Long known as a hospital supply and pharmaceutical maker, Illinois-based Baxter International Inc. is now setting its sights on becoming L.A.’s next biotech giant. The company has turned its attention to its biotech arm, Glendale-based Hyland Immuno, pumping hundreds of millions into its expansion and concentrating heavily on investor relations in an effort to get more recognition from Wall Street. “Baxter feels biotechnology holds a lot of promise,” said Thomas Glanzmann, president of Hyland Immuno. “We believe there is a significant market opportunity there.” In the last two years, Baxter has hired a new executive team for the Hyland Immuno arm, including Norbert Riedel, a former head of worldwide biotechnology for Hoescht Marion Roussel (now Aventis) who now heads Hyland’s genetically engineered drug division. Until now, Hyland’s main product has been drugs used to treat hemophilia and other blood disorders. Baxter has poured $100 million into upgrading its Los Angeles facility for those drugs. And last month, it pledged $400 million more on upgrades, including expanding its Thousand Oaks facility over the next year and boosting the L.A.-area workforce by several hundred employees to make a new generation of gene-based products. Becoming a local player It is also boosting its profile in the local community, with executives giving speeches at biotech-industry events and making connections with academia, including a possible financial partnership with the California Institute of Technology in Pasadena. “We gave people a coherent picture of where we want to go and I think people realize we’re changing,” Glanzmann said. “Now they’re waiting to see if we can do it.” Meanwhile, Baxter will have to convince Wall Street that it’s a biotech company. Even with an estimated $1.7 billion in biotech product sales last year, it is still widely perceived as a medical supply company. As a result, its stock has benefited little from Wall Street’s recent love affair with biotech stocks. While many such companies have seen their stock prices soar over the past year, Baxter shares have been relatively flat. On April 29, 1999, its stock was trading for $65.50 a share; exactly one year later, it was virtually unchanged. Baxter initially moved into biotech in 1996, with the purchase of Glendale-based Hyland Immuno, whose main biotech branch is located in Thousand Oaks, not far from biotech leader Amgen’s headquarters. There, Hyland Immuno makes its recombinant Factor VIII, a genetically engineered drug that treats people with the most common form of hemophilia and is one of the company’s best sellers, generating $500 million in sales last year. While most of its L.A. business has been with its plasma operation, which makes blood-related products using technology so old it isn’t considered a biotech operation, Riedel said the company is now moving into using its plasma division partly for gene-based therapies. “They have ambitions to do other things,” said Ahmed Enany, executive director of the Southern California Biotechnology Council. “The bulk of their employment is not in biotech. But the future is wide open.” Rick Wise, senior managing director of Bear Stearns & Co., said Baxter faces an uphill climb in convincing Wall Street to regard it as a biotech firm. “Baxter is a diverse company,” Wise said. “It’s one of the global market leaders and a major player in intravenous solutions, but it’s not regarded as a biotech company.” Building a giant Glanzmann acknowledges that until the company is able to bring new biotechnology products to the market, investors and others will be reluctant to recategorize it. Riedel said the company spends $150 million annually on research and development at its Hyland Immuno business, which has a staff of 600 scientists and researchers. Each year for the next five years, it plans to bring new biotechnology products to market, including the recombinant Factor IX, which treats patients with a less common form of hemophilia, as well as vaccines for Lyme disease and influenza. The company is also looking to acquire or form partnerships with smaller companies to boost its biotech business, which will focus on everything from preventative to curative therapies. Aside from Amgen, most biotech firms in Los Angeles are small, little-known companies. “There are more smaller firms, still trying to make it, who have not yet got the name recognition of Amgen,” Enany said. If Baxter is successful in becoming a biotech giant, it could lure in other companies like it, bolstering L.A’s small biotech base. “The fact that they made a commitment to be in L.A. and want to strengthen their work in Los Angeles certainly adds to the visibility of Los Angeles nationally when it comes to biotechnology,” Enany said. “Part of what they’ll do is make alliances and acquisitions with smaller biotech firms. These activities create a sense of dynamism and that attracts others.”
