Reg Kelly, Scotsman from Humble Roots, Finds New Purpose at QB3 in Mission Bay

Xconomy San Francisco — 

One of the leaders of the renaissance in biomedical research and entrepreneurship in San Francisco’s Mission Bay district almost didn’t have a chance to go to college.

Reg Kelly, the director of the California Institute for Quantitative Biosciences (QB3), was born 70 years ago in Edinburgh, Scotland, into a family so poor that he couldn’t afford boots to go hiking with his friends. His stepfather was an auto mechanic, and his mother cleaned factory floors. Kelly’s mother wanted him to go to work at 17 to help the family. He went to college only because Britain’s government in the late 1950s provided full-ride scholarships, including tuition and living expenses, to bright kids from poor families.

The force of personality that was partly shaped by those early struggles propelled Kelly on a career arc that led to the peak of academic neuroscience. Now six years removed from an abandoned attempt to sail away into the sunset, the hard-driving Scotsman has come back to pursue an even more improbable dream. He’s overcome some big political and cultural barriers to create an environment that’s incubating 22 biotech startups in what used to be one of the bleakest areas of the city. Mission Bay, he says, is on track to become nothing less than what he calls “the academic health center of the 21st century.”

“I’ve just hustled. It’s what I’ve been doing all my life,” Kelly says. “It’s the advantage of growing up a poor kid. You’ve got to hustle to make things happen.”

QB3 connects three big research centers in northern California—UC San Francisco, UC Berkeley, and UC Santa Cruz—to venture capital, entrepreneurship, and the for-profit life sciences industry. It provides key ingredients like mentoring, lab space, state-of-the-art equipment, about $8 million in seed capital, and free beer for networking events.

I met with Kelly at his office a little more than a week ago to learn more about the person who has made so much of this happen.qb3logo

Kelly was born in 1940, the year Germany launched the Blitz against London and other British cities and prime minister Winston Churchill delivered his legendary “finest hour” speech. He was the oldest of three sons. The Kellys lived in public housing, and the boys attended schools operated by the Catholic Church. He was a top student in his class, but didn’t show interest in science.

“There were only two choices, you either studied Latin and Greek and became a priest, or you opted for science,” Kelly says. “I didn’t particularly care for science. I liked history.”

While Kelly was growing up, Britain’s Labour Party established a benefit program for kids like Kelly. Not only could bright students from poor families get free tuition, but their families could get aid to cover living expenses, which made it easier to cope with a young worker being out of the workforce. This benefit proved to be short-lived, and the program was cancelled when middle-class families started demanding the same benefit, Kelly says. “There was a brief window there when to be bright, and poor, was advantageous,” Kelly says.

That scholarship took him to the nearby University of Edinburgh. He graduated at the top of his undergraduate class in physics in 1961. He thought about getting a graduate degree in astrophysics for a while. But this was the same year as the Cuban missile crisis, and increasing calls from around the world for nuclear disarmament.

“People were very upset about the bombs. I decided that wasn’t an appropriate career,” Kelly says.

These were also the heady early days of molecular biology, as bright young minds flocked to explore the mysteries around DNA that Francis Crick and James Watson had begun to unravel in 1953. There was only one problem for Kelly. He knew nothing about biology. “I had never taken a biology class in my life. They didn’t teach biology in Catholic schools, because you had to learn about sex. That wasn’t allowed,” he said with a laugh.

But Kelly still found a way to get into a graduate program that would value his physics training and allow him to get up to speed on biology as a grad student. It was through a biophysics program at Caltech, where he got his PhD in 1967.

Fresh out of Caltech, Kelly first arrived in the San Francisco Bay Area. During that period of anti-war protests and the counterculture, he took a postdoctoral fellowship that lasted a couple years in the Stanford University lab of Nobel Laureate Arthur Kornberg.

Pushing 30 by this point, he had an impressive academic record but hadn’t found his research path. Neurobiology seemed like a good place to be, Kelly says, especially since the famed biologist Sydney Brenner talked it up as the great frontier for biology’s biggest questions. So Kelly landed this time in Harvard University’s neurobiology program, best in the world at the time.

For a young man, it all looked like a predictable path toward a career as a leading neuroscientist. But then Kelly shocked his friends at Harvard two years later in 1971, when he accepted a faculty position at UCSF.

“It was a real second-rate place,” Kelly says. “People couldn’t believe that I had accepted to go UCSF over other options. It turned out to be one of the best decisions I ever made in my life.”

One of the faculty members at UCSF in those days, Gordon Tomkins, closed the deal. “I remember him say, ‘If you love Harvard, you won’t like what we’re trying to do. What we’re trying to do is make a place collegial, a community.'”

It was in tune with the spirit of the late 1960s, the hippie movement, and the desire to create a sense of belonging. It struck Kelly as the opposite of Harvard, with its notorious sharp elbows, where you had to guard yourself from colleagues who might try to steal your work.

UCSF proved to be the right place for Kelly to grow as a researcher along with other bright young peers. He reveled in the California outdoors. He gravitated to whitewater rafting, kayaking, mountaineering, rock-climbing. He told me about one white-knuckle adventure when a climbing partner fell and nearly yanked him off a mountain. “I was a wild man,” he says.

This was also a time when Kelly’s research career was taking off and the biotech boom was beginning to flower at UCSF. Kelly and a few other peers resisted loudly. They rejected the ideas of colleagues like Bill Rutter, who went on to co-found Chiron, and Herb Boyer, whose recombinant DNA technique was one of the discoveries that gave rise to the biotech industry.

“Herb Boyer didn’t get a lot of support from people like me, nor did Bill Rutter,” Kelly says. “It was the standard leftist thing to do-be against industry.” Anything to do with corporations, he thought, “would sully the beauty of academia.”

Kelly’s change of heart occurred around 1990, when he attended a company Christmas party hosted by Chiron. “There were 3,000 people at this party,” Kelly says. “All ethinic groups, from all economic strata, all dressed up to the nines, having a great party. It struck me that Bill Rutter, someone I criticized, had created 3,000 jobs. What had I done with my life? It was a revelation.”

He explained his thought process: “If you want to do good things for people, you have to do it with the private sector. It’s about creating businesses that create jobs, that create wealth, that creates happiness. It creates much more happiness than reading a great paper in Science or Nature. So I got more involved. I dropped my leftist attitudes toward business.”

Not only did Kelly drop his anti-business ideology, he started devoting himself to bridging the gap between academia and industry. During his stint as UCSF’s executive vice chancellor, from 2000 to 2004, Kelly established the first program in entrepreneurship for grad students, to help them better prepare for careers in biotechnology.

But his time as executive vice chancellor was not happy. Kelly worked his charms to tamp down a faculty revolt against the new campus in Mission Bay, a run-down neighborhood, unlike the beautiful Parnassus Heights campus near Golden Gate Park. There were lots of committee meetings, and ceremonies. “It was too much nuts and bolts for me, and it’s not what I’m good at,” Kelly said.

So he retired. He bought a sailboat, learned to sail. The plan was to travel with his wife to the South Pacific.

He got as far as Acapulco before he realized the whole thing was a mistake. He missed the intensity of his daily life, and while sailing was a relaxing counterbalance, it wasn’t something he could do all the time. “When you do nothing but sailing, you have no yin for your yang anymore. So it gets boring after a while,” Kelly says. He also was frustrated when meeting people in marinas, who had led fascinating lives, but wouldn’t talk about it. “It was almost like they were in denial about the fact that they had once been interesting people. I realized, they were really just waiting to die. It was depressing. I high-tailed back.”

QB3, founded in 2000 and four years old at that point, was a mess. The previous director, Marvin Cassman, was an outsider brought in from the National Institutes of Health for a job that required a broad base of support within the university and the ability to generate support from state lawmakers. Cassman is “a wonderful man,” Kelly says, but not the right fit. “We asked him to do an impossible job.”

So when Kelly showed interest in coming back to UCSF after his brief retirement, chancellor Mike Bishop asked Kelly to take over at QB3. This was a pretty thankless task, given that the operation was originally conceived to have a $20 million annual operating budget once the Mission Bay facilities were built, which was supposed to put it in the same league as a place like the Whitehead Institute in Cambridge, MA.

Instead, the agency got a $1.2 million budget from the state, for one year. All the staff had been laid off. When Kelly started on July 1, 2004, he was the only employee, with just a single laptop sitting on a desk. “I really had to start and create QB3 from zero,” Kelly says.

One of the key early decisions was finding the right team. Kelly did that by recruiting associate director Doug Crawford. “We hit it off. We’re both very hard driving, hard working. It’s always fun to do something with someone rather than try to do it on your own,” Kelly says.

The lack of operating capital was the No. 1 problem. It wasn’t going to rain down from Sacramento automatically, so Kelly turned to the private sector. He called his friend Art Levinson, then the CEO of Genentech, and asked him what wasn’t working in the relationship between academia and industry. Levinson cited intellectual property red tape as a big problem, so Kelly resolved to work behind the scenes at the university to find a better way. Six months later, Genentech and UCSF had forged a blanket intellectual property agreement that greatly increased technology transfer.

This was really the period, Kelly said, that he was hustling. He connected with an eclectic bunch of business and government leaders, including General Electric CEO Jeff Immelt, Dreyer’s Ice Cream founder T. Gary Rogers, and the government of Malaysia, who all committed to support the vision of translating basic science into products and jobs. Brook Byers, the legendary venture capitalist at Kleiner Perkins Caufield & Byers, agreed to put his name on an auditorium at the Mission Bay campus.

This growing legion of supporters for QB3, in turn, helped put pressure on California lawmakers to keep supporting the effort through some tough budget-cutting cycles. The level of state support climbed from $1.2 million in the first year to $7.5 million at its peak, although recent cuts have brought state support back down to $5 million a year, Kelly says.

Despite the cuts, the activity is increasing at QB3. The operation has hatched 22 startups, and gets two to four requests a week from others that are seeking to work in one of its incubator spaces. The Mission Bay Capital Fund was established last year with $7.5 million to invest in about 15 startups with ties to UC entrepreneurs. It’s already made a couple investments, but it’s really just getting started, Kelly says.

Getting startups to physically locate in Mission Bay is an essential piece of the puzzle Kelly is working on. The plan is to create a place where the intellectual, creative types of the university, the clinicians who treat patients, and the hard-driving entrepreneurs who develop new drugs are all in the same place, “cheek by jowl,” as Kelly says. The entrepreneurs have usually been missing from that equation, because of their need to keep costs low, which drives them to look for cheaper warehouse-like space in places like South San Francisco. But that creates disconnects which make it more difficult for people to build the kind of close working relationships across disciplines that are needed for something so complex as drug development, Kelly says. Getting them all together in one place, Kelly says, should make Mission Bay “the academic health center of the 21st century.”

This effort is still in the early days. The day I met Kelly, bulldozers were moving dirt across the street for the new UCSF Medical Center at Mission Bay. Last Thursday, the news broke that founder Marc Benioff and his wife are donating $100 million for the new hospital. It’s a big part of a $1.5 billion hospital system planned for Mission Bay, which will start to open in 2014.

Kelly is so eager when he talks about this that he often started answering me before I was done with my questions. He is pouring “the energy of a convert” into this undertaking. He recently turned 70 years old. I had to ask him whether he had a big celebration.

No, the poor kid from Scotland was out hustling that day, too. He was giving a talk about QB3 and the Mission Bay vision at a venture capital conference.

“Isn’t it appropriate?” Kelly says.