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Pharma has an enormous backlog of drugs that never made it out of clinical trials. At Gene Logic, these discontinued drugs spell opportunity. Not only are they the foundation of a new business unit at Gene Logic, such failed compounds may become the cornerstone of a new approach to R&D as the industry confronts its latest productivity crisis.
BIG PHARMA'S DISMAL DEVELOPMENT FORECAST IS HARDLY a secret. Drugs worth some $20 billion are going off patent in 2006, and most observers see too few drug candidates emerging to replace them. In the face of new generic competition, says Barbara Ryan, pharmaceuticals analyst at Deutsche Bank, "US-based companies don't really appear to have enough new drug candidates coming on-stream to allow these companies to grow."
In vivo animal imaging is one of many technologies Gene Logic uses to discover how drug candidates react in different biological systems.
What companies do have is an enormous backlog of stalled drug compounds, or "dead drugs," as they are sometimes called. Nine of 10 drugs that enter human trials are "discontinued," as the industry delicately puts it, sometimes for safety reasons, but often after they fail to reach just one or two crucial clinical endpoints. Uncounted thousands of such compounds have been shelved at pharmaceutical companies large and small. Most never return to the clinic.
Companies that are willing to talk about these drugs at all say they would love to repurpose them—to look for new clinical targets, or even to chemically modify compounds in order to reduce safety hazards or increase efficacy. But, to judge by company practices, most drug developers see shelving inactive drug candidates as a solid business decision. Ignoring the once promising compounds frees up R&D resources for drugs that are still in the pipeline.
At Gene Logic—a Gaithersburg, Maryland company best known for its fee-for-service toxicogenomics screening services and drug analyses using human-tissue databases—these discontinued drugs spell opportunity. Not only are they the foundation of a new business unit at Gene Logic, such failed compounds may become the cornerstone of a new approach to R&D as the industry confronts its latest productivity crisis. Most discontinued compounds are dumped after failing tests for a single indication. Such quick clinical exits might have made sense when chemistry ruled drug development, and repurposing a drug would have meant adding or removing a crucial chemical group on the molecule. But shelving candidates early is a poor drug-development strategy in the biological age, Gene Logic contends. Instead of modifying stalled compounds, the company systematically tests them for activity against hundreds of different diseases. And if they get a "hit," the stalled compound could be headed back to clinical trials within a year.
"We let the compound tell us what it is," says Mark Gessler, Gene Logic's CEO. "If the compound is active, we can find out what it does." Using genomics and other technologies, scientists at Gene Logic have developed a battery of tests to check the activity of compounds against bio-markers and gene targets for more than 400 diseases. No molecule is chemically altered to increase its chances of hitting a therapeutic target—whether the clinical trial's original one or a new one. No drug is re-engineered. Instead, the company seeks to discover, with systematic biological screens and assays, how—if at all—a drug interacts with a broad range of biological systems. At Gene Logic, this is known as "interrogating" a compound. Literally asking it how it reacts biologically.
The idea is to do systematically in the laboratory for many compounds what happens serendipitously during clinical trials and practice for a few. Viagra (sildenafil), Botox (botulinum), and even thalidomide, for instance, have become successful drugs when they proved effective for indications their creators did not anticipate. Why shouldn't unanticipated applications rescue compounds that never made it out of the clinic?
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."
In fact, a clean safety record is the only desideratum Gessler mentions when it comes to choosing compounds. The company does not care, at least officially, what target the drug was originally developed for. If it was proven safe, they are eager to see if it will engage one of their laboratory's growing list of disease targets. What matters is the drug's current activity. Its past is unimportant. Almost all compounds that interest Gene Logic were discontinued in Phase II or III—but to get paid, the company will have to return one to the pipeline.
"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.
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.
As it turned out, the missing technology pieces were about to be developed at Millenium Pharmaceuticals in Cambridge, Massachusetts. Two of Gene Logic's top scientists—Louis Tartaglia, senior vice president and general manager, drug positioning and selection, and Thomas Barnes, vice president, genomic pharmacology—were working at Millennium at that time. And although the two men had never met, each began speaking with former Millennium CEO Mark Levin about using the company's genomics technology to begin a drug-repositioning business. Levin introduced the two men and revealed that Millennium was planning to concentrate on drug development and shut down much of its technology business, including the gene annotation technologies that Tartaglia and Barnes needed. He suggested that the two scientists form a team of technology specialists and develop a business model for a new company. "We began incubating and developing the technologies," Tartaglia says. "What Tom and I had to do with the team was to adapt these mature technologies so that they could now identify the function of compounds. They had to be more compound centered for compound-annotation purposes as opposed to gene-annotation purposes."
In late 2003, when Barnes and Tartaglia were making the rounds of venture capitalists to fund a spin-off company, they met Mark Gessler, the new CEO. In 2004, Gene Logic purchased the new drug-rescue unit from Millennium, and launched what it calls the Drug Repositioning and Selection program (DRS) in Cambridge, where the Millenium unit had been based. Barnes never even moved his office.
Today, Gene Logic's DRS unit resembles a warren of laboratories, where teams examine compounds using not only genomics technology, but a range of investigation techniques from molecular pharmacology to liquid chromatography-mass spectrometry, even in silico biology and in vivo real-time animal imaging. However, no "hit" on any one of these approaches is sufficient in itself for a new indication hypothesis. The heads of various departments meet every week to discuss the reactivity of compounds and refine the experimental designs needed to achieve a testable hypothesis for a new drug indication.
If a compound does prove to be biologically active, Gene Logic and the compound's owner work together to develop an animal model to validate the new therapeutic concept. "Gene Logic develops a rationale for repositioning one of these drugs for different indications," says Roche's Babbis. "That is step one. In step two, a panel of individuals from both companies will get together, review that data, and determine what are the appropriate in vivo disease models that could be utilized to validate their concept."
Once the outcome of that model is known, in the Roche deal at least, the compound's parent makes the final decision. And at that point they have several ways to move forward, according to Babbis. The company can pay a milestone as they would with any in-licensed compound at that stage, or they can turn over the rights to Gene Logic in return for milestones and royalties if Gene Logic successfully develops it. The latter model might come into play if Gene Logic is convinced of efficacy and Roche is not, for instance. But in either case, Gene Logic parlays a hypothesis and proof-of-concept trial into an equity stake in a drug candidate.
In reality, decisions about who controls development of the drug may depend on more than data. "You have to think about what the return on investment is," says Frank Douglas, former head of R&D at Aventis and a Gene Logic board member. (See "First Responder"). "It depends on what you find. What you find may not be interesting [for a big company], but it may be interesting for some small company for whom $200 million is a huge payoff—and patients will benefit." That said, Douglas is convinced that Gene Logic is better off partnering with large pharmaceutical companies at this early stage, since no one knows what therapeutic area the new indications will fall into, and big companies are likely to have the expertise and resources to design a wide variety of clinical trials.
On the other hand, pitching the DRS program to large companies has been challenging. "Often, one of the hardest things we do is find the right person within the company to talk to," says Smith-Farrell. Frequently, no one is in charge of the molecules they want. "There is no vice president for discontinued compounds," says Gessler. No VP of dead drugs.
Gessler, who declines to speak in detail about the structure and value of specific deals, does like to recount his favorite argument for selling the repositioning program to Big Pharma. He asks his potential business partners what a particular compound would be worth if they out-licensed it "as is." If the compound had been discontinued in Phase II for lack of efficacy, for instance, everyone at the table knows it is all but worthless. Then he asks what the company would expect to pay if it had to in-license the compound once proof-of-concept was established in an animal model for another indication. "It tends to make the point about value creation," Gessler says.
Roche, in contrast to many companies, has a clear-cut policy on who controls discontinued drugs. Drugs that fail out of the clinic become the property of R&D. But even so, tracking the discontinued drugs proves challenging. "Digging up the history of these compounds within the company is not trivial," Babbis says. "And also making sure that we had sufficient compound on hand so that we don't have to synthesize the compound. We don't want this to divert from our main goal of supporting the pipeline, so we were pleasantly surprised to see that we are able to do this."
No one knows if Gene Logic's approach will succeed. But if it does, new intellectual property is needed. "These tend to be old compounds," Babbis says. One that Roche hopes to reposition is 15 years old. "So the intellectual property that we create on top of the composition-of-matter patent must relate to the application for a specific indication."
The biggest upside to the Gene Logic approach may be the opportunity to search for new indications earlier. As Babbis puts it: "Finding new indications is part of what we call lifecycle management of any compound. Probably the greatest way that you can create value is to find multiple indications for one drug or one drug series."
Instead of a serendipitous element in late-stage clinical trials or post-approval lifecycle management, the search for new indications could become a standard element of preclinical research. And although the pipeline has too few late-stage candidates, it has never been so full of preclinical compounds, many of which need not become dead drugs before developers seek unexpected applications.