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Glorious George

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No one nominated George Rathmann this year for the GT All-Stars “person of the year” award. And that’s too bad, because the genomics industry should pay more attention to how he operates.

Most know Rathmann, 74, for the notoriety he gained over the past two decades for founding and growing Applied Molecular Genetics from a three-person outfit to what is now Amgen, a $3 billion biotechnology company. Among Rathmann’s legacies is that Amgen seems to make it onto every “best places to work” list that is compiled.

And by now everyone in the genome world — especially anyone who’s been reading GT since December 2000 — knows all about how Rathmann came out of retirement to try to save Hyseq. He’s poured more than $20 million out of his own pockets into the company, and instilled the directionless company with a focused business strategy and an optimistic new outlook. Hyseq CEO Ted Love says he’s wooing investors back to the company that Forbes recently described as “biotech royalty’s tarnished crown.”

But the reason Rathmann deserves recognition this year is for his masterful handling of Hyseq’s legal troubles with Affymetrix. Two patent infringement lawsuits and an Affy countersuit, which were filed long before Rathmann arrived on the scene, had kept Hyseq for four years from following through on its plan to develop and commercialize tools from its sequencing-by-hybridization technology.

When Rathmann got to Hyseq in February 2000, his number one priority was to disentangle the company from the litigation. He entered settlement discussions within days after his start date, and kept them up for 20 months. Ultimately, Rathmann wrought a deal by which Affy funded the startup of the Hyseq spinoff, Callida, that intends to start selling sequencing technology next year, and created another subsidiary through which Affy and Callida are now co-developing a new DNA chip (See “Callida Comes Along,” p.49).

Having been through patent suits before, Rathmann knew the drill: “Anything that makes it look like the other guy has to give in will meet with resistance.” His approach was “to try to change the field completely and, instead of arguing about who was right and who was wrong, we had to decide what we can do that’s useful rather than use up our money in a lawsuit.”

Both companies had incentive to come to a settlement: “We were under pressure because we didn’t have that much money, and they were under pressure because they had enough litigation that was giving them a bad reputation,” Rathmann says.

They also knew that a court win wouldn’t be worth much. “You have to ask yourself, ‘Does their main thrust infringe our patents?’ A lot of things they did were infringing our patents, but I didn’t think it was their main activity,” Rathmann says, adding that, as Hyseq had no product on the market, it wasn’t infringing anyone’s patents. He figured that neither party would gain any more from the lawsuit than being able to say, “We won.”

It was obvious to Rathmann that “if we could put together our plusses — namely their method for making chips and our method for doing sequencing — we might have a product that nobody else in the world could match.” Once the two sides agreed to look for a mutually beneficial outcome, Rathmann says negotiations weren’t so difficult.

That’s not to say he’s a sucker for the win-win solution. In the ’80s, Amgen fought Genetics Institute all the way to the Supreme Court for the rights to erythropoietin. “Everybody told us to settle 50/50, and I just simply said, ‘No, you don’t settle when you’re 100 percent right and the other guy is zero percent right,’” Rathmann says. “You can’t take your shareholders down that path.”

Rathmann’s negotiations with Affy, of course, proved a boon to shareholders of both companies. “We both saved ourselves a lot of legal money, and they saw an immediate benefit in their stock price. It went up by such a big factor that it was like money in the bank,” Rathmann says.

In the end, however, the real winner is science. Snezana Drmanac, who has worked much of her career on development of sequencing by hybridization and is now VP of R&D at Callida, says of the Callida and Affy scientists who are now collaborating on a prototype sequencing chip, “We were looking at each other and wanted to work together for such a long time. If you look at your neighbor who has something that would help you, why wouldn’t you [work together]? It’s simple logic.” Yet, she says, George Rathmann was the only person who could have solved that problem.

Adrienne J. Burke, Editor in Chief

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