THE air of change is palpable. Inside the buff-colored buildings, construction crews are ripping up floors and installing new cubicles. White-smocked scientists dart in and out of laboratories. The staff is growing like bamboo. ``Half of these employees weren't even here a year ago,'' says a company official of the 1,050-member work force.
It's perhaps not surprising that Genentech Inc., the patriarch of United States biotechnology companies, is throbbing with activity. The company already has two genetically engineered products on the market, the first ones approved for sale in the country. Now it is awaiting approval for another, a drug to treat heart disease that some financial analysts claim could be a ``blockbuster.''
The changes occurring inside these buildings perched on the edge of frothy San Francisco Bay mirror in an exaggerated way what is happening in the biotech industry in general. After more than 10 years of research and $3 billion in investment, biotechnology is moving from the petri dish toward the product bin.
As it does, it is once again bringing prognostications of revolutionary changes down on the farm and in medicine cabinets.
At the same time, however, the industry faces years of development and regulatory hurdles before most of its genetically engineered wares reach the market. In the case of agriculture, biotech companies also face fresh concern about how safe those products might be.
Thus as biotechnology begins to move beyond the test tube, industry analysts see these trends emerging:
The 1990s will be more of the genetic-engineering decade than the 1980s. Although a wave of biopharmaceuticals is appearing on the market or moving through approval processes, many of the significant drugs won't emerge until late this decade. Farm products will come after that.
Recent concern over the release of genetically altered microbes in the environment is likely to continue to slow the development of the science for certain agricultural uses. ``We are in a very significant government- and public-acceptance struggle now with regard to environmental-use products,'' says Harvey S. Price, a Maryland biotechnology consultant.
Genetic engineering is expected to live up to its long-touted promise as one of the most important technologies of the 20th century. It is envisioned generating everything from new vaccines and new strains of vegetables to new ways of cleaning up toxic waste.
``In another decade, every person's life -- certainly in more advanced countries -- will be touched by recombinant DNA,'' says Kathleen Behrens, a biotech analyst at the investment firm Robertson, Colman & Stephens.
There are several reasons genetic engineering has not fulfilled all expectations so far.
One is that early on, many biotechnology companies established overly ambitious research projects. Products proved tough to crack, and, once cracked, tough to develop into marketable goods. In some cases, technical problems proved daunting.
``The Eureka-type products that people expected have not occurred,'' says Luther Smithson, director of the biotechnology program at SRI International, a California research firm.
All this has contributed to an on-again, off-again love affair with the industry among investors. It has also caused some restructuring and refocusing by the 200 or so small companies in the industry itself.
At present, enthusiasm is again filtering through parts of the investment community and the health-care branch of the biotechnology industry. But analysts caution that many of the same forces that clipped hopes in the past still exist.
Among the industry's first products have been monoclonal antibodies, a technology that detects whether a person has a particular bacterial or viral infection. Diagnostic kits based on monoclonals, which first appeared in 1980, now test for a variety of ailments, including AIDS (acquired immune deficiency syndrome). Kit sales hit $150 million last year.
Stirring more interest in medical circles are a number of biodrugs that companies are banking on to be more powerful or, in a few cases, safer than conventional curatives. One, Tissue Plasminogen Activator, is a blood-clot dissolver intended to aid heart-attack victims. The Genentech product, which may be out as early as next year, is expected to be the first big money-spinner of the biotech age, with annual sales expected to top $300 million.
Some lab-created versions of interferon and interleukin, substances that medical researchers say play a role in regulating the body's immune system, are showing positive results in attacking certain cancer cells. Some analysts say that by 1990, the two chemicals may command a market rivaling the $450 million a year spent today on conventional chemotherapy drugs. Other medicines nearing or on the market: vaccines against malaria and hepatitis and a treatment for dwarfism.
``There is no question that biotechnology is going to have a big impact in a lot of [health-care] areas,'' says Robert Riley, a senior consultant with Arthur D. Little Inc., a Cambridge, Mass., research firm. But, he adds, ``it is not going to take over all other technologies.''
Indeed, obstacles loom in trying to turn biodrugs into dollars, particularly for small companies. One is launch costs. Moving a pharmaceutical from idea to marketplace can take $25 million to $50 million and three to five years of testing, though conventional drugs often take longer. ``If a couple of kids want to build a new computer, they can get to work in their garage and have a product nine or 10 months later,'' says Tom Kiley, a Genentech vice-president. ``It doesn't work that way in the pharmaceutical industry.''
Patent problems exist, too. Most of the industry's products are substances that occur naturally in the body. To be protected, they must be produced in a unique process or with a unique application. Few patents have been granted so far, and no one knows how they will stand up in court.
``Patents will play a big part in sorting out the men from the boys,'' says Robert Fildes, head of the Oakland, Calif.-based Cetus Corporation, which has more than 1,000 biotechnology patents pending worldwide.
Many companies are working on similar -- and thus competitive -- products, often for relatively small markets.
Beyond this, there is the potential for negative side effects or misuse of ``wonder drugs.'' Industry analysts consider the risks with the current generation of biodrugs no greater than with conventional pharmaceuticals.
Even so, Genentech, when putting out its growth hormone to combat dwarfism, took steps to prevent its misuse by parents who want to make short children taller. It is mainly restricting sales of the drug to hospital pharmacies.
As biologists become more adept at manipulating human genes -- perhaps one day being able to alter those said to be responsible for hereditary diseases -- ethical questions will intensify over how far scientists should go in tinkering with the human species.
In the other main biotech frontier, agriculture, the potential rewards are as large as a combine -- but some of the risks are no less daunting. It will take longer to get most of the products out of the lab and, in some cases, they may not be as immediately profitable as the health-care products.
One reason for the slower development has been that the pharmaceutical industry usually produces drugs by inserting genes into bacteria, relatively simple creatures. Implanting a foreign gene into a complex plant cell can be far tougher. Knowledge of basic plant physiology, moreover, lags behind knowledge of human physiology.
``Agriculture is a good five years behind medical products,'' says SRI's Mr. Smithson.
Environmental concerns are haunting companies trying to test and market agricultural products containing genetically engineered organisms. Last month, activists led by Jeremy Rifkin, an ardent genetic-engineering foe, successfully blocked the landmark test of a frost-fighting bacteria that was to be sprayed on potato plants outside Tulelake, Calif.
Local protests halted a similar experiment, this one of a bacterium to fight frost on strawberry plants near Monterey, Calif., earlier in the year. In April, the federal government briefly halted the sale of a genetically engineered swine vaccine after another Rifkin-led protest.
Although most scientists are convinced that none of these products posed any threats, the controversies reminded the industry of the importance of public relations in the Biotechnology Age. Companies are now going to great lengths to allay any local fears before they field-test products.
``The mishandling of Monterey reminded us that companies will have to have well thought-out public education plans,'' one company president says.
Agricultural experiments not involving living bacteria have been moving ahead largely unencumbered. Last month, Rohm & Haas Company, a Philadelphia-based chemicalmaker, began the world's first outdoor test of genetically altered tobacco plants resistant to insects -- a trait scientists eventually hope to transfer to cotton and corn plants. Wisconsin-based Agricetus is conducting the first outdoor tests of disease-resistant tobacco plants.
On the horizon: disease-resistant soybeans, plants that thrive in harsh environments, altered soil microbes that may produce highly specific and perhaps safer pesticides -- even popcorn that won't require butter or salt. In all, the US General Accounting Office estimates that close to five dozen genetically altered plants and organisms will be ready for field tryout over the next five years.
While the new science promises eventually to usher in a second green revolution, it is also raising questions. Herbicide-resistant crops, for instance, may one day allow growers to control weeds more effectively and economically. But some environmentalists fret that they will just prolong the use of chemicals down on the farm.
A new product called bovine growth hormone, which increases the milk production of cows by as much as 40 percent, is expected to go on sale in 1988. There is concern, however, that a fall in milk prices that would likely result as use of the hormone increased milk output could force many small dairy farmers out of business.
``The problem we are going to have in agriculture is dealing with the tremendous productivity bursts that will come on the scene almost overnight,'' says Jack Doyle, author of ``Altered Harvest.''
Friends and foes of the new technology will have some time to debate its impact. With a few exceptions, most of the fruits of agricultural gene splicing won't be on the market until the 1990s.
In the meantime, biotech companies face more-tangible challenges before they can produce corn as high as a geneticist's eye.
Like their counterparts in the health-care area, the agricultural biotech firms are trying to walk the fine line between pursuing research and gearing up for the demands of the marketplace. They need money to tide them over until products emerge.
Most are coping now. But analysts say a shakeout is inevitable. Some companies will fold. Others may be bought up by big agricultural companies, which, like the big pharmaceutical houses, have already been moving aggressively into the field.
Once this Darwinian struggle is over, US biotech companies can prepare for one other assault: from abroad. While the US remains the scientific leader in the field, other countries -- notably Japan -- are moving quickly to exploit the technology.
``The worst thing we can do is delude ourselves into thinking that we are way out front,'' says Dr. Leonard Guarraia, a director of science and technology policy at Monsanto Corporation.
Previous articles ran Sept. 25 and 26.