In an effort to expand its business and provide a much-desired service for its customers, Gene Logic Inc. acquired a technology program and a six-person research team from Millennium Pharmaceuticals Inc.

The acquisition will allow the Gaithersburg, Md.-based company to identify new therapeutic indications for its clients' drugs.

As part of the transaction, Gene Logic also in-licensed Cambridge, Mass.-based Millennium's MLN4760 product, to find new indications for the compound in exchange for fees, milestone payments and royalties. Gene Logic plans to conduct similar work on products from other pharmaceutical and biotechnology partners, creating downstream value.

"We anticipate using these technologies to help pharma partners rescue failed drugs and find new indications for their drugs," Mark Gessler, chairman and CEO of Gene Logic, said in a conference call.

The technology acquired includes in vivo compound imaging, in vitro pathway screening, predictive and genetic ADME capabilities and metabolomics technologies for use in preclinical and clinical development.

Gene Logic will pay $3.5 million in cash or stock to Millennium in 2006. It also will pay $1 million in cash and stock to certain employees who are leaving Millennium and joining Gene Logic. Millennium will receive a license to use Gene Logic's ToxExpress database for three years, a value of about $4.5 million, and Millennium will have grant-back licenses to certain technologies acquired by Gene Logic.

"The total amount that we will pay comes to $9 million," Gessler said.

He added that the company will spend at least $8.5 million over the next 18 months to further develop and commercialize the new technologies. It will continue to work with Millennium on developing certain transferred technologies.

Founded in 1996, Gene Logic started out as a business offering discovery services. It initially identified new drug targets, and later offered toxicogenomics and preclinical services. With the acquisition of Millennium's technologies, the company has the capability to work on clinical-stage and approved products.

"What we're getting from Millennium is technology that pushes us further down the value chain, providing us with a clinical development capability vis-a-vis drug rescue," Robert Burrows, Gene Logic's senior director of corporate communications, told BioWorld Today.

The six people joining Gene Logic from Millennium include key developers of the technologies. They will be led by Louis Tartaglia, who served as Millennium's vice president of new ventures and vice president of metabolic diseases. They will remain at offices in Cambridge, Mass.

"The need for these technologies have never been greater," Tartaglia said in the conference call. "R&D costs and industry competition are rising, increasing the pressure on biotech and pharmaceutical companies to expand their pipeline."

As the first customer of Gene Logic's new business, Millennium is handing over MLN4760, which entered the clinic for obesity in the fourth quarter of 2001. Millennium since has removed it from its pipeline. If Gene Logic succeeds in identifying new therapeutic indications for MLN4760, it would re-enter Millennium's pipeline, entitling Gene Logic to fees, milestone and royalty payments.

Gene Logic also acquired Millennium's MC-4 antagonist therapeutic program, which it intends to out-license following further preclinical and indication-expansion efforts. That program was orphaned by Millennium, and is one that fell into Gene Logic's lap during negotiations for the technology. Unlike the agreement for MLN4760, it is not indicative of the type of deal Gene Logic intends to normally conduct with other companies, Burrows said.

Tartaglia said that many popular drugs had their greatest therapeutic potential in indications other than those for which they initially were developed. Examples include Viagra (Pfizer Inc.) for erectile dysfunction, Hytrin (Abbott Laboratories) for benign prostatic hyperplasia and Evista (Eli Lilly and Co.) for osteoporosis, he said. About 90 percent of approved drugs later are discovered to have value in other important indications. Tartaglia believes there are several compounds sitting in company pipelines that have potential in unexplored areas.

Millennium decided to sell the discovery technologies because they are not part of the company's core business, which focuses mainly on pipeline products, Burrows said.

"Millennium has always been a pretty cutting-edge company in its own right, and these technologies were borne out of that entrepreneurial zeal," he said.

Gene Logic's stock (NASDAQ:GLGC) dropped 8 cents Friday to close at $3.62. Millennium's stock (NASDAQ:MLNM) dropped 22 cents to close at $11.01.

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