BIOTECH BULLANTS: BORN GLOBAL?
If ever a local industry was defined by its fortunes overseas, it is biotechnology. Things have not been all rosy for Australia’s biotech sector, with sober reflection supplanting the heady excitement prevalent just a few short years ago. With Australian biotech companies holding less than one percent of the global market, making it in the US is paramount. Jodie O’Keeffe set out to dissect some of the heavy hitting biotech companies that will fly our flag during May at the world’s biggest biotech conference, BIO 2007, being held in Boston.
It’s big and it’s busy. BIO 2006 went something like this: four days, 19,479 attendees from 62 countries, with the BIO Business Forum staging 11,018 meetings.
To stand out from the crowd, you need to be strategic. That’s where Helen Karuso comes in. Based in Washington D.C. as Austrade’s Senior Business Development Manager in Biotechnology, Karuso’s goal is to help our biotechs be heard above the noise level at BIO.
"At Austrade, we strategically identify and connect our biotechs with potential opportunities in the US. Last year our US, EU and Australian offices set up more than 150 meetings for Australian biotechs and research institutions, helped secure key speaking sessions at the convention and project managed the Australian Pavilion exhibit and events. We also sponsor and help coordinate pre-convention events such as the Boston BioRelationships conference," says Karuso.
The biotech industry is inherently global and Australia’s biotechs reach out to achieve better capitalisation and development prospects for their innovations. Our research and development abilities are world-class in the human therapeutics areas of immunology, stem cells, reproductive medicine, infectious diseases and oncology and we have six Nobel Prizes to prove it.
Funding the early stages of drug discovery and pre-clinical development remains a challenge, as securing patient capital for an often high-risk investment from a limited pool of local funding is a tough ask. Government instruments, such as the Commercial Ready grants, which match investor funds, can induce investment. Karuso believes the early funding gap is responsible for the dearth of Aussie biotechs boasting good pre-clinical or early clinical data, as sought by global investors and partners. What’s more, many US companies are expected to require financing in 2007, so competition for capital will be high next year.
"We need to better understand the value and potential of our innovations for both early and longer-term exit strategies. The lack of accord between founder valuations and private equity has been a biotech feature for a long time, and our venture capital industry’s participation in the sector is still relatively new," she says.
As such, overseas partnering and collaborative alliances are often essential for Australian biotechs with promising but unproven products, and BIO is but one venue of a year-round campaign to interest global partners. "At BIO we stimulate and maintain partnerships through business meetings and networking opportunities, but we also want to raise the profile of the national industry and promote investment in Australian efforts," says Karuso.
Australia has a lot to offer industry partners, not just in terms of new products in the pipeline, but also as a location for pharmaceutical clinical trials. Compared with the US, UK, Germany, Japan, Singapore and India, Australia ranks first on clinical trials, scoring well for low average costs, with a high percentage of clinical trials completed on time, according to a 2005 Economist Intelligence Unit benchmarking study.
Karuso warns against becoming complacent, though, with the emergence of competitive Asian biotech firms also wooing US industry.
"We need to keep costs low and remain competitive in research and development. We also need to engage the US in our areas of expertise, and align with them in areas they lead," she says.
Engagement of the global industry is a continuous process for Austrade. At BIO 2007, aside from making formal connections, the agency will also take a fun networking approach, sponsoring the Australian Networking and Partnering Wine Tasting Event. Past exhibitors found local wines to be particularly helpful in encouraging meetings with potential partners.
When the global biotechnology community gathers in Boston on 6-9 May 2007, the 70 or so Australian organisations attending will join forces at the Australian Pavilion and do their utmost to stand out from the crowd. Given the quality of our biotech firms (and our wine), we are well on the way.
Taking stock of the flu virus
With fears of an avian influenza pandemic running high, governments around the world are stockpiling anti-flu drugs. As developer of the original anti-flu drug zanamivir (Relenza), experienced Australian biotech Biota is keen to improve on past efforts with development of a second generation, long-acting influenza drug. Not only does the new treatment cut the doses required from twice daily to once weekly, Biota CEO Peter Cook says there are other benefits to consider.
"These second generation influenza drugs are 1,000 times more potent than the Relenzas and Tamiflus of this world. That doesn’t necessarily make them better, but it does make them occupy one thousandth of the space. When you’re stockpiling pandemic drugs for 30 to 40 percent of the population, this is an important consideration," says Cook.
In a program enjoying significant funding from the US National Institutes of Health, active compounds in the potential new treatment have passed Phase I trials, with Japanese partner Sankyo conducting Phase II in Japan.
Based in Melbourne’s Monash Medical Precinct, the Biota team has several other research projects underway. The human rhinovirus, a major cause of the common cold, is one target.
"We’re not interested in a cure for the common cold, because it is a relatively minor and trivial disease in an otherwise healthy individual. But for some people, like asthmatics or those with cystic fibrosis, a minor infection of rhinovirus becomes a significant, debilitating and frequently hospitalising event. We have completed Phase I and we’re looking forward to getting our Phase IIa studies underway," says Cook.
Biota is partnering with Boehringer Ingelheim International to develop and commercialise a new Hepatitis C treatment. The agreement was signed last year, when the research was at a remarkably early stage.
"Normally we’d look for a partner once a lead candidate had been identified, so we had one or maybe two preferred compounds. But this has been licensed at a very early stage, where it is simply a class of compounds and the lead optimisation is to be completed. The positive aspect of that is we will be doing it in conjunction with Boehringer," says Cook.
While the deal may be unusual, Cook believes there are no hard and fast rules.
"You need to sell something when there is a buyer ready to buy. That doesn’t necessarily happen in a prescriptive or logical manner. So you need to be cognisant that there might be somebody ready to buy, not necessarily when you’re ready to sell. You need to be receptive to that because you can miss the opportunity."
Biota has another partnership with major US player MedImmune to develop lead compounds aimed at respiratory syncytial virus. To Cook, having a variety of projects at different stages of development is the key to a balanced pipeline.
"We’ve got three products in the market and two products licensed, so they’re on their way to market and to generating royalties. We’re also working on a couple of programs in-house, with licensing likely in the future. It’s a focused pipeline, and we’ve stuck to our knitting around antiviral. It’s a space we understand," he says.
Cook says the BIO International Convention is a significant drawcard for Biota.
"It is a chance to maintain the networks we have built up over time. When we license a product, we talk seriously with two or three companies and build strong relationships, even with the companies who weren’t successful in the deal. We want to maintain those relationships. That’s the advantage of the BIO forum; it’s the reason we participate."
Starving the bad guy
Being starved of nutrients and oxygen sounds like a bad thing, unless, of course, we’re talking about a cancerous tumour. Adelaide-based Bionomics is developing a new type of Vascular Disruption Agent (VDA) called BNC105, a drug that rapidly shuts down the blood supply to a variety of cancers, including colon, lung and breast.
Bionomics CEO Deborah Rathjen says the drug is a very exciting prospect for future cancer treatment. It has advantages over classical chemotherapy as the occlusion of a single blood vessel can kill thousands of tumour cells, with mutant cells unlikely because the therapy targets the blood vessel, not the tumour.
"With BNC105, we have made a submission to the US Food and Drug Administration (FDA) and are meeting with them early this year to discuss clinical trials and get feedback. We hope to commence clinical trials towards the end of 2007," she says.
Rathjen expects initial trials to be held in Australia, later moving to the US.
"Our strategy is to bring on board a large partner who can facilitate the clinical development, particularly in terms of funding," says Rathjen.
Bionomics has been a regular attendee at BIO conventions, with BIO 2006 kick-starting BNC105 partnering discussions.
"The objective at BIO conferences is to further Bionomics’s partnership objectives, and to engage with companies interested in partnering in BNC105. BIO 2006 went very well; our team went to a lot of meetings and we are in ongoing discussions in relation to BNC105," says Rathjen.
"In the past, Bionomics has used BIO to great effect. In fact, we struck a licensing deal with a large European biotech company, Genmab, early in 2006, and that came out of a series of meetings held at BIO and other partnership meetings. BIO plays a very positive role in terms of introducing our technologies to a broader marketplace," says Rathjen.
The market potential for vascular disruption agents is an estimated US$5 billion per annum, so interest is high and Rathjen sees BIO 2007 as an opportunity to further engage with prospective partners.
Backing up BNC105, Bionomics is conducting pre-clinical evaluation on another compound, BNC210, for anxiety disorders.
"We are doing comparisons with Valium, which is rapidly acting but also highly sedating. Prozac, on the other hand, is not rapidly acting, it can take several months, but it doesn’t have the sedative side-effect," says Rathjen.
Drugs used to treat anxiety sell around US$14 billion per annum, "real block-buster territory", according to Rathjen. She anticipates BNC210 will enter a formal development program and be on track for a clinical trial in June this year.
The Bionomics pipeline also includes new generation multiple sclerosis and epilepsy treatments. Current treatments for multiple sclerosis are administered via injection, but the Bionomics candidate will be taken orally. The company has a long history in epilepsy research, leading to the identification of compounds demonstrating exceptional seizure control with reduced side-effects compared to current treatments.
Though the pipeline is quite busy, Rathjen is excited by the possibility of further expansion. "We’re always on the lookout for new products to expand that pipeline, for products that fit within our core areas of cancer and central nervous system disorders."
Product to market, DIY style
Australians love the do-it-yourself philosophy, but it is usually applied to home improvements rather than late-stage biotechnology products. After the initial drug discovery and pre-clinical trials are complete, Australian biotechs often require a large, resourceful partner to help commercialise their technology.
One Sydney-based biotech firm, however, is pushing its products from one end of the development pipeline to the other single-handedly.
Pharmaxis specialises in products for the treatment of chronic respiratory and autoimmune diseases and the development of improved lung function tests. It is a niche market, which CEO Alan Robertson says is particularly suitable for a small firm going it alone.
"Part of our business strategy is to retain as much of the value of the product as we can. So we research and develop new products, and where it makes sense, manufacture, package and market them. It means we need the right product – one amenable to manufacture and also to scaled-up manufacture, and it needs to be a specialist product, rather than one for the mass market," says Robertson.
To carry off such an exercise a company also needs access to patients for clinical trials and the funds to back them. By targeting conditions like cystic fibrosis and chronic obstructive pulmonary diseases, Pharmaxis has found patients readily accessible through relationships with hospitals.
"In our case, the product seemed right, we seem to be targeting the right diseases and patients were experiencing a benefit. We were able then to go out and convince the capital markets to support us through the three fund raisings we’ve done so far," says Robertson.
Pharmaxis listed on the ASX in 2003, generating $A25 million, followed by a $A20 million NASDAQ listing in 2004 and a global capital raising of $A87 million in 2005.
With TGA and FDA-approved manufacturing facilities in Sydney, Pharmaxis is gearing up for sales of its asthma management product Aridol, recently approved for sale in Australia and Sweden, with the rest of Europe set to follow this year. Aridol tests a patient’s lung function to determine whether the prescribed asthma treatment is working.
Aridol is followed closely in the Pharmaxis product pipeline by Bronchitol, a therapeutic agent designed to improve mucus clearance in the lungs of patients with cystic fibrosis and chronic obstructive pulmonary diseases. With the potential to address an unmet medical need for cystic fibrosis patients, the FDA recently designated Bronchitol a ‘fast track’ product, to speed its way through the regulatory system.
Pharmaxis expects to start Phase III clinical trials this year. While he may not be shopping around for a funding partner, Robertson sees BIO 2007 as an important event on the biotech calendar.
"BIO 2007 is more than a networking opportunity. It’s very important to benchmark yourself against the rest of the world and all the world congregates at that conference. It’s a great opportunity to talk to companies in the respiratory medicine field, to share ideas and learn from each other’s experiences, clinical and non-clinical. It helps with business planning and strategic thinking," he says.
While Pharmaxis regularly collaborates on a research and development level, Robertson sees huge benefits in the do-it-yourself approach to the later stages of the development pipeline.
"With in-house manufacturing, we have a greater understanding of the product. We can more easily spot opportunities for refinement, economies of scale and next generation products. You learn so much more about your product if you take it on for yourself. Besides, you don’t want to give the farm away before you sell your first crop."
The evolving biotech
Despite product pipelines spanning a decade or more, the biotech industry is a fast-moving, dynamic space in which to play. To transform an early-stage biotech into a more mature, mid to late-stage player, many firms look to merge or acquire other companies fitting the bill.
Sydney-based biotech Peptech has been on the scene since 1985, leveraging patents around the unique anti-Tumour Necrosis Factor (TNF), used to treat rheumatoid arthritis, psoriasis and Crohn’s disease. A steady royalty stream and some smart investments have bolstered Peptech’s early-stage pipeline, with second generation anti-TNF compounds, oncology and macular degeneration products reaching pre-clinical and clinical development this year.
Peptech, however, is in a bit of a hurry. Vice President Business Development Cliff Holloway and CEO John Chiplin are transforming Peptech from an early-stage to research company to a mid-stage development company.
"We are in the process of converting from a diversifi ed range of healthcare assets to a world-class biologics-based business," says Holloway.
"We’re looking at business strategy to acquire in-license or merge with companies that have late-stage assets. Our sweet spot is for companies with mid to late-stage biologics in the areas we already focus on – autoimmune inflammatory diseases and oncology," he says.
Peptech recently sold its 31 percent share of Domantis, a leader in the development of second generation antibody therapies, to pharmaceutical giant GlaxoSmithKline, realising a gain of A$138.2 million from a A$40.2 million investment made in 2001. The deal puts Peptech in a strong position to follow up on the M&A strategy, as well as supporting projects currently moving through the development pipeline, particularly the promising anti-TNF compound PN0621.
"PN0621 is going to be the jewel in the crown of our existing portfolio because it’s a differentiated product. Currently there are three products servicing a market worth $US10 billion, but there are problems with non-responsiveness and side-effects. Around 2012, we expect to hit a market worth $US15-20 billion, with a more potent, cost-effective product," says Holloway.
Following PN0621 in the autoimmune and inflammatory disease product pipeline is a potential treatment for age-related macular degeneration, as well as several promising oncology diagnostic and therapeutic products. Peptech also holds proprietary technology in the control of animal reproduction, with several products already on the market.
With big M&A plans for 2007 and beyond, Peptech will be heading to BIO 2007 keen to open and continue partnering, buying and selling discussions.
"As Business Development Manager, I have a buying and selling list. On my buying list are companies with the range of assets we’re looking to acquire or merge with, the mid to late-stage biologics. On the selling list, we’re actively looking to partner in our age-related macular degeneration efforts and we’ve got a number of discussions ongoing with that in mind," he says.
While Peptech is committed to taking PN0621 through to Phase III clinical trials, the company will use BIO as an opportunity to keep the big pharmaceutical companies abreast of developments.
"We need to identify a partner for that compound way before it gets to Phase III," says Holloway.
Peptech recently boosted their UK presence with a listing on London’s Alternative Investment Market, but the firm also has its sights set firmly on the US.
"The majority of the world’s biotech market is in the US and we don’t want to ignore that fertile ground."
STEM CELL SCIENCES
Stem cells for business growth
It’s a highly debated area of medical research, with untold potential. Stem cells form the foundation for growth and act as the repair system for the body. The ability to harness these properties for therapeutic purpose is the central theme of stem cell research around the world and Australian biotech Stem Cell Sciences (SCS) is a pioneer in this field.
Before cell-based research can be conducted, of course, you need cells. Supplying the research community with cells, and the right environment in which to grow cells, is a major part of SCS’s operations, according to co-founder and CEO Peter Mountford.
"You must be able to grow stem cells robustly, to understand their biology and develop a cell culture medium that meets their needs. We market cell culture media products for growing and providing stem cells to the research community," says Mountford.
SCS provides the "infrastructure for stem cell research," according to Mountford, the basis upon which ground-breaking research can take place.
"If you look at the wider picture, the industrial revolution was fuelled by steel and the ability to fabricate steel. Then the IT revolution was based on the silicon chip and information. Stem cells will play a huge part in what will be a biological or a biomedical revolution," he says.
SCS also out-licenses technologies to the biopharmaceutical industry for the production, genetic engineering and selection of stem cells for use in drug discovery and basic research. The company has a new cell culture facility in Cambridge, UK, featuring state-of-the-art technology for automating cell production.
"It’s a cell factory. We volume manufacture ‘cells in wells’ for the bio-pharmaceutical industry for drug screening," says Mountford.
While these products and services generate a steady revenue stream, SCS is keen to advance its SC Therapies business unit, creating cell-based therapies for previously incurable conditions of the central nervous system, such as muscular dystrophy, Parkinson’s disease, epilepsy and acute spinal cord injury. Researchers are currently undertaking pre-clinical programmes to evaluate the repair capacity of SCS’s stem cell lines. According to Mountford, it’s inspiring stuff.
"This is what makes the people behind the company excited, this is what drives them. It’s a major business opportunity for a company like ours. It’s hard to compete with the pharmaceutical industry, but here we have the opportunity to develop a new business in cell-based therapies, in a new business space."
SCS has been building its presence in Asia, the UK and Australia as a precursor to establishing itself in the US, with a California office scheduled to open this year.
"The US operation will be primarily a business team, conducting business development and investor relations, to develop an awareness of the company in the US investment community," says Mountford.
As such, BIO 2007 presents an exceptional opportunity for SCS.
"You can do so much in just a few days, without travelling the world. SCS has such a diverse intellectual property portfolio and so many areas of application, across animal genetic engineering, stem cell-based screens, reprogramming and potentially even licensing therapeutics in the pipeline. It’s an opportunity for us to meet with many different companies, all in the one place."