Just south of Virginia's Shenandoah Valley, in a rural town called Radford that was once a thriving rail and manufacturing center, biotechnology has slowly taken root over the past few decades. From the outside, there's little to explain biotech's presence in the pleasant, 20,000-person town, with its parks, quaint downtown and local university. But locals know the reason: Randal J. Kirk, a local lawyer turned entrepreneur who, according to Forbes, is worth about $2.2 billion, nearly all from a decade or so of venture investing, company building and dealmaking.
Kirk, 58, is a major figure in biotech these days. "He seems to have sort of a prescience in terms of what new drugs and technology will gain value in a matter of years," says George Zavoico, an analyst with New York-based McNicoll, Lewis & Vlak LLC who has covered Kirk's companies. "He has a tremendous value-add to anything he's touched so far. If that pattern continues, he'll make a lot of people wealthy as well."
On the surface, Kirk appears to be the antithesis of the conventional biotech investor. He operates far from the academic centers, such as Boston or San Francisco, that have traditionally nurtured biotech startups. He lacks both the scientific training of most biotech entrepreneurs and the institutional backing of most venture capitalists. And yet, over three decades, he has shown a mastery of this high-risk business, with its long lead times, capital intensity and dauntingly unpredictable R&D.
Kirk lacks the drawl of many Virginia residents -- he grew up in California as a military brat and attended local Radford University as an undergrad -- and he introduces himself gregariously as R.J. His conversation often proceeds at a tangent, yet he always seems to recover to deliver his point. He graduated from law school in Virginia at 27 and settled back in Radford to practice. He's a local now, having raised a family around Radford. One son, Julian Kirk, is a managing director of Third Security LLC, his investment firm.
Third Security operates as a long-term venture capital fund, pouring money into startup biotechs for equity or board positions, and remaining with them until they go public or sell out to a strategic buyer. Kirk, however, does not like to be called a VC. "It's not venture capital; it's not private equity. They're true capitalists. They put money out, they want to know how much is coming back and that kind of jazz," he says. "We're really looking for opportunities where, through our personal efforts, we can add value."
Kirk philosophically notes that the act of investing in a biotech startup is as much about the return as it is about the scientific and social benefits. "Nobody bats a thousand on anything," he says. "It's the oddest thing: Every time I've done something that was intended to make money, I lost money. The things we've been successful at are the things we've focused on that will make a big difference."
Despite his success, and increasing media attention, Kirk is not a well-known name on Wall Street outside biotech circles. He is better known in southwestern Virginia, having served on various boards at Radford University. He owns some 6,000 acres in surrounding Pulaski County. And he plays a role in Virginia politics as a campaign contributor, according to the nonprofit Virginia Public Access Project, giving more than $2 million since 1999, primarily to what the project considers Democratic-leaning campaigns. But he's supported Republicans, too. Kirk says he doesn't affiliate with a political party, but supports a candidate if he likes the person.
He owes it all to biotech. In 1998, Kirk sold his first company, General Injectables & Vaccines Inc., to healthcare product distributor Henry Schein Inc. of Melville, N.Y., for as much as $145 million. That provided the backing to start Third Security, which he used to help fund a startup biotech in 1998, Radford-based New River Pharmaceuticals Inc., which he sold to Shire plc in 2007 for $2.6 billion; Kirk took home about half the selling price. Since then, he has invested in at least a half-dozen other companies, most of which are biotechs, and sold a number of them. One of his most recent plays -- an investment he believes could be his biggest ever -- is Intrexon Corp., a Blacksburg, Va.-based startup that operates as a contract manufacturer, using an in-house database of genomic information to build models of synthetic DNA for customers, who in turn can use them to manufacture anything from therapeutics to agricultural products.
"It was literally, in our view, the world's best technology," says Kirk, who first came across the company in 2005. "It could be the high ground of synthetic biology."
Though Intrexon is more than a dozen years old, the company has been following its current business plan, under Kirk's direction, for only two years. Whether it proves to be another blockbuster, or like so many other biotechs, a bust, remains to be seen. But Kirk has plans. Because of Intrexon's complexity, he thinks the company may not be sold, but instead attempt a public offering, though he won't offer a view as to when.
Meanwhile, as Intrexon's current chairman and CEO, Kirk can already anticipate one of the "rock star" managers he has hired taking the helm. "I look forward to the day when one of them can take over," he says.
Born in 1953, Kirk had a peripatetic childhood. His father served in the Air Force, and the family moved from Pleasanton, Calif., where he was born, to various locales across the state, to Massachusetts and to Texas. After his father retired, the family moved to southwestern Virginia, where Kirk finished high school.
Kirk has been fascinated by eclectic interests apparently since he was a child: He told Forbes in 2007 that he learned to read by matching letters on a cereal box with sounds from the television, and used that knowledge to tackle his parents' encyclopedia. The Air Force base where he was born eventually was turned into a women's prison. "It used to drive my mother nuts when I told people that I was born at the state women's prison," Kirk says.
He earned a business degree from Radford in 1976, then attended the University of Virginia Law School. His legal studies weren't his only interest. Kirk says he learned language assembly programming on a single-board computer that allowed him to write and play his own music -- this was the late 1970s, when personal computers were still in their infancy. In 1980, Kirk was admitted to the Virginia state bar.
As an attorney in Bland County, a few dozen miles west of Radford, Kirk had plenty of work. Not only did he run a general practice, dealing with cases as varied as real estate, domestic relations, criminal defense and civil litigation, but Kirk says he was the only resident of the county who was also an attorney. "I was a real country lawyer doing the sort of practice that every country lawyer did at that time," Kirk wrote in an e-mail. "Over time, however, my practice was increasingly taken up by regional business clients -- entrepreneurs, mostly."
The legal work held his attention for only so long. While Kirk practiced law during the day, he moonlighted as an entrepreneur. He and a local pharmacist successfully founded their first company in 1984, General Injectables & Vaccines, a supplier of medical devices and vaccines, with $100,000 of their own money.
The pair built the company through the end of the decade, when Kirk turned to it full time, shuttering his legal practice. In the mid-1990s, General Injectables spun off King Pharmaceuticals Inc., a company with a focus on acquiring pharmaceutical brands.
In 1998 Kirk experienced his first big success. That year, he exited his investment in King, which went public for $56 million, and sold General Injectables to Henry Schein. (King sold to Pfizer Inc. last year for $3.6 billion.)
With cash in hand, Kirk says he wanted to maintain his energy and focus. He founded Third Security, a name that plays on his belief that he was entering the third phase of his life: the first as preparation, the second as a serial entrepreneur, the third as an investor.
Kirk then founded New River, a company he created to develop small-molecule therapeutics. As he built New River, Kirk also began to compile a formidable list of investments. He was chairman of Fremont, Calif.-based Scios Inc., which was acquired by Johnson & Johnson in 2003 for $2.69 billion. More recently, he served as chairman and majority shareholder of Newton, Mass.-based Clinical Data Inc., an antidepressant drug developer that was acquired by New York-based Forest Laboratories Inc. for $1.2 billion earlier this year. Kirk netted more than $600,000.
Today, Third Security is inundated with investment pitches from biotechs. Kirk intentionally keeps the number of investments relatively small, another way, he insists, he's different from conventional venture funds. "The main thing we look for is, if we believe we can try to help, then we can add value through our personal efforts," he says. "If we're not adding value ourselves, there's not a reason for us to be working in this thing. If we're going to live and sleep and breathe this thing for a decade, we've really got to love it."
Kirk appears to really love his most current fixation, Intrexon, although the company came perilously close to failing three years before he came onto the scene in 2004.
Thomas Reed founded Intrexon in 1998, in his last year at the University of Cincinnati, where he was pursuing a Ph.D. in molecular and developmental biology. The idea had stemmed from an internship Reed, who had just graduated from the University of California at Davis, had taken at Genencor, a 30-year-old joint venture started by Genentech Inc. and Corning Inc. Reed was fascinated by the entrepreneurial élan of the company, and the science, which used genetics to produce products such as glass stains and enzymes that can be used to make cheese or wine. "You can do all of this with DNA," Reed recalls thinking. "I hung out with them, and it made me think, 'Gosh, I can do this too.'?"
After completing his Ph.D., Reed focused on his startup, which aimed to develop so-called on-spec transgenes for its clients. He had raised a quarter of a million dollars from friends and family to begin, but he needed more. In 2001, he went looking -- just as the dot-com bust and recession hit.
Realizing he'd have no luck with the venture capital community, Reed turned to small communities looking for job creation and tax revenue. "I went on a multistage economic development agency road show," he says, pitching the same opportunity: "You invest in my company, and I'll bring you jobs."
In late 2004 Roanoke, Va., about 40 miles northeast of Radford, came calling. Roanoke, population 92,000, offered Intrexon -- then known as Genomatix Corp. -- $850,000 to relocate there, as part of an economic development incentive offered by Roanoke-based Carilion Health System (now Carilion Clinic), the Virginia Tech Foundation and two angel investors.
Third Security was also looking for local investments. Carilion Health, the VT Foundation and Third Security had created the NewVa Capital Partners LP to pour $12 million into southwestern Virginia companies. While it may have been circumstance that brought Intrexon and Kirk together, Kirk saw something more. Kirk spent the next seven months in 2004 and 2005 performing due diligence on the company. In May 2005, NewVa offered Intrexon a $500,000 investment.
"What's important about that time frame is the level of diligence Third Security performed for a mere half-a-million dollars," Reed says. "It was clear that they understood that we were something bigger. Every time they discovered something might be valuable, they wanted to know more."
Biotech is among the bigger crapshoots around. Each year, biotechs fail, running out of money or faith or both. Others linger in a limbo of constant fundraising. Intrexon was caught in that fundraising rat race. The company was still called Genomatix, a name it discarded after discovering a German firm was already using it.
Kirk and his Third Security team stress due diligence. They pay third-party scientists to analyze the science, and accountants to check the books. They know here are no guarantees. Even if an investment pans out, this being biotech, it takes time and money; Kirk says his average investment lasts 10 to 12 years. Often, it requires some luck, too.
For example, Kirk says that Clinical Data, another Third Security investment, picked up Viibryd -- the potentially billion-dollar antidepressant that attracted Forest Labs -- when it bought a fledgling biotech called Genaissance Pharmaceuticals Inc. for $56 million in 2005. "Did we look at that asset in 2005 and say, 'Holy moly, that thing is worth a billion dollars?' No indeed," Kirk says. But Kirk and Clinical Data executives did know that Genaissance was worth at least $50 million, so they made the deal.
Kirk began meeting with the Intrexon staff on a monthly basis in 2006. "He started going, 'Can you do this?' Yeah," Reed says. "?'Can you do that?' Yeah. 'Can you do this?' No. 'Why not?'?"
Simultaneously, Kirk began urging the company to change certain aspects of its operations while maintaining more fundamental elements.
By then Intrexon had relocated 40 miles away, from Roanoke to Blacksburg, home of Virginia Tech. The company was initially founded as a hybrid: part genetic engineering, part software. In its early days, it developed a database architecture that allows it to input information about genes of both complex and simple organisms. The database not only stores information, but allows the company to study the consequences -- both failures and successes -- of the so-called synthetic transgenes that Intrexon creates. It uses that knowledge to hone its research capabilities.
Transgenes are synthetically created gene sequences introduced into organisms to induce a certain cellular behavior. For example, Kirk says, the company could introduce a transgene into yeast to alter its structure to produce beer with higher alcohol content. Intrexon's initial target customers were research institutions and pharma companies that required genes used to develop or manufacture drugs.
Intrexon used its software to develop computer designs of genes it hoped to create for clients and then test them. Intrexon could then store the results and use that information to improve the speed and accuracy of specific design.
Intrexon's original business model was costly and time consuming. For a single job, the process would take four to five months and $20,000 to $30,000, Reed says.
Kirk persuaded Intrexon to change that. He had Reed stop spending countless hours building on-spec transgenes and instead focus on research. The company then built an information library storable on a database. Whenever Intrexon built an in-silico, or computer-simulated, model of a transgene, the database provided thousands of potential ways to construct the synthetic DNA, which could be cross-referenced against others to determine effectiveness. As a result, the process of creating the right transgene grew "iteratively faster," Kirk says.
"The system captures all this information in real time now," Kirk says, adding that it also captures errors so that "the more mistakes we make, the smarter we become."
Since early 2007, Intrexon's primary goal has been to expand that information pool. Meanwhile, Kirk has developed a broader business. He has now set up five commercial divisions: therapeutics, protein production, agricultural production, industrial products and animal science. Each is operated semi-autonomously, trying to recruit customers who may want to utilize Intrexon's database and DNA-building capabilities.
Kirk officially took over as CEO in 2009 and acts as the "master strategist" of the entire company, Reed says, who remains the company's chief scientific officer. "R.J. is driving us, and is bringing in funding so that we can expand our resources," Reed says. "Even though he'll tell people that he's just a lawyer, he's brilliant."
Because Intrexon remains private, financial data is unavailable. But Kirk, who holds voting power over most of the stock, is keen on its potential. Intrexon raised $100 million earlier this year. Kirk contributed a portion, but for the first time new investors funded most of the round. Since Intrexon moved to Blacksburg and Kirk became involved, the company has raised $164 million in cash and warrant sales, according to filings with the Securities and Exchange Commission.
The company has engineered a number of small acquisitions this year, as well as partnerships, such as one announced in January with New York-based Ziopharm Oncology Inc., which gives Ziopharm rights to any anti-cancer platforms Intrexon develops. Kirk joined Ziopharm's board, and through Intrexon and his own holdings, has picked up a 12.11% stake. Intrexon will buy up to $50 million in future securities, the companies announced in January.
Ziopharm has also started using a "gene switch" technology that Intrexon acquired in 2008 for one of Ziopharm's anti-cancer treatments. The treatment, which uses immune system communicators known as cytokines, had almost been written off. Even though they cause the immune system to attack cancer cells, cytokines can be extremely toxic and unsafe to use on their own. "The idea here is that the parent molecule is effective," says Jonathan Lewis, CEO and chief medical officer of Ziopharm. "It's just fraught with trouble."
When a cytokine is combined with Intrexon's RheoSwitch technology, that toxicity can be controlled. When a patient takes one of Ziopharm's pills, the treatment switches on within 24 hours. When a patient stops taking the pills, the treatment switches off. Thus, toxicity is tolerable.
Early Phase 1 data from Ziopharm's pill using RheoSwitch has shown positive results.
Partnerships like the one with Ziopharm are precisely what Kirk says the company is seeking to bolster growth and revenue. Intrexon wants companies such as Ziopharm to approach it with a genetic problem that it can remedy using its synthetic DNA.
Because of the complexity of Intrexon's science and its interest in forging partnerships instead of acquisitions, Kirk says a sale to another company is unlikely. He says Intrexon will likely take the initial public offering route, adding that he has a certain valuation in mind, which he describes as more than just a few hundred million dollars.
If the company does go public, and Third Security exits, Kirk won't exactly be free. In addition to roles at Third Security, Intrexon and Ziopharm, he is currently on the boards of Halozyme Therapeutics Inc. and Cyntellect Inc., both San Diego-based companies.
In the process of becoming one of Virginia's wealthiest residents, Kirk has courted some controversy, though the incidents remain very local affairs. He took some heat in late 2007 when Pulaski County residents found out he had requested that the county let him privatize a road that runs through his acreage, according to The Roanoke Times. He says the request was dropped after the public reaction, arguing that it was a measure taken by his attorneys and security personnel as a safety precaution.
And when Kirk was the rector of the Radford University board of visitors, he and a fellow board member, local accountant Robert Blake, had a disagreement that resulted in Blake's resignation from the board. The affair left Blake, who was an investor in New River Pharmaceuticals, with a less-than-positive opinion of Kirk. Even so, when Intrexon and Ziopharm linked up, Blake bought stock in the oncology company. When it comes to business, Blake says, "I set personalities aside. I think he's done very well. I'll commend him for that."
Nobody in Radford, or anywhere else for that matter, can argue with Kirk's record in biotech.
Former Commodity Futures Trading Commission Commissioner Bart Chilton brings his saucy eloquence to DLA Piper as a senior adviser in Washington. For other updates launch today's Movers & shakers slideshow.
The activist investor and the famed auction house are headed for a courtroom showdown. Loeb wants three board seats and the ability to fire Sotheby's CEO William Ruprecht. The company responded with a $300 million dividend for shareholders and a poison pill aimed squarely at Loeb. More video