single step.
The research park serves as an excellent metaphor for the growth in life science technology in North Carolina and the Triad. In North Carolina, the number of biotech companies and contract research organizations more than tripled in the 12 years from 1988 to 2000.
Here in Winston-Salem, we’ve been growing just as fast, even though we got a later start. Ten years ago, there was no Piedmont Triad Research Park, just a few scattered buildings that were remnants of this town’s older technology.
Idealliance took the lead in developing the research park, working in collaboration with its partners from academia, business and local and county government.
The Phys/Pharm department from the Medical School was the first tenant, moving into the park in 1996. In five short years, the park has blossomed into a community of innovation. Today there are nearly 20 companies with 350 employees doing business in the park. Nearly half of these are involved in biotech.
As a result of all this growth, the Piedmont Triad has earned a prominent position on the U.S. biotechnology map — both literally and figuratively.
BioSpace, Inc., which is a major web-based resource for U.S. and global biotech, is currently producing a map of North Carolina’s life science companies. BioSpace has already created maps for several other hotbed biotech communities, including the original "Biotech Bay" map of the San Diego region. This map is now on permanent display in the Smithsonian Institution. Now it’s North Carolina’s turn to step up and be recognized.
Originally the North Carolina BioSpace map was restricted to Research Triangle Park — you know, the area that’s home to those little companies like Glaxo SmithKline, Bayer, BASF and Becton Dickinson. However, we here in the Triad were able to convince the mapmakers that we have earned a place on the bio map too, and they agreed. The grand unveiling of this wider North Carolina map will be in Durham on December 5.
Having the Piedmont Triad included on the North Carolina biotech map is great news, since it gives us an opportunity to showcase what our area has to offer.
BioSpace will be promoting this map at major conferences such as BIO 2002, which is the Biotechnology Industry Association conference that will be held next summer in Toronto, Canada.
I had the opportunity to make a presentation at the BIO 2001 conference in San Diego this past summer, and was astonished by the number of people who attended. In 1999, about 5,000 people attended the BIO conference. In 2000, the figure was 10,000. This year, 15,000 people attended BIO 2001. The fact that this biotechnology conference tripled in size in three years serves to underscore both the interest in this field and the importance of biotech to future growth.
As anyone who knows me will tell you, I’m a very optimistic person. I predict that we will soon have 50 biotech companies in the Triad, focused on genomics, proteomics, bioinformatics and other aspects of biotechnology.
I’m also optimistic about one particular company that’s located right here in Winston-Salem called Targacept.
I think many of you may be familiar with our history and how Targacept got its start. A couple of decades ago, R.J. Reynolds Tobacco Company began doing research on the chemistry and biology of nicotine.
As part of this research, the RJR scientists took a look at the human nervous system. They focused specifically on what are called neuronal nicotinic receptors, or NNRs, which are a unique class of molecular targets that maintain and adjust nervous system activity.
I like to think of this group of related receptors as the volume knob on the nervous system. If the activity at the nerves is too low, these receptors are important in "turning up the volume" and if the activity at these nerves is too high, the receptors can "turn the volume down." In this way, the receptors can regulate the flow of nervous system activity.
The RJR scientists knew, from many studies, that smokers had a lower incidence of such disorders as Alzheimer's disease, Parkinson's disease and ulcerative colitis. What became clear was that nicotine was acting on the receptors that I described and creating beneficial effects on these disorders.
It wasn’t long before our scientists discovered that nicotinic receptors could be relevant in the treatment of many other human diseases, and particularly those that affect the nervous system.
The significance of this new class of targets in the treatment of human disease was what spurred the creation of Targacept.
What Targacept then did was take this whole concept one step further by refining, if you will, how the receptors are engaged.
The drug compounds that we are developing are highly selective to specific receptors. The significance of this is that we can maintain nicotine-like beneficial effects in our therapeutic products while reducing or eliminating side effects. Targacept, by the way, stands for "targeted receptors."
This good news was not lost on RJR, which saw the commercial potential for this research in the pharmaceutical industry.
So, Targacept, Inc. was established in 1997 as a wholly owned subsidiary of RJR. The company was spun out by RJR in August 2000 on the strength of a $30.4 million first-round venture capital financing, which was one of the largest in the history of biotech.
What we are doing today is discovering and developing therapeutic products for neurological, psychiatric and gastrointestinal diseases.
This seems a good place to correct a common misperception about Targacept. Although nicotine research gave us the idea, the drugs we are working on today are NOT nicotine. Nor are they tobacco. We are not chopping up tobacco leaves and turning them into pharmaceuticals. Although Targacept is a small company, with just 50 people (but growing!) we use many of the same methodologies for research and development as big pharmaceutical companies.
What we do is develop new drugs through sophisticated molecular design and new technologies such as high throughput screening and combinatorial chemistry. Our in-house resources include medicinal, analytical and process-research chemistry, neurochemistry, cellular and behavioral pharmacology, and clinical research. We have over 60 issued and pending patents related to our receptor technology and an extensive patented portfolio of thousands of highly targeted compounds. We also have a powerful drug discovery platform called Pentad that gives Targacept a very competitive position in the industry by fueling a strong pipeline of innovative therapeutic products.
However, we are not doing this alone. We are working with some impressive global partners, including Aventis Pharmaceuticals, the seventh largest pharmaceutical company in the world. With Aventis, we’re developing therapies for Alzheimer’s and Parkinson’s disease.
Targacept is also working with Dr. Falk Pharma of Germany, which is the leading pharmaceutical company in Europe providing treatments for inflammatory bowel disease. With Dr. Falk, we are developing therapeutic products for ulcerative colitis.
Targacept is also researching therapies for several other diseases and disorders, including Lewy body dementia, pain, depression, Tourette’s syndrome, anxiety, schizophrenia and obesity. By addressing these unmet medical needs, we hope to minimize human suffering.
Although we're living in a day and age of much uncertainty, there are actions we can take to give us more control over our fate. The 20th century gave us the tools of vaccines and antibiotics. In the 21st century, we expect to conquer the diseases of aging, such as cancer, heart disease and dementia.
But to reap rewards, as I’ve been describing, you have to be willing to take risks. It wasn’t easy, establishing Targacept. Believe me, there were hundreds of barriers to our success. I can assure you that every biotech company in this region that I’ve mentioned today is struggling with its own set of barriers, as are many of you here in this room who are growing your own companies.
But in this area, there’s a tremendous amount of support, which has been developed for over a decade. To a large extent, the explosive growth in biotech companies in the Triad was created by the vision laid out over 10 years ago by a special group of leaders, many of whom are right here in this room:
As the last decade unfolded, many more leaders too numerous to mention, also emerged. Some of these leaders stepped forward to raise funds to create Idealliance and hire a president by the name of Bill Dean.
Bill left his position as the head of a successful research park in Huntsville, Alabama to come to Winston-Salem. Bill played an instrumental role with Dick Dean at the Medical School in getting Targacept into the research park.
On top of all this are the superb local organizations that have been formed to spur entrepreneural business development in this area. These include:
How did all of this happen??!!
I’ll tell how I think it happened. It happened because of the kind of people that are in this room today — people with character and vision.
Heraclitus, a Greek philosopher who lived around 500 B.C. said, "A man's character is his fate." I think that the same can be said for a community of people: "A city’s character is its fate."
Winston-Salem has character, and from character comes virtue. This city and the region we call the Triad have virtues that come from the collective activities of its people.
At Targacept, we interact daily with colleagues in the Triad and in France, Switzerland, Germany and elsewhere. We have a wonderful, diverse workplace, with 25 percent of our employees from all parts of the globe, who speak many different languages and who represent many ethnic backgrounds. When we were spun out over a year ago, the company had 23 employees. Today we have more than double that and are expecting to have nearly 75 next year.
All of us at Targacept choose to work and live in the Triad, and we all choose to contribute to the betterment of society by developing therapies for serious unmet medical needs, as do many others in this wonderful city and region.
Targacept and the Triad are indeed taking their place in the global biotechnology industry, and the industry is all the better because of it.
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