STRATEGIC INSIGHTSEconomic Development
Lexicon Genetics wants to help put Texas on the biotech map
May 19, 2004
By Barbara Depompa
| Nestled in the woodlands, a planned community 27 miles north of Houston, Lexicon Genetics has built a robust business using the Human Genome Project to study the function of genes that may be useful in drug discovery. The company has so far completed analysis of 30 percent of the 5,000 human genes considered to have potential value in drug therapies. Lexicon's primary focus is in analyzing those genes to discover novel drug targets from the human genome.
In 2003, Lexicon's revenue increased by 22 percent to $42.8 million from $35.2 million in 2002, marking the company's eighth consecutive year of revenue growth and the year of its IPO, completed in September. "We're pleased with our financial performance in 2003," says Julia Gregory, CFO and executive vice president of corporate development. "We continue to carefully control expenses and supplement our strong cash position through corporate alliances and capital-raising activities."
| 'T' IS FOR TECH: Lexicon Genetics took advantage of Texas tax breaks, but the low cost of living was the decisive factor in choosing the Longhorn state.
Lexicon's solid balance sheet has enabled it to rapidly advance drug-discovery efforts, and indeed the company is busy these days with more than 40 drug-discovery programs active. In addition, Lexicon achieved its first performance milestone under an alliance with Genentech, using Lexicon's target-validation technologies to discover the functions of secreted proteins and potential antibody targets identified by Genentech researchers.
Lexicon has also formed a broad R&D partnership with Bristol-Myers Squibb in neuroscience, where the company will contribute 13 drug-discovery programs from its current product pipeline to BMS, and receive a minimum of $30 million in research funding over the initial three-year term of the agreement. To date, Lexicon's most advanced drug-development programs center on therapies to treat neurological diseases such as Alzheimer's, as well as treatments for obesity, diabetes, and solid tumors.
The Woodlands, where Lexicon was born, is one of the first master-planned communities in the United States, started in 1974 and still considered to be some of the best-selling real estate in Texas. Lexicon acquired the buildings needed for its laboratory and headquarters from property previously owned by Baylor University, including 300,000 square feet of lab space and 16 surrounding acres.
The state used property-tax breaks to help seal the deal, but Gregory says those incentives weren't the deciding factor. Instead, the organization's founders were attracted to the area by the lower cost of living and the ability to run a business in a far less expensive area than, say, the Northeast.
So far, Lexicon Genetics has built upon the structures already in place in the Woodlands and created a laboratory and campus that spans the process of gene-to-drug in a single facility. "We believe it's a one-of-a-kind location," Gregory says. In addition to the Woodlands campus, Lexicon has a chemistry division in Princeton, N.J.
Since 2000, the company has grown from 125 employees to 630, with about 550 employees at the Woodlands location. Gregory says that Lexicon has managed its growth well in a challenging economic climate, and managed to attract scientists from all over the world to the Woodlands campus.
Employees reportedly like the close proximity to M.D. Anderson Cancer Center, St. Luke's Community Medical Center, and the Methodist DeBakey Heart Center, along with Houston's cultural amenities such as the symphony orchestra and theatre districts. But the key advantages of working for Lexicon in the greater Houston area boil down to affordable housing and the broad research opportunities.
"Recruiting hasn't been a problem," Gregory says, "because once job candidates see the scientific and commercial opportunities, the living conditions make it easy to move to this area."
Summers certainly swelter in Houston, with 100-degree days in July and August not uncommon. But the rest of the year, temperatures are pleasant and outdoor activities abound. If there's one big obstacle to recruiting top talent, it's that Texas is considered off the beaten track for biotech. "We struggle occasionally," Gregory admits, "because this is typically an extra stop for most research analysts and consultants who'd otherwise visit companies only in San Diego or Raleigh, North Carolina."
Currently, Tanox and Encysive Pharmaceuticals are also located in the Houston area, and technology-transfer units of the local universities are working to get more new companies started in this region.
Despite the seeming remoteness, Gregory insists Lexicon manages to acquire talented scientists and researchers. "We believe we're changing the face of medicine with our drug-discovery program," she explains. "Our work is a one-time chance to change the world. Being situated in a nice location is just one more plus."
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