General Electric pushes into biotechnology

General Electric pushes into biotechnology

General Electric pushes into biotechnology

G.E. Finds Strength in Its Diversity

Christoph Hergersberg stands before a wall-size diagram with far too many arrows, symbols and letters for an untutored eye to decipher. Skip to next paragraph

Christoph Hergersberg is the head of a biotechnology lab at General Electric. Mr. Hergersberg and his research team hope their imaging work will make the company a leader in the clinical diagnosis market.

It is a hodgepodge of the known biochemical pathways of the body — the way it makes DNA, for example, or turns sugar into energy. And it represents just a fraction of what goes on in living organisms. Mr. Hergersberg and his staff are trying to fill in some of the blanks, in hopes of finding genetic markers or other biochemical connections that could provide early alerts to cancer and other diseases.

Many scientists are doing that. But Mr. Hergersberg is running a biotechnology lab at General Electric, a company that people associate more with engines and finance than with genetic research. He is aiming to bring G.E. ever closer to a business in clinical diagnoses, “And that,” he said, “is a business G.E. definitely wants to be in.”

So are security, energy services, “green” products and many other areas that Jeffrey R. Immelt, G.E.’s chief since 2001, has singled out as the company’s growth platforms. He has jettisoned reinsurance and advanced materials, two slow-growth businesses, and the plastics business is on its way out.

He is also bolstering some of G.E.’s older businesses — in January, for example, G.E. spent $4.8 billion to buy the aerospace business of the Smiths Group, which adds control technology to the already thriving aerospace unit. But that same month he also spent $1.9 billion to buy the oil and gas operations of Vetco Gray, and $8.1 billion to buy a diagnostics business from Abbott Laboratories.

G.E.’s executives now face the task of integrating those mammoth acquisitions into the corporate fabric. But here at the company’s Global Research Center, the impact may be even more immediate: more acquisitions mean more technologies to tap into, for use in other businesses.

“The cross-business fertilization of research was marginal under Jack Welch, but Jeff has created an excitement and energy around the concept,” said Noel M. Tichy, a professor at the Ross School of Business at the University of Michigan, who has written extensively about G.E.

Examples abound. When G.E. decided to pursue the security business, its researchers immediately began adapting imaging technology from the health care division for use in scanning baggage. Another G.E. group is adapting lightweight carbon-and-plastic composites, originally developed for fan blades in aircraft engines, for use in windmill blades, some parts of power generators, and even for automotive parts.

Investors often favor the shares of companies that focus on one business area — “pure plays” in Wall Street parlance — over those of conglomerates. But scientists say that when it comes to research, the conglomerate structure is a strength.

Researchers at the University of California, San Francisco, are working with G.E.’s biotechnology lab to develop injectable agents that increase the sensitivity of magnetic resonance machines. They say the software and hardware expertise amassed in G.E.’s other businesses is helping immeasurably.

“G.E. brings a huge breadth of knowledge in information technology, imaging equipment and injectable agents,” said Sarah J. Nelson, a professor of bioengineering at the university, and head of the team that works with G.E. “Those interdisciplinary skills give G.E. an excellent chance of developing new biomarkers and genomic tools.”

Analysts say the diversity gives G.E. an edge in each new business. “G.E. is set up to transfer technologies from older businesses to all of their growth platforms,” said Deane M. Dray, an industrial analyst at Goldman Sachs.

That is certainly reflected in Niskayuna. A new 40-room lodge sits on the research campus, to accommodate visiting executives and customers. About 1,900 people work at Niskayuna, 19 percent more than in 2001. And another 700 are scattered through G.E.’s three offshore laboratories, in Bangalore, Shanghai, and most recently, Munich.

Until Mr. Immelt, G.E. had no biotech lab at all; today, more than 70 people work in that area. Mr. Hergersberg, like much of his research team, came on board in 2004, when G.E. acquired Amersham, which makes injectable substances that are used to improve images obtained during scans. Until that acquisition, imaging devices were G.E.’s main foray into health care.

But General Electric is not the only imaging company to see clinical diagnosis as a blockbuster market. Last year, for example, Siemens, a longtime rival in imaging, bought Bayer’s diagnostics division and a Los Angeles company called Diagnostic Products.

Now the companies are racing to make the research breakthroughs that will push them to the head of the pack. “We have billions of ‘letters’ of DNA,” Mr. Hergersberg said, “but so far, we can only read about 2 percent of the sentences those letters form.”

For now, the ability to parse those “sentences” is far too rudimentary for the biotechnology lab to worry much about applicability outside GE Healthcare.

But many of the older labs may soon face one downside of the interactive approach that Mr. Immelt has insisted on: when G.E. exits a business, it can leave a jagged hole in the company’s research network.

Once the plastics business is sold, for example, G.E. will have to join with another company to manufacture and distribute automotive plastics. It will have to go outside for the myriad plastic formulations and potential manufacturing processes that G.E.’s researchers in plastics electronics have tinkered with for several years. And, it will lose what Anil Duggal, a scientist on the plastic lighting project, calls “the market pull from the plastics side” — the easy dialogue it has had with customers who are looking to use plastics in new ways.

Still, under Mr. Immelt, G.E. has grown more amenable to joint projects with other companies. In January, it folded its security business into a joint venture with Smiths Group, whose aerospace unit it purchased. And it has formed a research collaboration with Eli Lilly to find ways to detect and treat Alzheimer’s disease.

At Niskayuna, just outside Schenectady, the emphasis is clearly on the science, not on the methods for commercializing it.

G.E. Finds Strength in Its Diversity

 

The walls of the research center’s lobby are adorned with pictures of dozens of G.E. scientists who each have more than 25 patents, with cases of medals and prizes they have won. And the anchor piece of the lobby is a desk — nothing special to look at, until you realize it was the one that Thomas Alva Edison was using when he helped found G.E. in 1892.

Skip to next paragraph The labs themselves are dealing more with the illusive future than the illustrious past, though. Almost every lab is working on some aspect of wind energy, for example. The composites lab is working on those lightweight carbon-fiber blades for windmills. The electronics specialists are seeking automatic controls to better coordinate demand and supply.

The electric power researchers are studying more efficient ways to convert the alternating current generated by windmills to a reliable source of direct energy that can move seamlessly onto utility grids, and perhaps ways to store excess energy when the wind is blowing particularly hard.

“We’re working with the Department of Energy, with the state of Hawaii, with local utilities, with everyone we can to see what technologies we can incorporate into better wind power,” said Juan de Bedout, a renewable energy specialist who manages the electric power and propulsion systems lab.

But perhaps most important for G.E., the labs are working closely with its businesses. G.E. executives rarely spent time at Niskayuna when John F. Welch Jr. was chairman; under Mr. Immelt, they visit four times a year. Joseph M. Hogan, chief executive of GE Healthcare, is a frequent visitor to the bioscience labs, while Scott C. Donnelly, the chief executive of the aviation business — and the former director of the research center — closely follows the composite work.

The frequent visits help the labs parcel out their results to many of the businesses simultaneously.

In the nanotechnology lab, for example, abracadabra moments occur often. A pool of black liquid contains tiny iron particles that jump up to a hovering magnet and form little “solid” spikes that, when touched, turn out to still be liquid.

A few feet away, researchers work to replicate on hard surfaces the water-repellent ability that nanoparticles impart to lotus leaves. Yet another experiment involves nanocameras that when positioned around a body and used in tandem, can take a much sharper picture of an organ than is yielded by the rotating single cameras in most imaging devices.

Those experiments might yield results that could lead to sharper images from M.R.I.’s, better ways to de-ice airplanes, and even to ways to detect substances that might be used by bioterrorists. In other words, they could yield products for G.E. businesses as diverse as health care, aerospace and security.

“Nanotechnology is letting us do things we never did before, in a huge number of areas,” said Margaret Blohm, who runs the nanotechnology research program.

G.E. hopes biotechnology can have a similar impact at the company. In a sense, it takes G.E. into uncharted territory. G.E. has always avoided products that enter the human body, since even small mistakes can be dire. But if Mr. Hergersberg’s crew is successful, G.E. will have an arsenal of substances for use in diagnostic imaging.

Mr. Hergersberg stops short of equating low risk to no risk. “The substances probably wouldn’t stay in the body long enough to trigger adverse reactions,” he said. It is a moot point, anyway. “Diagnoses and prevention are the future,” he said, “and that’s where we have to be.”