By Nuala Moran

BioWorld International Correspondent

LONDON ¿ ¿It¿s the products, stupid¿ is the mantra CEOs must keep in mind as they strive to create value in biotechnology companies in the current climate.

That was the collective message of speakers Tuesday at the opening plenary session, ¿Climbing the value curve,¿ at the second annual BioIndustry Association CEO and Investor Conference held here.

¿In 2000, platform companies dominated with Celera [Genomics] setting off a surge in the stock markets,¿ said Jerry Benjamin, director of Advent Venture Partners. ¿In the past six to nine months they have fallen back, and it has now come to the fore that product companies are where the value is.¿

Stuart Collinson, former chairman, CEO and president of Aurora Biosciences Corp., described how he recognized the need to create value in Aurora by shifting the focus away from the platform technology around which it was founded. ¿We had a suite of technologies that worked very well, but we wanted to get closer to the US$300 billion pharma market, not be so far upstream.¿

The company ¿edged¿ into medicinal chemistry, made a couple of acquisitions and set up five discovery agreements in 2000. ¿So we felt very confident as we started to think about setting up our own drug discovery [capability].¿

However, Collinson said the company realized that it could end up spending five years making acquisitions to achieve this. ¿And it is not enough just to buy the component parts. We would then need to integrate them.¿ The lesson for technology platform companies is, ¿You can¿t morph yourself into a drug discovery company in two to three years.¿

In the end, the route Aurora chose was a $600 million merger with Vertex Pharmaceuticals Inc., completed in July. The move created a $2 billion company with 1,000 people and four facilities. ¿This put us into a world with nine products in the pipeline and one on the market. We decided to take 20 percent of the pie that can be the next Merck or Pfizer. We are building the next generation of pharmaceutical company.¿

Similarly, Michael Kranda, of Oxford GlycoSciences plc, said that from the day he became CEO of the company in 1996, the focus was on ¿running from platform to product.¿ The company closed its instrumentation arm and moved into disease protein profiling, later christened proteomics.

The strategy was to sell its proteomics data in the short term, but keep the focus firmly on developing its own pipeline. ¿The rule is to keep as much as you can afford to,¿ he said. ¿You have to do early deals to get running and financed, but don¿t give away your first-born.¿

OGS¿s proteomics platform enables it to leapfrog genomics and discover disease-specific proteins. For example, in schizophrenia it has discovered 29 different proteins, all made by the same gene. ¿This allows us to build a pipeline based on novel targets,¿ Kranda said. ¿These are being run though both antibody and small-molecule screening. We find it, own it and finance development ourselves.¿

OGS is in the relatively unusual position for a European company of sitting on a war chest, having raised #170 million (US$240.6 million) in December 2000 in its secondary listing on Nasdaq.

Thomas Hofstaetter, senior vice president, corporate development, at Aventis Pharmaceuticals Inc., said it is not productive for big pharma to look for ¿bits and pieces¿ of technology. As a result, biotechnology companies that are integrated have a big advantage in terms of doing deals with pharmaceutical companies. ¿You need a sustainable model; one product is not enough.¿

This was the thinking behind Aventis¿ $450 million collaboration with Millennium Pharmaceuticals Inc. Aventis was looking for a number of technologies to fill gaps in its genomics, pharmacogenomics and bioinformatics capabilities. ¿We did the deal with Millennium because it covered 80 percent of our requirements in three areas, and because one alliance is easier to manage,¿ Hofstaetter said.

However, Genghis Lloyd-Harris, managing director of the biotech sector at Credit Suisse First Boston, issued a caution: ¿Markets are fickle. Last year they wanted genomics, this year they want products. So my advice is to stick to what gives you competitive advantage because the markets will want something else next year.¿