West Coast Editor

SAN FRANCISCO - Pharma's growing desperation for viable drugs became ever more clear at the Allicense meeting here, as officials from two major players, AstraZeneca plc and GlaxoSmithKline plc, provided a somewhat more detailed peek than usual into their strategies.

"We know the innovation is sitting in this room," said Johan Hoegstedt, in charge of North American strategic planning and business development for AstraZeneca, adding that it's "no surprise to any of you that we have had some disappointments in late-stage products."

Notable among them is Galida (tesaglitazar), a dual-acting oral peroxisome proliferator-activated receptor agonist designed to fix glucose and lipid abnormalities. AstraZeneca abandoned the drug, which had reached Phase III trials, last year.

As a partner, the UK firm has been "pretty much non-existent in late-stage deals," Hoegstedt said, and "we still are setting with too few [advanced] products - five or six," but a "fundamental cultural change" at the company promises changes that already have begun to happen.

"Hopefully, you have seen more of AstraZeneca in the last year than you have in the previous several years," he said. At the start of 2007, the firm entered a deal worth up to $1 billion with Bristol-Myers Squibb Co. to develop and commercialize a pair of potentially Galida-replacing, compounds for Type II diabetes: saxagliptin, a dipeptidyl peptidase-4 inhibitor, and dapagliflozin, a sodium-glucose cotransporter-2 inhibitor. (See BioWorld Today, Jan. 12, 2007.)

The BMS deal was followed quickly by a deal worth as much as $310 million with Cranbury, N.J.-based Palatin Technologies Inc., to develop small-molecule compounds for obesity and other metabolic disorders. In the arrangement, AstraZeneca got access to Palatin's melanocortin receptor (MCR) program in obesity, along with its compound libraries and technologies for MCR work. (See BioWorld Today, Feb. 1, 2007.)

The deals are part of an ongoing externalization push, Hoegstedt said. About 25 percent of AstraZeneca's pipeline comes from licensing or other partnerships, and he said he would not be surprised if a third of the line-up soon originates from the outside.

At the same time, the firm is backing away from key indications that are "still very lucrative and important" - a laundry list of them including hypertension, irritable bowel syndrome, functional gastrointestinal disorder, Parkinson's disease, multiple sclerosis, addiction, insomnia and protecting the nervous system in stroke.

"We didn't see the short-term commercial impact in these areas being critical," Hoegstedt said. "We will continue to watch these areas. We have experts in these areas, but these are not the areas that we're going to be interested in early stage licensing deals or acquisitions."

Instead, the firm is taking aim at such disorders as diabetes, analgesia and infection. In the last, AstraZeneca has "invested heavily in the research, and we feel like we have some key breakthroughs, but again we don't have enough products on the marketplace," he said. "That's going to be another key [area to] build for us."

Hoegstedt highlighted AstraZeneca's $1.3 billion buyout of Cambridge Antibody Technology Group plc, of Cambridge, UK, for $1.3 billion, disclosed in May 2006. That move added CAT's royalty stream for Humira (adalimumab), three pipeline products and six antibodies being developed with partners. AstraZeneca sold the Humira royalties, which meant less than $500 million laid out for CAT. (See BioWorld Today, May 16, 2006.)

"This allowed us to truly invest into CAT," which became a freestanding entity within AstraZeneca, he noted. "The way we manage CAT is quite unique." If AstraZeneca finds, say, a potential deal in biologics applied to neuroscience, "I would go to that opportunity and I would bring CAT people with me," so the teams can evaluate the potential deal together. Then, if AstraZeneca buys in, CAT manages the project all the way to proof of concept (POC).

Mark Edwards, managing director of Recombinant Capital, which sponsors Allicense, asked whether other companies might hope for similar arrangements.

"If we believe they can manage [a project] faster and better than AstraZeneca, then we would be very open to it, and that's how we approached [Arrow and KuDOS]," Hoegstedt said. In early February, AstraZeneca agreed to buy antiviral specialist Arrow Therapeutics Ltd., of London, for $150 million cash, and in December 2005 paid $210 million for KuDOS Ltd., of Cambridge, UK, a firm focused on small-molecule inhibitors of DNA repair enzymes.

Maxine Gowen, senior vice president of external drug discovery for GSK, detailed her firm's eagerness to shop for promising compounds. She said consolidation over time of about 16 mid-size pharma firms into four huge pharma companies - one of them GSK - did not help research and development. Instead, the giants found it "much harder to be efficient and productive," and had to turn toward biotech.

GSK set up its Center of Excellence for External Drug Discovery, which charged a small team (15 people, soon to be 20) with delivering proof of concept molecules into the late-stage development for GSK by way of deals, and the company gave the team freedom to disagree with R&D leaders inside the firm.

"Obviously, we have the opportunity to access all the expertise within GSK, which often is a starting point," she said. Experts outside are consulted, too, "because we are very keen to not fall into the 'not invented here' trap."

Gowen pointed to the high price tags on licenses to Phase II, proof-of-concept compounds, and said "the goal [is] to try to acquire a portfolio of programs, or at least acquire options to a portfolio of programs, at predetermined prices that we would have access to, hopefully ahead of the competition, at proof of concept."

"Up to this point, we had put in place certain alliances and, really, they were kind of getting on with it, and no one was actually accountable for their success within GSK," Gowen said.

Among the partners added last year are Galapagos NV, of Mechelen, Belgium; Pharmacopeia Drug Discovery Inc., of Princeton, N.J.; Praecis Pharmaceuticals Inc., of Waltham, Mass. (which GSK disclosed plans to buy for $54.8 million in December); ChemoCentryx Inc., of Mountain View, Calif.; and EPIX Pharmaceuticals Inc., of Lexington, Mass. (See BioWorld Today, Dec. 22, 2006.)

The Praecis arrangement involved a pilot program with a technology that "sounded too good to be true. We were able to see, up close and personal, without putting too much at risk, how that would work out." The pilot program deployed Praecis' DirectSelect technology to identify small-molecule lead drug candidates against a diverse set of four targets chosen by GSK.

Gowen said the deal portfolio now totals 10, and GSK hopes to add "another four or five partners this year, if possible." The firm is open to any company with at least one compound in the clinic, and a willingness to see it through proof of concept.

A representative from another pharma behemoth - Wyeth, of Madison, N.J. - questioned Gowen from the audience. Thomas Hofstaetter, vice president of business development, wanted to know to what extent GSK influences what partners do. POC reared its head again, as Hofstaetter cited an instance where Wyeth wanted a study that the would-be partner did not want to carry out.

That's a point where GSK doesn't bend.

"If the partner company does the POC study that they think is great, but doesn't answer the critical questions that will allow GSK to decide whether or not it wants to take the option out, then it's really not to anyone's benefit," Gowen said. The firm has a joint committee that agrees in advance to the study design.

The Allicense meeting ended Thursday.