Welcome to Cellicon Valley?

Philly invented the computer — then whiffed on becoming home to the tech industry. Will we do better with the next-gen medical breakthroughs we're hatching?

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In the conference room of a spacious loft office near 30th Street Station, Usman “Oz” Azam and Michael Christiano huddle for a meeting. They’re CEO and chief business officer, respectively, of Tmunity Therapeutics, a start-up launched to commercialize some breakthrough research out of the University of Pennsylvania — a method of reengineering a patient’s own immune system cells so they can destroy cancer tumors.

The two execs are the company’s sole employees so far. Their new headquarters still contains chalkboard-style signs and leather couches from the prior tenant, some sort of hipster

telemarketing operation. It looks like an abandoned Cosi restaurant.

“Literally the only thing we’ve done is bring in a coffee machine,” Azam says.

It’s a microscopically small start to what some people around Philadelphia hope will become very, very big.

Down the hill at the Center for Advanced Cellular Therapeutics, an alliance between Penn Medicine and global drug maker Novartis is working on other pioneering immune system research, which, like Tmunity’s technology, comes from the labs of Penn’s Carl June. It involves extracting T-cells from patients, genetically modifying them so they can attack blood cancer, and putting them back into patients, where the altered cells multiply and become a sort of living medicine. Trials on some leukemia patients have obliterated the disease, and this designed-in-Philly treatment is on track to be the first-ever FDA-approved personalized cellular therapy for cancer.

One floor below, in the same University of Pennsylvania building, scientists at the Parker Institute for Cancer Immunotherapy are working on what could become America’s first use of the genome-editing tool CRISPR in human beings, aimed at cancer. It’s funded in part by Sean Parker, the Internet billionaire played by Justin Timberlake in The Social Network (who gave $250 million to six medical schools and cancer centers). It’s not the only CRISPR venture in the city. Nearby, on Market Street, the start-up Excision BioTherapeutics is working to commercialize technology from Temple University that uses CRISPR to snip viruses such as HIV out of affected patients.

Just one block up Market Street, in the penthouse-floor laboratory of Spark Therapeutics, researchers cultivate cells in flasks of a liquid that looks like weak cherry Kool-Aid. Spark, founded in 2013 to commercialize research from Children’s Hospital of Philadelphia, is what companies like Tmunity and Excision seek to become. Spark employs around 240 people and has a stock market capitalization of $1.61 billion. In May the company filed with the FDA to create the first gene-therapy treatment for an inherited disease in the United States. The treatment, which involves injecting new genes into patients to replace the imperfect ones they were born with, has reversed a rare form of blindness in clinical trials. It could be approved by the end of the year, with gene treatments for hemophilia to follow. They’ll all be produced right here, at 38th and Market.

And so we’re having a moment in Philadelphia. We’re out to an early lead in the race to become a hub for the next generation of medicine: synthetic biology that augments the human immune system to make it better than nature did. It’s a future in which medicine is less about gulping pills to mitigate symptoms than about using targeted gene and cell therapies that begin to approach cures for ailments as serious as blindness, hemophilia, AIDS and cancer. If we don’t fumble the opportunity, it’s also a future that the Philadelphia area can own. People speak hopefully of a regional economy blossoming around these innovations — an ecosystem, a magnet, the way Los Angeles is for entertainment, the way Washington is for lobbyists.

“I can make the argument that Philadelphia has the greatest concentration of foundational research in gene and cell therapy in the world,” says Spark CEO Jeffrey Marrazzo, a Philly native who convinced CHOP to make the company its first commercial spin-off.

“We’re at a unique moment,” says Richard Vague, a managing partner at Philly-based Gabriel Investments who has personally funded some of Carl June’s research. “The genome has been mapped. The revolution in technology has occurred. So much that needs to happen has happened. The opportunity for real breakthroughs is palpable.”

Some smarties at Penn Medicine have cooked up an optimistic nickname for this region: “Cellicon Valley.” It’s an awkward portmanteau, probably no more likely to catch on than “Phillywood.” Really, it’s a brand name for a desire. Maybe this could be our thing (besides cheesesteaks, which we know to be effective in humans). As much as anything, the nickname encapsulates a new attitude, an eagerness to better exploit advances in medicine coming out of local labs. There’s been a history of missed opportunity here, a gap in translating the genius of our academia to the marketplace. Remember, back in 1946, Penn scientists introduced ENIAC, the world’s first electronic computer. But the Delaware Valley didn’t become Silicon Valley, or even Vacuum Tube Valley.

“There’s a whole negative piece that could be done about what Philadelphia did not do that Boston or San Francisco did,” says Steven Nichtberger, a longtime entrepreneur who teaches Wharton undergrads how to commercialize scientific ideas. At MIT and Stanford, pitching moneymaking schemes to venture capitalists is part of the university culture, as routine as joining the Dungeons & Dragons club.

“Other places have had reasons they became really good at what they do,” Carl June says. “Now, this is our chance. I hope we don’t blow it.”

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Looking south from his window in the Perelman Center for Advanced Medicine, on Penn’s rampantly spreading medical campus, Jonathan Epstein can see the smokestacks of Philadelphia’s industrial legacy.

“I think we have a chance to see a new and important industry arise here,” he says. Since he’s chief scientific officer at Penn Medicine, one of his missions is to help make that happen. On a recent field trip to present Philly to venture capitalists in San Francisco, Epstein floated the phrase “Cellicon Valley.”

“I actually had screens around the auditorium showing the modern parts of Philadelphia, in order to convey the sense that it’s not the old manufacturing city that many people have in their minds. It is hard to change people’s impressions,” he admits.

Epstein thinks of Kendall Square — the once-desolate area around MIT in Cambridge, Massachusetts, that’s now crawling with shiny biotech buildings — as a model. “I grew up in Boston, and I like to tell people that Kendall Square is where they used to tow my car,” he says. “I watched the development of that region.”

In West Philly, the makeover has begun. On streets around Penn and Drexel, you can hardly have a conversation that isn’t drowned out by the beeps of a construction vehicle erecting another gleaming high-rise. But Penn getting richer — or even University City becoming an “innovation district” — isn’t the same as success for the region. Around Boston, the prosperity from waves of computer tech and biotech has had a blast radius of 25 miles, to far-flung neighborhoods and suburbs. It’s more extreme around San Francisco. Could we have that kind of success here? What would it look like?

If you think of Silicon Valley or Hollywood, they’re places people go with dreams. It’s where the jobs they want are. If you leave a company in Mountain View or Kendall Square, there’s another across the road or down the highway that needs staff. Small firms grow into big ones and seed new start-ups like acorns. Venture money burns holes in the pockets of investors who live in the area. And behind the headline-making companies are enterprises that support the IPO superstars, providing specialized staffing, equipment and facilities.

Philadelphia has some of these things. It has companies like WuXi AppTec in the Navy Yard, which contracts to do cell production and R&D. Tmunity plans to use a cell-manufacturing facility in East Norriton previously owned by Tengion, whose ambitious plans to grow human tissue ran out of runway, resulting in a 2014 bankruptcy. “If you want to make a drug, it’s easy to hire a contract manufacturer. But if you want to make a cell therapy, it takes particular kinds of facilities and expertise — which exist here now,” says Nichtberger, the former CEO of Tengion.

The region, of course, has a medical and pharmaceutical legacy that goes back centuries. Ben Franklin founded Pennsylvania Hospital in 1751. In 1830, John K. Smith opened a Philly drugstore that would evolve into Smith, Kline & French and eventually the massive GSK. The Wistar Institute transformed global health with vaccines for rubella, rabies, and other life-threatening diseases. Bob McGrath, who heads Drexel’s office of technology commercialization, points out that four of the National Cancer Institute’s 69 designated cancer centers are here, at Penn, Jefferson, Fox Chase and Wistar. There is infrastructure to build on.

But in this new world, infrastructure isn’t enough. What’s also required: money to back academic research, and, no less important, an entrepreneurial culture that lets scientists see a path to making their work available to the world — profitably, if possible. “It’s going to be hard to retain or attract the very best scientists who are entrepreneurial if there isn’t an environment here in which they can see their dreams come true,” Epstein says.

That’s required a culture change, at Penn in particular.

“For Ivy League schools, commercializing technology is a very new event,” says June, director of translational research at Penn’s Abramson Cancer Center. “Google came out of Stanford. It never could have come out of Penn back then. Ivy League schools kind of turned their nose up at funding from commercial entities. The faculty were encouraged to get peer-reviewed” and go for government funding.

These days, the word “translational” is on business cards and medical buildings all over University City. It means translating science from “bench to bedside,” from the lab to the patient. That can cost multiple millions of dollars, and government money isn’t what it used to be. “When I moved to Penn in 1999, I was like most faculty here in that over 80 percent of my research funding was from the NIH,” June says. “Now, it’s less than 20 percent.” Attracting funding from other sources is more and more important.

Pretty much all the local institutions are trying to get better at it. In a sense, they’ve begun throwing open their lab coats to the world and saying, Check us out. Spark’s Marrazzo says that in 2011, Steve Altschuler, then CEO at CHOP, invited him to walk the corridors there looking for commercial ideas. “It’s literally true,” Marrazzo says. “He said, ‘Why don’t you spend three months? I’ll give you the authority to walk the halls and meet with scientists, see if there’s anything there that you think is worth trying to take a bolder step.’”

Not-for-profit universities and hospitals can’t raise money by selling stock. But they can take equity in the start-up companies built around their intellectual property, which is almost as good. Marrazzo says CHOP invested $35 million in Spark. “They have already liquidated between $150 million and $200 million, and they still have 18 or 19 percent of the business, which is worth probably another $300 million to $400 million,” he says. CHOP has now spun out three other companies and hired serial entrepreneur Patrick FitzGerald to a new position: Vice President for Entrepreneurship & Innovation.

Penn’s medical school offers a master’s degree in translational research, which MD and PhD candidates can add to their studies. The course helps researchers undergo a Nutty Professor style transformation from meek lab-focused scientists to confident presenters of their assets to potential funders

“They’ve got to learn how to articulate their science to different audiences — to give the elevator pitch, the TED talk,” says Emma Meagher, a cardiologist and clinical pharmacist who runs the program. “When they go to the NIH, they have to articulate the science as a scientific discipline. When they go to a not-for-profit foundation, they’ve got to articulate the science as it appeals to the unmet medical need for that foundation. To a for-profit funder, it’s Are you gonna make me money, where’s your business plan?”

Drexel’s McGrath is a matchmaker who connects faculty inventors with commercial partners. A review committee helps them groom pitches. The Lankenau Institute for Medical Research, in Wynnewood, has an incubator to develop companies spawned from its research. CEO George Prendergast calls it a “small Bell Labs of bioscience.” He invented the word “acapreneurial” to describe the model marrying academics with entrepreneurship.

At Temple’s Lewis Katz School of Medicine, legal experts from the university’s technology transfer office embed in the med school and “look at the faculty’s papers and grant applications before they go out and see if there are elements we ought to protect with respect to the intellectual property,” says Steven Houser, senior associate dean of research there. “If you don’t protect it, no one in the private sector will ever want to invest in your idea.”

Racking up patents isn’t an official yardstick for evaluating faculty. “Not yet,” Houser says. “There are discussions at most institutions about whether things like patents should be considered in tenure discussions.”

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So how do we enter the Valley? “It doesn’t happen by chance. It happens because people make strategic moves,” Penn’s Epstein says.

The schools’ outreach to industry is part of it. Public funding and local incentives like tax breaks are also still important, even as the Trump administration pushes for big cuts to NIH and NCI budgets. Pennsylvania has a patchwork of aid. Governor Wolf’s new budget proposes selling bonds to raise $45.9 million for CURE, which issues health-research grants. State-supported Ben Franklin Technology Partners offers seed capital to start-ups. Keystone Innovation Zones provide corporate tax credits. But June envies what other states have done. A California voter initiative provided $3 billion for stem-cell therapies. Texas sold bonds to raise $3 billion for cancer research. “It’s recruiting people and new companies. We need to do that here,” June says.

Of course, amid all the possibility, there’s a need to proceed carefully. Gene therapy isn’t like building a new mobile app. Human health is at stake. Pioneer Jim Wilson’s experience tells a cautionary tale — and offers another kind of hope.

Wilson created Penn’s gene-therapy program when he arrived there in 1993. “There was a tremendous amount of enthusiasm in the mid-’90s,” he recalls. “It’s the natural trajectory of an emerging technology: There’s a lot of expectation and anticipation, a little knowledge, and in this particular area it was fueled by all of us. By the PR machines of the universities. By the investigators, who could garner resources. By patient populations, especially those with rare diseases who just were neglected. Gene therapy sounded different. It wasn’t just another drug. It was: I have a bad gene and you’re gonna fix it.”

Then, in 1999, Jesse Gelsinger died, in a Penn gene-therapy trial directed by Wilson. The 18-year-old’s body reacted adversely to the virus used as a vector to deliver a new gene to his system. It turned out Wilson owned stock in a company that was funding the research. There was a lawsuit, and much debate about the conflicts that arise when science gets in bed with business. “People walked away from the field,” Wilson says.

Humbled and censured, Wilson kept a low profile but continued to work, landing on a safer vector that’s part of the current rebirth of gene therapy. Two companies based on his new work, though, located elsewhere. RegenXBio is in Rockville, Maryland. Dimension Therapeutics is in Cambridge, “despite the fact that the R&D engine was here at Penn,” Wilson says. “We tried everything we could to convince management and the investors that it would make more sense to place these companies at Penn.”

But ecosystems build one victory at a time. Kevin Mahoney, executive vice dean for integrative services for Penn’s medical school, had hinted to me about such a victory: a secret new gene start-up coming to the city even though the moneymen tried to insist that it be headquartered in Kendall Square. “They said, ‘It can only be in Kendall Square.’ And we said, ‘No way. It has to be in Philadelphia,’” Mahoney says.

Wilson wanted to tell me the secret, too. “It’s a new company called Scout Bio, based on gene therapy technology out of my lab at Penn,” he reveals. “It uses gene therapies in small animal health — pets — to deliver therapeutic proteins for anemia, atopic dermatitis, cancer. We’re building that in Philadelphia.”

Yo, dog. Welcome to Cellicon Valley.

Published in the July 2017 issue of Philadelphia magazine.