Not too long ago the the traditional, major drug companies were the engines of innovation. Those days are gone. Today, biotech is where the action is. They're smaller, more nimble, pay well and--at the risk of sounding elitist--are typically located in cluster areas where smart, well-educated and cultured people want to live. Without getting too deep into the science, old-fashioned drug companies make small-molecule products--or pills--using chemicals. Biotechs make large-molecule--often liquid and injectable--products using living organisms. The sector is doing so well lately that every major pharmaceutical company has acquired or partnered with biotech companies and wants to be more like them. For the past few years, Genentech has been the envy of biotech. Although there have been some bumps in the road over drug pricing and safety issues the company has been on a roll. It started with the launch of the new cancer drug Avastin. It's already approved for colon and lung cancers, but is being tested on nearly every other type of solid tumor in more than 100 clinical trials. Then, last year it won approval of Lucentis for age-related macular degeneration--the first drug for the leading cause of adult-onset blindness to show an improvement in vision.

Genentech's success stands in stark contrast to what's been happening in big pharma over the past few years. The industry has been laying off thousands of workers and closing dozens of plants and facilities to cut costs. The drug companies need to offset the loss of billions of dollars worth of brand-name drugs that are going generic and a relative dearth of new products in their peipelines to replace them. Meantime, at Genentech they've hired 1,500 people a year for the last 3 years and plan to bring on another 1,200 people this year. The company's adding 800,000 square feet of office/lab space and nearly 2,500 parking spaces to accomodate all of the new people at its sprawling South San Francisco headquarters campus. It's goal is to become the top cancer drugmaker by the end of the decade.

Genentech leaders will tell you the key to their success is that they "follow the science and the data". But there's much more to it than that. 95% of Genentech employees own company stock which has gone up about 250% over the past five years. Much of that ownership comes from a broad stock-option program. And Genentech allows its scientists to spend as much as 15 to 20% of their time pursuing "don't ask, don't tell" pet research projects. It was during that free time that one of its rock-star researchers discovered what would become Avastin. And, yes, Genentech offers all of the other perks you'd expect to find at a modern company in the Silicon Valley region including an on-site sushi chef, basketball courts and Friday-evening keggers called "Ho-Hos". (I asked where the name came from, but was told there are three explanations, none of which makes sense, so I didn't get one.) But, make no mistake, it is not party city. Many prospective employees are put through the wringer during the interview/screening process and they're expected to put in long hours if they get hired.

For now, Genentech's system is leading to innovation and it's paying off for patients, employees and shareholders.

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