Is Randal J. Kirk Biotech's Best Investor?

"This morning, Forest Laboratories announced plans to buy anti-depressant maker Clinical Data for $30 per share, plus a $6 dollar payout contingent on sales of the company’s drug, Viibryd. I wanted to get this story — a portrait of Clinical Data’s main backer, billionaire investor R.J. Kirk — out as quickly as possible.

The print story, which I wrote with Robert Langreth, will appear in the next issue of Forbes magazine. The deal pays out less than Clinical Data’s $33.90 closing price on Friday, but still locks in plenty of gains for Kirk, who has been backing the company for years. The full magazine story appears below." - Matthew Herper

Grand Plans

Investor Randal J. Kirk became very rich making small improvements to old drug classes. Now he and partner Thomas Reed want to change the world.

Biotechnology produces few billionaires. The high costs of drug development mean that most early investors no longer own big stakes by the time a medicine finally gets to market. Randal J. Kirk, a Virginia biotech investor whose net worth FORBES estimates at $2.2 billion, upends this rule. Instead of spreading his bets and taking profits early like most venture capitalists, Kirk bets big on a few small companies and stays the course until a product gets to market. He reaped $1.2 billion in 2007 when he sold his New River Pharmaceuticals and its attention deficit disorder drug to Shire for $2.6 billion. His next big score could come from his biotech company Clinical Data, whose antidepressant Viibryd was approved in January. Its shares have doubled this year on speculation that Kirk will soon sell to a big drug company desperate for new products. Kirk, with common stock, convertible notes and warrants, is sitting on a 52% stake worth over $600 million. [Note: Clinical Data today announced plans to sell to Forest.]

But Kirk says everything he has done in the past pales next to the potential of his latest project: Intrexon, a secretive research-stage company that is working on the hot new field of synthetic biology—basically genetic engineering on steroids. Kirk and his investment fund, Third Security, have poured $200 million into the closely held 180-person company based in Blacksburg, Va., which has no drugs on the market.

“I’ve been a biotech investor for 27 years, and Intrexon is by far the best thing I’ve ever seen,” says Kirk, 56, who raises falcons and composes electronic music on a 7,200-acre cattle farm in rural Pulaski County, Va. He likens Intrexon to “the Google of the life sciences” and predicts that in a decade it could become “the largest, most significant company” in its burgeoning field.

Today’s biotech industry makes modest genetic tweaks to living cells—adding or deleting single genes so bacteria will produce insulin or corn will resist pests, for example. Synthetic biology aims to make much more radical changes and reengineer living cells from the ground up. One goal is to make protein drugs far more cheaply and efficiently than is ­possible today. Another is to transform living cells into tiny molecular factories to make everything from gasoline to ­construction materials. Some scientists even want to create entire new life forms from scratch.

Lots of big scientific names are working in synthetic biology, which so far has produced lots of hype and headlines but few practical breakthroughs. Gene jockey J. Craig Venter, known for sequencing the first human genome in 2000, leads a company called Synthetic Genomics that has a $300 million deal with ExxonMobil to make designer biofuels.

Intrexon has released few details about which products it is pursuing. Its lead drug is only at the earliest stage of human trials. It is so obscure that three prominent synthetic biology researchers contacted by FORBES—including Venter—said they had never heard of it. Kirk shrugs. Among other colossal ambitions, he wants to revitalize the troubled field of gene therapy, make dozens of inexpensive protein drugs and produce better genetically engineered crops that will benefit consumers, not just farmers. The company is also working on biofuels, designer enzymes, bioplastics and unspecified consumer products. Keeping the work secret is part of the plan, Kirk says. “If we were in the business of publishing, we could get the cover of Science magazine any issue we wanted,” he boasts.

The scientist behind Kirk’s mystery company is the 45-year-old molecular geneticist Thomas Reed. He founded Intrexon in 1998 while still completing his Ph.D. and postdoctoral work in cardiovascular genetics at the University of Cincinnati. “I think of him as the Henry Ford of DNA,” says Kirk. “We are all living in his dream.”

By Robert Langreth and Matthew Herper
Forbes Online