This approach appears to make sense to Big Pharma. Some of the industry's major players have signed on to let Gene Logic seek new targets for their discontinued drugs. Millennium Pharmaceuticals, Pfizer, Roche, and one Japanese company, which Gene Logic declines to name, have inked repositioning deals. Gene Logic is currently seeking new targets for more than 30 discontinued drugs. They are in "animal model validation or partner evaluation discussions" for six of the compounds, according to their 2005 third-quarter financial statement.

"There is no way we can have a business plan like this without a pipeline crisis," Gessler says. "Ten years ago, none of the big companies would have listened to our pitch." Gene Logic also benefited from strong prior relationships with some of these companies. Roche, for instance, had used the company's toxicogenomics services before hearing the drug repositioning pitch, says Lee Babbis, Roche's vice president of preclinical R&D.

"There are many companies out there that are desperate to get compounds from pharmaceutical companies," says Babbis, the Roche executive charged with administering discontinued drugs. Most companies that want to license new compounds from Big Pharma seek drugs that are early in development, Babbis says. "But Gene Logic's twist was a little bit unique. They wanted compounds that had been in the clinic and had not reached their clinical endpoint, but up until that point had shown no signs of overt toxicity that would have led to a decision to terminate the compound."

"There are milestones and royalties attached to these drugs when they actually go back into pharma," says Joanne Smith-Farrell, Gene Logic's vice president for corporate development and strategy. "So the idea is really a partnership. Pharma is contributing chemical matter to the partnership, and they retain ownership of that. We are contributing the ability to actually provide a commercial path forward and a development path forward." But if the screening efforts fail, as they are sure to do more often than not, Gene Logic bears all the risk—at least in early deals with Big Pharma.

Seeds of Change

The drug repositioning unit is the newest division of Gene Logic, but it stands on the shoulders of genomics and other technologies that have matured for more than a decade. When Gene Logic was founded in 1994 as a specialized genomics company, it began building technology to aid drug discovery and development. By combining detailed gene-expression models and informatics, the company created customized databases that could be used to reveal drug activity in specific therapeutic areas, including heart and kidney diseases, osteoporosis, inflammation, psychiatric disorders, diabetes, and other diseases. This work was advanced by the acquisition in 1998 of Oncomed, a company with expertise in tissue handling and microarrays, which are tools to determine how genes interact, including how the cell regulates large numbers of genes at the same time. These new technologies were interwoven with Gene Logic's existing systems to help clients see how new compounds changed the expression of genes and, equally important, how they affected biological pathways involved in some 400 disease indications.

"We started being able to understand certain effects of drugs across a wide range of tissue samples in addition to the target organ," remembers Gessler. It was this sort of data, suggesting unanticipated drug activity, that first spurred Gessler and Doug Dolginow, the head of the pharmacogenomics group, to think about how to find new uses for drugs. But even at this point, in late 1999 and 2000, the company lacked crucial pieces of technology. Gessler describes what they had then as "slivers" of information. They saw enough to convince themselves that they were onto something, but not enough to take proposals to a client company.