Stem cell research is so new that most researchers talk about measuring progress in decades, with profits from stem cell products deferred far into the future. But at Invitrogen’s Stem Cells and Regenerative Medicine business unit, commercial success does not depend on getting medicines or other biologics to market. “We provide the picks and shovels of the Gold Rush,” explains Joydeep Goswami, vice president and head of the unit. “We have been very good at helping the customer focus on the science. We have found a way to make the mundane easier and less mundane for them.”

Invitrogen marginalizes the mundane the same way that a good hardware store does. After all, you don’t want to have to fabricate a wrench each time you need to fasten a nut and a bolt. Stem cell researchers depend on increasingly sophisticated tools, and Invitrogen’s business model centers on trying to provide them with exactly what they need. That is why the company as a whole is sometimes referred to—and not disparagingly—as the Home Depot of biomedical research. 

For 20 years, the $1.15-billon company, based in Carlsbad, California, has provided the basic tools—reagents, probes, cell culture beads, software packages—essential to all manner of work in bio labs. With 4,300 scientific and professional employees operating in 70 countries, Invitrogen supplies 25,000 distinct products and services for cell biology, cell culture, genomics, proteonomics, and bioinformatics. Most of the company is organized vertically, with businesses focused around a particular technology—nucleic acid purification, for instance, or gene expression profiling. The stem cell business is different, drawing from every part of the company in order to serve a particular customer group—the stem cell researcher. 

Goswami, reared in India and educated at the Massachusetts Institute of Technology, took over the stem cell business in October, 2005, after running Invitrogen’s Global Technology In-Licensing Group. With a Ph.D. in chemical engineering, plus an MBA from MIT’s Sloan School, he spent five years as a consultant with McKinsey, helping clients in the United States, Europe, Asia, and Latin America solve problems in strategy, operations and other areas. His ability to analyze the big picture plays into his current work at the company. 

“In stem cell research, as in every other biological domain,” Goswami says, “whether it’s therapy, screening or research, there is a common thread, which we call workflow.” For stem cell research, Goswami divides the workflow into three basic tasks: understanding basic developmental biology; trying to turn that knowledge into products and services; and regeneration—the effort to build tissue that can replace diseased or degenerated tissue. Invitrogen, he says, has a role to play at every juncture.  

Each of the three basic tasks involves isolation of the cells, which is to say obtaining or purifying the cells, clearly identifying the cells you have and growing the desired cells in large quantities, not only for use in the lab, but also for treatment. In addition, you must grow them in a way that retains their ability to differentiate into different types of cells without introducing viruses or other adventitious agents. The final step is differentiating the cells into the desired lineage: heart cell, brain cell or, perhaps, kidney cell. “The kicker is that each stage also must be economical,” Goswami adds. “Without that last “omics” [economics], there is no practical therapy.” 

According to Goswami, Invitrogen has isolated and carefully analyzed the technical processes in each aspect of stem cell workflow  in order to design a set of widely applicable tools. To facilitate isolation, for instance, the company modifies or creates technologies such as molecular beads that enable researchers to gently separate certain cells from others. These capabilities extend to antibodies and even conjugation chemistries that can attach antibodies to the beads, then allow technicians to use magnetism to pull out the cells attached to the beads. With respect to cell characterization, Invitrogen has acquired expertise in gene expression PCR (polmerase chain reaction), protein expression, and epigenetics.

 But, as Goswami notes, “Few people outside of stem cell labs appreciate how difficult it is to grow the cells.” Accordingly, Invitrogen also plays a role in the more nuanced applications.

The traditional method of cell culture is to toss a batch of serum and animal origin components into a medium. In the case of stem cells, unfortunately, there’s a problem that Goswami likens to the Heisenberg uncertainty principle in physics. “The normal elements used to propagate cells actually interfere with what scientists want to study. It’s like a quantum effect. They send the wrong signals to the nascent stem cells, and those cells start differentiating uncontrollably. Moreover, for therapy in humans, reagents of animal origin pose serious risk of infection or rejection. Using cells grown on a mouse platform, for example, would never withstand scrutiny by the U.S. Food and Drug Administration.”

The obstacles to obtaining the precise cells researchers want presented a major opportunity for Invitrogen. The company developed a series of solutions, protocols and reagents that are well-defined and free of any other extraneous cells of animal origin. “We help take much of the guesswork out of growing stem cells and differentiating them into particular lineages,” Goswami says.

Managing data, especially the enormous proliferation of information from the genomics revolution, represents another critical challenge for investigators. To expedite and organize data collection, Invitrogen built tools called I-Gene and I-Path, published on its website. The tools first help people find their gene of interest very quickly, then help them determine which pathways these genes or proteins involve, and finally allow them to identify specific reagents for studying those genes. There are also systems for capturing lab information in digital notebooks and storing and cataloging them in an efficient manner.

Goswami directs the development and marketing of stem cell applications from company headquarters, four buildings nestled on a 20-acre campus some 30 miles north of San Diego. The facility’s scope and scale epitomizes the new, high-tech industrialization of biomedical discovery, while it also validates the Home Depot comparison. The largest of the four Invitrogen structures on site is 300,000 square feet. It houses acres of storage space, distribution facilities, lab space, marketing, sales and an auditorium large enough to hold roughly half of the 1,000 headquarters employees. Across the road, the company recently developed an additional nine acres into what it named “Discovery Park.” It has an amphitheater for large, outdoor meetings, a running track, a basketball court, and ample space for picnics, soccer and—as befits the California setting—Frisbee. 

The company’s origins also follow the classic plot line of the California startup. In 1987—in the obligatory garage—founders Lyle Turner and Joe Fernandez launched Invitrogen with the idea of creating tools for molecular biologists. For many months, they sustained themselves with three employees and one product, called “The Librarian.” This was a reagent kit containing everything necessary to clone DNA, and it sold for $3,200. By the mid-90s, they had 180 fulltime employees and $34 million in sales. By 1999, head count was still about the same, but sales had more than doubled to $71 million.

A public stock offering in 1999 raised $48 million, which provided capital for a modest round of acquisitions. Then, in 2003, with the arrival of current CEO Greg Lucier, a member of this publication’s editorial advisory board, acquisitions exploded. In all, between 2000 and 2006, Invitrogen acquired 16 other companies.

"Lucier has been known as a serial acquirer," says David Lo, an analyst with Think Equity Capital in San Francisco. "And there have been some hiccups along the way—the usual problems with integrating new business units.  Investors  punished them with the stock fluctuating between $77 and $56 a share." In early August, however, the stock was trading near $79—near its 52-week high of $79.49.

"Investors worried that some of the new companies were not a great fit with Invitrogen, or with Invitrogen's management," says John L. Sullivan, who covers the stock for Leerink Swann & Company in Boston.    "Selling off Bioreliance [a provider of contract biologics safety testing] made everyone happier," Sullivan adds, "and now Lucier seems to be taking a more measured approach to acquisition. They also seem more focused on managing the assests they have....'getting all the juice from the orange,'  in other words."

Sullivan estimates that the stem cell unit is less than 5 percent of Invitrogen's overall business (the company declines to say), but that it is growing faster than the company over all. Goswami confirms that his unit is growing in double digits. And yet the stem cell unit has looked less to acquisition than to organic growth—including collaborations with early-stage companies—for its expansion.

“When we look outside,” Goswami says, “we don’t see many companies that are too far ahead of us. So our goal has been to collaborate with people we respect.” 

Many of the smaller stem cell companies with which Invitrogen aligns itself are not tool companies. Typically founded by scientists around a specific invention, they tend to have therapeutic aspirations, but little capital. “We can say ‘OK, you’re working toward a therapy,’” Goswami says. “‘We can either help you with those aspirations or we can provide a conduit for the tools that you might develop.’”

Because stem cell science is changing so rapidly, no one company can claim exclusive expertise or a sufficiently broad range of knowledge over the entire area. There is also, according to Sullivan, no clear market leader in supplying the tools of the trade. 

"They're still coming off the starting line," says Sullivan. "No one competitor has emerged from the pack. But Chemicon at Serological has a very healthy position."

Goswami is very aware of the competition–he mentions R & D Systems, Sigma, Stem Cell Technologies, Celera and Illumina, amonger others.  Still, rather than using racing metaphors, he likens his business to “the semi-permeable membrane they discuss in biology classes.” How are business relationships structured? What is owned and what is shared? These matters are ripe for innovation, and Invitrogen has been experimenting with a variety
of configurations.

“It’s very different from the way businesses were structured a generation ago,” Goswami says. “It’s a cue from biology. It’s symbiosis.” Even in the absence of formal collaboration, scientists in different companies and academic research labs cooperate in efforts to validate products and to improve beta testing because they are hungry for solutions. Asked whether this spirit of openness will last, though, he predicts, ”As a field evolves, you find people much less willing to beta test. If you find a solution that works—why would I need to adopt something else?”

In other ways, Goswami also finds his business reflecting the science he serves. “Just as in the laboratory, we are trying to bring order to chaos. But when you talk to customers who are working in stem cells, and when you are doing things for them, the structuring of risk and the transfer of risk from one party to the other is quite different. We have a heavier use of milestones rather than large upfront payments.”

 In the stem cell field, there is also a premium on talent. “Being able to recruit the right people and get them up to speed quickly and really making sure that they’re contributing and really up to speed with the external environment—this is a challenge because in some ways, we are the leaders in many of the areas in which we’ve been evolving for quite a while. In cloning, for instance, we don’t really need to look outside every two days. But here again, stem cells is moving so quickly that we have to benchmark ourselves very, very often.”

Finding top scientists and other employees  isn’t the only challenge.

"In stem cells, they have a market that is 65 percent academic, and therefore at the mercy of the NIH," said Think Equity's David Lo. "The grip that the University of Wisconsin has over patents, restrictions on the use of embryonic cells, the U.S. regulatory environment—it's tricky."

And right now, according to John Sullivan's educated guess, supplying stem cell researchers is no more than a $50 to $100 million business, in total, for everyone involved.  "Still," Sullivan adds, "I would not be surprised to see it growing by 20 to 25 percent over the next five years. Expanding into stem cells makes perfect sense for Invitrogen. It's a natural exension of their franchise. It's where their customers want them to go."