Wednesday, April 11, 2007

The ups-and-downs of out-licensing

Monday's Boston Globe had an interesting article (probably $$$) on a story which hadn't seen much attention previously but illustrated a number of biotech themes: rapid reversals & odd partnerships.

A group at Beth Israel Deaconess Medical Center (BIDMC) had developed a potential new protein therapeutic which they thought they might hit it big with. I must confess a special fondness of BIDMC, as a team there oversaw the delivery of my most important project ever, but they seem to have really gone out on a strange limb in this case by picking an odd partner for developing their blockbuster.

The potential blockbuster is apparently a single chain protein encoding a dimeric erythropoeitin (EPO). EPO is, of course, the most financially successful biotech drug ever and what made Amgen bigger in market cap than some old-line pharmaceutical companies. EPO has been in the crosshairs of a number of other companies, but Amgen has thus far won all the battles on patents -- first with Genetics Institute (now Wyeth) at the outset and later knocking out Transkaryotic's (now Shire) attempt to end-run their patents. Amgen followed up with a slightly modified form (Aranesp), which has also cleaned up. Affymax has a clever mimic in trials -- though this illustrates the need for patience in this business, as their splashy paper on it came out when I was interviewing at Millennium nearly 11 years ago!

So a tandem EPO would seem like a reasonable bet, with the claim that this form is longer lasting (ala Aranesp) and more potent. EPO is used to treat anemia in kidney failure (EPO is normally made in the kidney) and cancer patients (along with illicit off-label uses in the field of athletics) -- more is better, right?

Lately, the bloom is off that rose -- several studies are suggesting that for cancer patients there may be drawbacks to high EPO doses. EPO has now earned a black box warning and Amgen is scrambling (the CFO just bailed -- perhaps with shoeprints on his backside).

Now that's just bad luck -- pharmaceuticals are like that. One day COX2 inhibitors are miracle drugs; the next day they're persona non grata.

It's the other half of the story that I found very curious. If you were trying to out-license your institutions exciting new protein therapeutic, what would your first choice of company be? How about a failing genomics company with a slim bank account? No? That doesn't sound appealing? But that's exactly what BIDMC did.

Now a lot of genomics companies exited the genomics boom in a strange place: lots of money raised during the bubble, but no path forward to make money in genomics. Companies such as HGS and MLNM are still living off that cash, but they had interesting programs going. Others had stranger outcomes. Variagenics and Hyseq proved that 1 genomics company + 1 genomics company = 0 genomics companies, as they merged, ditched all their genomics operations, and changed to Nuvelo to develop an in-licensed protein therapeutic.

BIDMC chose DNA Print Genomics for their wonder drug. I have nothing against DNA Print, but there's nothing in memory (or on their website) to suggest that they have any of the key skills. Nor do they have much cash. While they do actually have products, those products don't inspire much awe. DNA Print will type your DNA to estimate your ancestry. That might be fun, but how big is the market really? They also claim to have tools which can predict the physical characteristics of a person (skin color, earlobe attachment) from forensic samples -- a sort of genetic sketch artist. I'm sure there are missing persons-type cases where this provides one more set of clues, but its hardly something that would see routine use in cases.

Wall Street hardly loves DNA Print -- if Yahoo's statistics are to be believed, it is trading at a market cap of 4.58M much below its cash position of about 8.5M -- but it is also (if I'm reading this right; I really don't stare at these often) blowing through 3-4M per quarter -- meaning that cash will run out in the near future unless they find financing or take a scythe to their operations. This was a point raised in the Globe article -- BIDMC has hitched their wagon to a lame horse which may expire very soon.

An interesting question, which one can never get a straight answer to, is why pick DNAPrint? Was there really nobody else interested? It is curious that the consultant who BIDMC hired to find a licensee (after Eli Lilly had bailed out) for the compound ended up as chief executive at DNAPrint. While that is hardly unheard of, it does raise a real issue of conflicts of interest. The deal structure is strongly loaded towards milestones & royalty payments -- i.e. BIDMC sees very little without a lot of progress being made. DNA Print apparently has reported preclinical results.

A weak & failing partner for a troubled market niche -- hardly a good place to be. C'est la biotechnologie!

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