June 13, 2007 | Systems biology pioneer and biosimulation specialist Entelos just celebrated its first anniversary as a public company after going public on the London stock exchange. For 2006, Entelos reported revenues of $21.6 million, with a narrowed loss of $754,000. $4 million of the IPO proceeds went to pay down high-interest venture debt. CEO James Karis expects to return similar figures for the coming fiscal year. Entelos has active partnerships with J&J, Roche, Novartis, and the American Diabetes Association.
Executive Editor John Russell talked with Karis about Entelos’ migration to later-stage development work, his vision for predictive biology, and the turmoil surrounding the systems biology arena — a label Karis would prefer to eschew. (The complete interview can be found at: www.bio-itworld.com/archive/silicobio/index_05092007.htm)
JR: You state that repositioning drugs is one effort Entelos will seek, and cited exercising options to buy compounds. What are your plans in those areas?
Karis: We’re always looking... We actually acquired rights to some late-stage therapeutics. In this case, we felt that there were some therapeutics [J&J] had and were not developing further, which had an application in a different therapeutic area. This is where repositioning ideas come in.
I don’t really have a shopping list. There are certain criteria we’re interested in. We want stuff that’s been in man. Clearly we can add value in early stage, but it’s not something we really want to do right now. And [we] obviously want to cover a therapeutic area where we actually have technology or could build technology.
JR: How important is the repositioning initiative?
Karis: We’ve always kind of done that and part of it is being more specific about it. If I were to say what three things you can do with our technology, one of them would clearly be this whole issue of patient-specific, kind of sub-population medicine applications. Another one would be [identifying and developing] applications in another disease. And the third one would be dosing.
You start thinking about what that all means [and] that pretty much starts sounding like what repositioning is all about today. Some of our projects to date have been like that. The therapeutics we’ve acquired are going to fall into that category. When you think about our technology, when you apply it in discovery — it’s one thing. But when you start getting into development, you actually start doing some repositioning stuff as well as clinical trial stuff. I think we’ve just been more specific about calling it out now and making sure we have the right kind of capability to do that. There is a lot of interest in it.
JR: Are you emphasizing development more than discovery?
Karis: Right now, our mix of business is definitely moving in that direction. It’s not so much [that] we pushed it there, as that’s where the customers are heading, really. That’s where they’re spending their time and money and trying to get these development projects through the pipeline.
JR: How about the notion of expanding into markets outside R&D?
Karis: We have a technology where, if you want to predict what’s going to happen when you perturb human biology, that’s what we do. Where else is that applicable? What’s happening is that the lines have gotten very fuzzy on both ends of the spectrum here. On one end you have the [recent collaboration] with Unilever and the whole cosmetics, anti-aging space. At the other end ... the functional food space. So I think this is all part of a continuum that’s more differentiated today by the regulatory environment rather than an R&D environment. We see an opportunity to leverage our technology.
JR: Some pharma companies are falling out of love with systems biology (SB), while others are pushing forward. What’s your take on the SB landscape?
Karis: We’ve always struggled with being described as a systems biology company... When you talk about systems biology today, one tends to think that it’s an effort to try and understand — the key words here is understand — biology in a larger context and system. It sounds really great, but the piece that’s missing is that the goal here is to make predictions. Pharma has always and will always want better ways, better predictive technologies. When you say this technology, it’s not just about understanding, but about being predictive. Then there is a market for it and there always will be a market for it.
The problem is when people build systems biology centers to advance understanding — I mean that doesn’t necessarily advance what the industry is trying to accomplish. That’s a good academic exercise maybe. Their business is about predicting technologies from knockouts to whatever is out there, they’re always interested in that because actually the hard part of the business is when you’re involved in research and development you want to be able to predict what’s going to happen instead of just trying it out to see what happens. That’s probably the one issue I’ve had with the systems biology descriptions I see, and why I try not to use that term when I talk about us. So people think, “Oh, you’re out there for understanding of biology.” Our goal is prediction.
JR: Do you say to customers, “Look, we have a technology which has predictive value for you”?
Karis: Yes. The thing is, I hate those arguments. We’ve had the same challenge you brought up, people saying we can’t be predictive. And I’d say, let’s start with where are you now on a predictions scale? How predictive is an animal model? How predictive are the other models? So I think what happened here is that people, if they’re not careful, they try to hold predictions to a standard or mathematical modeling to a standard that has no bearing on their current model of knowledge.
I had a customer say, “When you guys are perfect I’ll talk to you.” Perfect? When I’m perfect I’ll be talking to you. We’ve had discussion a while ago when people said, “Well, what diseases can’t you model?” And I said, “What do you mean?” And they’d say, “Well, there’s not the same amount of data around a CNF disease as there is around diabetes.” And I said, “Think about it this way. When I model any disease, I’ve advanced that disease understanding a little further and then I’ve also started to put in a capability that never existed before.” So we can add value to any disease; it’s just a different level of value prediction. As long as we can provide another way to make a prediction that can be confirmed, can be validated, can be compared, we’re adding value. But if we’re just adding understanding, I don’t think that’s enough value to spend money on.
JR: Do you think pharma’s fear of not having enough compounds is sucking funds away from technology engagements and redirecting them into buying compounds from companies?
Karis: Yes. And that is the challenge. I think what’s happening is maybe there’s less money being spent, [but] I don’t think it’s necessarily because people lost confidence in systems biology. I think it’s just where the focus is today... That’s one reason we started to focus more on development because they started asking us to. But it’s clearly because that’s where they’re looking and why we’re looking at trying to take our technology to add value to compounds, create an asset they want.
I remember I was at a conference when I first joined this company and the CEO of a pharma company stood up. It was a room full of technologists, even genome people, everybody else. He said, “I’m looking at a room full of cost centers. Until I get a drug, all you do is cost me money.” I think we forget that sometimes. Right now they need drugs. They need drugs to market. They need sales.
JR: Was choosing the London AIM market to go public on the right choice?
Karis: Our options were to stay private or to go public in London. We really didn’t have a ‘go public in NASDAQ’ option at the time. I think from the point of view between staying private and going public, it’s been very helpful to us. Granted, it’s been painful, it’s been expensive, in some cases. But in terms of raising our visibility in an area in which there’s a lot of confusion, I think we have raised our visibility.
JR: What grade you would give your company for its first year being public?
Karis: I’d give us a B. I think we executed well on a number of fronts. I think acquiring therapeutics was a big deal. Going public and having decent performance for the year is a big deal. It’s no question this is a hard sell — to sell this technology. You have to work really hard to get deals closed. Every day I think there’s got to be a breakthrough idea in how to position what all these companies do, to get adoption jumpstarted. I haven’t figured it out yet. When I do, then I’ll give us an A.
The big challenge going forward [is] finding out how to get this thing jumpstarted. I think it’s not just going to be just us doing it. There’s enough companies out there doing related things that I think we have to find a way to get the visibility so it just becomes part of the process, not just this novel thing that people do...
This industry still is doing trial and error. The fact that you and I are even talking about fully accepting mathematical modeling is kind of hard to believe.
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