By Malorye A. Branca
June 15, 2003 | If you had $100 million to $800 million dollars and a mountain of proprietary genomic data to work with, could you bring at least one new drug into clinical trials within the next year or so? Several genomics companies say they can. And soon they must prove it to impatient investors who’ve grown weary of waiting and are increasing the pressure on these companies to demonstrate a return.
Indeed, circumstances have changed dramatically since a couple years ago, when these companies raised the cash now standing between them and acquisition or dissolution. In those days, large pharmaceutical partnerships and tool or data sales were what attracted investors. Some of the bubble-era big shots, such as Incyte and Celera Genomics, didn’t even contemplate drug discovery and development until less than two years ago, whereas Sequenom and deCODE Genetics had always planned on becoming drug companies. But none of them anticipated being forced to make the transformation so quickly.
Incyte, a pioneer of the data-selling business model, has abandoned its roots, going so far as to dump its “Genomics” moniker, changing its name to “Incyte Pharmaceuticals.”
Once one of the fastest runners in the gene sequence “land grab,” Incyte now sees little immediate value in its own intellectual property. “The vast majority of these sequences [Incyte’s patents] need extensive proteomics and functional genomics [to become drug projects],” says new CEO Paul Friedman, “That’s not a good jump off point for drug discovery.” Incyte’s most advanced compounds are still preclinical and came with the 2002 acquisition of small molecule developer Maxia.
Incyte still sells data but eventually, Friedman says, “It may make more sense for the two entities [databases and pharmaceutical development] to be separate.” Now, the company is counting on its legacy bankroll and a virtually ready-made R&D department drawn mostly from Dupont Pharmaceuticals’ former inflammation R&D team. Dupont sold its pharmaceutical division to Bristol-Myers Squibb in 2001. Friedman was president of those research labs until the acquisition.
Of the more than 130 recent new hires at Incyte, the majority are former Dupont employees. Ironically, some of these scientists are still working in the same building they occupied as Dupont staffers, only Incyte is now leasing the property. In less than two years, that team has already identified a series of promising anti-inflammatory drug candidates, and Incyte aims to take at least one of these to the clinic by 2004.
“At the end of the day, it is the level of expertise you have that makes you a winner,” Friedman says. He can also afford a backup plan. “A lot of small companies like ours don’t have the luxury of having $420 million in the bank,” he says. Besides funding new internal projects, Incyte is aggressively hunting for new collaborations and drug candidates it can buy from others.
One intriguing question is whether any company, even one leaning on Dupont’s cast-aside investment, can go from “zero-to-sixty” in drug development that quickly. But having cash available to buy other companies’ drug candidates should help.
Many biotechs brought to market “prematurely” are running out of money and selling assets, says Paul Abel, portfolio manager at Kinetics Medical Fund. Because it’s so difficult to assess drug candidates before they’ve been through a couple rounds of testing in humans, these compounds will sell cheap, according to Abel.
“There’s no cherry picking going on,” Abel says. “Nobody is in a hurry to buy. You might as well wait until the price is rock bottom.”
Celera Genomics is shopping too. The former database provider has no drugs in clinical trials yet, but does have about $800 million in the bank. While it plans to use its genomic and proteomic data to develop homegrown drugs, “We are continually looking at licensing,” says Robert Booth, senior vice president of R&D at Celera.
Celera’s vast stores of data, says Booth, will help it pick drugs candidates that will perform better than the industry average for getting drugs to market. “The new information we have from genomics, coupled with the therapeutic discovery capacity of Axys [acquired in 2001] is all starting to deliver,” he says.
DeCODE and Sequenom share similar awkward positions. They each have about $100 million in the bank but nothing in the pipeline. Both companies are at least target-rich. Burning with the desire to see those targets through to the end, they are doing whatever it takes to stay in the game.
“Everything is for sale,” says Sequenom president and CEO Toni Schuh. Besides its MassARRAY mass spectrometry instruments and related supplies, the company hopes to sell or partner some drug targets.
Earlier efforts to jump-start drug discovery with genomics failed because there were insufficient data behind them, according to deCODE President and CEO Kari Stefansson. Besides gathering sequence data, deCODE and Sequenom incorporated genetics into their programs — actually studying patterns of diseases inheritance. They say this approach, and their high-throughput technology platforms, give them richer information than does genomics alone.
DeCODE has “absolute certainty when it comes to the target’s role in disease,” says Stefansson in typical boastful fashion. “We are starting out with the Rolls-Royces of targets.” The company has announced the discovery of three disease genes, and says it has valuable data on the locations of more new genes linked to about 20 diseases.
Sequenom also cites the “depth” of its data. “In the past six months, we have discovered and replicated, more disease genes than the entire genetics community put together,” says Schuh. The company has completed 10 entire genome scans, and will do five more by year’s end. That effort has turned up 20 gene targets Sequenom considers reliable.
The key is being able to sort through the reams of data “intelligently,” says Shuh.
All four companies still have a lot of ground to cover, fast. Drug giants like Pfizer can boast about how they can take a “me-too drug” like the cholesterol-lowering Lipitor to the top of an already crowded field. Genomics companies, without that marketing clout, are banking on finding drugs that actually work better than the old kind. It’s time to prove that concept really works.