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The Cetus Story (As Presented to Potential Clients) lcgical innovation - the commercial exploitation of molecular biology. Cetus Corporation~is the leading exemplification of a dramatic techno-- Cetus Corporation was founded in 1971 to bring a new level of scientific y4';y Y .. . '"`~-V ~ intensity to industrial microbiolo ~~~~ gy. Its very creation~was a harbinger.. ~'YLx * '. r~~ ~• In the since then, many of our years predictions have proven conserva ° tive. Cetus has built a solid record of accomplishments of immediate .l_..- . 4.~., . 3r economic impact. Beginning with programs of massive screening for drug companies, Cetus today serves several large clients in diverse major industries, and simultaneously carries out internal programs building proprietary technology for its own account. 1 ^1r 'Z~! ~.. Most important, the Cetus team is multi-disciplinary and experienced. Using incomparable facilities, Cetus scientists are well-qualified to.;~ address the broad challenge - the industrial application of all develop= developments in recombinant DNA technology. All Cetus work in this, as limited to an unmatched investment in and capability to implement all ments in molecular biology. This includes, but is not in any way in all other fields, is carried out solely in Cetus facilities and grandstanding and quick profit, and fraught with ethical questions. eschew paper or phantom financial arrangements clearly designed for our investment must not be compromised by questionable "deals." We totally financed by Cetus. This reflects our corporate philosophy that Scientific Background .. , .. _ .._ . .. -~ . . . ~~. .. , .. .. .. .. - - .. . .. ~~ ... i•.'f. ? . 0 The purpose of all programs in industrial microbiology is to harness the `~ :f2 metabolic machinery of microorganisms. There are innumerable different kinds of microorganisms; there may be as much variety in the microbial • ~'.~. world as in all other forms of life combined. Only a very few specific members of this enormous group have been harnessed by man, starting in prehistoric times: the fermentation of cheeses, beer and wines and the`~ leavening of bread are microbial processes. So are the ravages of infection, unfortunately the most familiar manifestations of microbial I'A activity. Ironically, the epidemics which decimated mankind until this generation are now largely controlled by another family of microbial products: antibiotics. Exploiting microbial processes for the benefit of man has been more an art than a science; only in recent years have we seen the beginnings of serious attempts to mount truly scientific efforts in this area. By comparison with the enormity of the problem, these efforts are typically small in scope and maddeningly inefficient in execution. T.P enumerate those few familiar examples of successful industrial..,,., utilization of microorganisms runs the risk of short-changing the real potential of the concept in its broadest sense. N N `s A r } . - . .. ... ~,, a. _- . ~.:._ -" ' ' .. .. - .. . .. . .,. 5~l . - 3: . • f ~. ,; ., . .. _. :.. ... . ~~... -. -.. . ... ~.r s. ~.:, . . . .. ., ~~ - ~~..., . . ~. ~~ ~_

When we exploit a particular microorganism, it is because we have dis- covered that as that organism carries out the intricate metabolic pro- i.e., when it facilitates a useful reaction.-'. ganism becomes useful to man when a particular gene becomes useful, cell to make a particular enzyme. In turn, each~enzyme facilitates a particular reaction, i.e., produces a particular product. A microor- portion of the DNA molecule) contains the "instructions" causing the protein molecule called an enzyme. Typically, each gene (a certain vidual biochemical reaction is facilitated by a biochemical catalyst - As is true for all living things, the "blueprint" for these complex metabolic processes resides in the genetic molecule DNA. Each indi- cesses which comprise its finely-tuned life mechanisms, one or more of these metabolic processes accomplish something useful to man as well. capabilities.. Cetus' first contribution to industrial microbiology : Cetus has developed and utilizes a unique combination of technological ~ .:.: . ~~~:•- ~ • ~. • ~ .~~. •`.. 1 . ..... : .~ -• ~. . ~ ~- . " . 1• ~~. ,,.t ,• .-.~. ..~.ti ~ involved massive screening of microorganisms. This work arose out of the genetic development of microorqanisms with preciselv those charac= „ . 1,. ,.-,~ garding detection of rare events. This permits us to efficiently manage_; Nobel laureate Professor Donald Glaser's inspiration and insight re-;-1 conversion of wood into sugar, or the production by fermentation of teristics which are suited to an important task, whether that be the chemicals to replace scarce petrochemical feedstocks. To put this in perspective, we should ask - how do new useful genes appear, and how are they discovered? microorganisms have come to man's attention in all the years in which he selection." Small wonder that such a small number of truly useful "fittest" in the Darwinian sense: they lose out in subsequent compe- tition with their non-mutant,cousins, and are eliminated by "natural properties which are useful to man, but they turn out not to be the difficult to discover these "improvements." They may be enhanced for ,., is an improvement observed. But another factor makes it even more microorganism. Only rarely, perhaps once in 10,000 surviving mutants, These changes have the effect of changing the instructions, thus af- fecting the enzymes and the corresponding metabolic reactions. Most such changes (mutations) are deleterious and many are fatal to the From time to time, and especially during the process of reproduction, when DNA molecules undergo duplication, minute changes occur in the DNA. has been looking! ment programs undertaken by drug companies manufacturing antibiotics. In a few selected instances, industry has embarked on systematic genetic improvement programs. A useful example: the so-called strain improve- as 100 organisms daily. If a desired improvement occurs once in 10,000 Laborious techniques are necessary; a typical company may screen as many teresting enhancement, say, of antibiotic yield, the rewards are indeed increment, and several must be parlayed to achieve economically in- progeny, the lesson is clear: an improvement will be seen once every U0 working days. Since each improvement may represent only a slight slow in coming. ~ ~+~~•.i,; 4.~

f~,• _ ~•~1 u v1~~ 4 -+l ~d~td'i_. ar~t z ~+ •~'~„,~~. - : ~,~-• ~ . ~.-: At Cetus, by contrast, via a combination of new procedures, detection systems and a massive materials-handling capability, it is feasible to screen thousands of microorganisms daily. If searching for desirable mutants can~be likened to looking for needles in haystacks, we can scan many more haystacks than anyone else. Even with average ingenuity we are sure to find many more needles. The coupling of this unprecedented mass screening capability with the biological insights of Cetus' scien- tific team creates an exceptionally powerful combination. ; ' ' Gy . ;.=5 -:.., , _. ,~.- ~ ~. ... . . ~:. ,.~- _ ... .:'.. ~ ~~ ` . :... ..:.. .. . _. . - . .•' . ;. +`.~~ a ~~'.t" t 5 -'+«;L' "'~ry°~-~ Ou fi t th th h t i r rs rust was o ass e st armaceutical industry p ry in improving the yields of existing commercial antibiotic cultures. Cetus developed ~~ the capacity to effectively create new strains by mutation and other ~ newer techniques, then to clone and grow large numbers of microorganisms ~ il mutaneousl = to screen them swiftly for the y potentially most valuable' strains as they occur; and then to select the most significantly im , s "' ~-proved strains for still further genetic improvement in environments !:N From the outset, Cetus has avoided "contract research" relationships Our purpose has been to build for the future, so we have insisted on a "piece of the action" in all our client-related programs. Typically, -' our relationship with client companies has involved two kinds of pay- ment: a front-end fee to assure continuity of effort and a reward or "royalty" on the sales arising from new and useful microorganisms ~ . ~ J+~; discovered. Currently, reward credits are accumulating for work suc ~•:~,~ cessfully completed. T'*' ~-~~'_' • ', r`~ _ productive p y- P g But as our im rovement-b mutation ro ram has been, it has -~ `•~`., ~'~~~-~: • .~. . ~ ~.~ •';}~•~~~t+. resulted in significant yield improvements in the production of major:~°' # antibiotics '. controlled for optimal growth. Applying this capability for clients has In 1973 Dr. Stanley N. Cohen at Stanford and others began developing techniques for taking DNA from one species of bacteria and inserting it • Z. ~ u , ,~'x_~ ` s+ ~ genetic material of microbes. Why is the time now so ripe :• . .: ._ .. .. i for a breakthrough in exploiting this kind of knowledge? Most important, because during the past several years... science has progressed dramatically in the ability to manipulate the jy into the DNA of an entirely different species. This produces a hybrid ;DNA contairiing genes of two entirely different species. This has been different protein products. Random changes in these organisms, while ,: ~. ._ - had limitations - limitations which no longer need exist. The DNA of industrial microorganisms codes for a relatively limited number of . valuable, pale in significance when compared to what has suddenly been made possible. similar manner, biologists can also take certain viruses that infect only bacteria, insert a set of foreign genes into the viral DNA, and then infect the bacteria with the new recombinant DNA. ` .6. done with bacterial plasmid DNA (which also permits the amplification as well as the heredity transmission of the inserted DNA). In a somewhat ~. .; 1wY. ~_'r.k .~ t*~l ~y f rF~e , 1e~~~qjpSS~14i'a•: ;~• RV •~~~:~. .~: W 4.' Yx`~ ~rA1~iY ~

.~ ~ t~'~:• ~k:~+~.::: ~t•i~s~,:~, .1s~' ` . _ .,~:. . J,: ff =:Y this is now within our grasp. 4S4 1: _ This technique, familiarly known as recombinant DNA or "gene stitching," has reached the point where it isn't limited to grafting DNA's just between bacteria. Several laboratories have made recent headlines by reporting the successful insertion of genes coding for mammalian hor- mones into bacteria. This breakthrough means that no longer will the industrial exploitation of microorganisms be limited to getting them to do better something they already, or almost already do. human proteins in microorganisms by "stitching" human DNA into the DNA examples, this means nothing less than producing vast quantities of .. The future clearly will see many projects in which non-microbial products are produced using industrial microorganisms. In the most challenging . r , The Future . . _ . . . - . .. . .. . ~ . ~ ~ .. . =7~fPr of an appropriate microbe. only recently considered a distant dream, . ... _ . . , •.r. _ ,. '- ~ _, .,.~.. .. . . ~ . .. . ~ . . ~' . . ,.-. . . . ~~~ But in the "real world," other simultaneous developments, less romantic which host may bear no relation to the original organism. This is this limitation. The genes for the desirable functions should be trans- ferable to the host organism~best suited to industrial utilization, the need of producing an "ideal" industrial microorganism - something which does not yet exist. Where previously the microorganisms, or "bugs" used to produce useful products, were the natural bugs in which these capabilities were first discovered, the new technologies relieve obvious where the oorganism is Homo saPerisf original i ~~... F.<. :• ,r. :-- • ., , , - ,,, ,. _ ..~ , 4L; The challenge is to create the ideal recipient organism - optimized from many economic and safety points of view. Such an organism, or "biophore would have great economic utility. (At present, E. coli is widely used f~~?1 [e.g., the cost of nutrients it requires] nor with other production characteristics.) . n _. . .. . . .. . .. . - . . . . r.. .. . 'n , . .. r . :i..~.. in basic laboratory research as such a recipient. Indeed, it does have the advantage of a great backlog of knowledge about its genetics.`';" Unfortunately, that does not necessarily coincide with economic utility Currently, Cetus is deeply involved in this field, finding and improving organisms that have the unique combination of genetic utility and ease of handling in large-scale fermentation and of producing their gene productsin readily extractable form. .,,. . , - _ . . . .._. , ~:. ~ ~~ . 4F •a fqr other projects. With sufficient financing;*it might be more appro- priate to carry the autonomous development of a new strain of microor- ganism to the point where it could be auctioned in a free market for the most advantageous long-range returns. dMk ±.:. . . _--.. .:.":~t.'~~-'~. ~ . J.:•~-'~'- •..-.,. , , .. .:,;. • .. ~,-_- ~.t..,Z~- " ~ - 7 ~ •~ ~+v.~ perhaps, but just as important, will be necessary to make possible true=; return on investment." For many industrial projects Cetus anticipates It is reasonable to expect proprietary rights to attach to any new .~.organisms in such a program. ti , ..,. . There remain~many fields to conquer, and Cetus intends to become a major factor in each. In the field of antibiotics wehave so far opted for-a Q . '!.pervice to client" relationship, but we may not persist in this pattern jU f-r, -.{ 4_.t~} ~ ~..i,~. .. {17. -1_ ,-,•, ~~:~~ ~• ~.,... ~nr !, ~ ...i. ::S

,~...,. _ .. ._.. . .~~ .... New industrial processes for the manufacture of commodity and specialty chemicals, foodstuffs, and other products could be licensed. This is the world of biosynthesis: many thoughtful scientists feel that microbes can tackle virtually any task which can be accomplished by svnthetic organic chemistry. On more than one occasion the production of a spe- cific or anic ch i L b i bi l f g em ca y m cro a ermentation has eclipsed tradi- tional chemical synthesis on economic grounds. Many advocates believe that the scope of biosynthesis actually dwarfs non-biotic chemical synthesis, and they are hopeful that specific applications, such~as the use of microorganisms to provide vast amounts of food ("single-cell protein"), will in the not-too-distant future prove them right. The entire field of microbial-produced insecticides looms as another in triguing possibility. rµ~ r lCila~37 In certain markets,where marketing would not represent an overwhelming investment, Cetus might opt to "go it alone," for example, selling and '~z~"; licensing microorganisms, processes and/or products outri ht to va i g r ous industries. ~~.A~ ~.} ~7~'I .... t , . . . ._..._". .. . .. . . . s . . . ~ .. .. J - , ref ~ . . . .. . _ .. .....~r Ti~•;31,~-tevs.... _:3`? a.~`aw"~Y~itr~~`~. ".. -.. , ~,...... .,.. , :. .: . . . . .. - .... .... . . ...__ '[ xi`.r +~R ~ V f~~ ~ ;~. final touches needed for commercial utility. It is obvious that Cetus ; remen ous accumu at on of scientific knowledge is waiting for the .X , ' i q...'.v_ ~ ': Y A t d l i y s to come. , .~ r , ~ •;.«~ ~i~ ,. :i~..,t .. ll~Y3'e_n { s,rr .~ •,~;,~ ~~- ` production, will be a prime mover at this new frontier. The challenge, both scientific and economic, is to identify those programs whose feasibility and utility will combine to provide the greatest rewards Each such program will result in an accumulation of know-how and pro prietary advantage which promises - to us who commit now - a commanding ° position in industrial applications in the life sciences for many years xr N. ;.} . .. . . - .. . .. .... ...... . .... 1~ t y ~r w,>t ...,, These are generalizations and those interested in major participation ~~ ~ y4 ~' with Cetus in future projects will want to hear specifics. Some of the ~ most exciting prospects are in fields that are moving so rapidly, and ;C~. =. _ ~ F a ~Y" ,:.a .t~,•`_ , which has pioneered in the application of sophisticated genetic and engineering methods for the improvement of microbes for antibiotic have such large potential markets, that they require detailed,-up-to Y the-minute personal presentations by-Cetus scientific and management ~ . r . _.,. teams. Such presentations will be arranged when appropriate.'s '... _~. ~ .~~. L'1R P: T! v.~ ?s:~4:c-~•2}`': T"~i~~t~'`.~wF s~ ;ii" i~~"ti ~ ~~~,~e•.!~?i~: s { crc P.~,. t dk•s'.xc3YL~~a~.~k'. ":. i•~~r~sa.'''.a~:;-