By Randall Osborne


Europeans are fond of comparing leaders of American industry to cowboys: rough-and-tumble types who will try anything once, hardy souls fit for harsh weather and long days of grueling work ¿ even eager for the challenges.

Most in the United States do little to dispel the image. In fact, it's accurate, for the most part. And it's especially accurate by comparison with overseas enterprise, which often turns out to be ultra-carefully considered, somberly overseen, planned and studied a few extra times for good measure before something actually happens.

In such a picture, U.S. industry hardly needs to be reckless to appear that way.

Nowhere is the cowboy notion more fitting than in biotechnology, with its constantly evolving, tricky science, its ever more complicated financial scene, and its capricious market, where companies are faced with the demand for true grit, a kind of rugged versatility required to such a degree in few other realms.

"Venture capital" is just the sort of capital biotechnology would need ¿ the kind of capital that goes into a "venture" in the truest sense, so much that it might be called "adventure capital."

The phrase "private placement" suggests, to those not schooled in financing, some social service agency finding a home for the orphan child in its care, and "venture capital" has overtones of boldness, of money thrown bravely toward the untried.

It's not quite so dramatic, but experimental biotechnology still relies heavily on venture capitalists for cash. Tullis-Dickerson, which partner Lyle Hohnke called a "mid-sized" venture capital outfit based in Greenwich, Conn., has been pledging its resources in a relatively new space: making transgenic antibodies not in mice, but in chicken eggs, corn and soybeans. Farm products.

"And there are other proteins besides antibodies that can be produced in plants," Hohnke said. "I've had the question asked, and I don't know if it was facetious or not, 'Do plants produce proteins?' Well, [the technology] just happens to use the plant as a bioreactor, another vehicle for producing a protein."

Hohnke said people tend to believe, "If it's a plant, it's got to be low-tech, and can't be a very exciting story." Tullis-Dickerson, a half-billion-dollar concern, believes otherwise.

"This was blue-sky biology a few years ago, but I think it's starting to be taken very seriously now," he added. "It's directly related to demonstrating the utility of therapeutic antibodies, which has been a roller coaster, starting with Centocor [Inc.], back in the 1980s. There's a huge therapeutic opportunity, and then immediately you say, 'How are we going to meet market demand?' That's a major driver," Hohnke said, noting supply problems with Enbrel (etanercept) that have been experienced by Immunex Corp.

In transgenics, Tullis-Dickerson is focused on three firms.

Avigenics Inc., of Athens, Ga., was founded in 1996. One of its premises is that the white of a chicken egg is a sterile, closed environment, replicated often and with very little expense ¿ perfect for making proteins and ultimately advancing the march of gene-based medicine.

"It just makes sense," Hohnke said. "Albumin is a protein, and many vaccines have been made using egg technology for a long time. If it's possible to introduce new genes into the hen at the appropriate time, this can be very exciting."

In this subdivision of the transgenics space, he added, "Genzyme Transgenics [Corp.] is clearly the leader. They were in very early, with goats and cows. That [research] says it's possible and, since that time, companies like Avigenics have gotten into the field, using poultry. You can produce large amounts of protein probably less expensively than in the goat and cattle models."

Cost of manufacturing proteins is one issue, Hohnke said, but quantity is another, just as serious ¿ and a bottleneck seems inevitable. Egg and plant transgenics "will open new areas," he said. "The validation of antibodies as a therapeutic is moving at breakneck speed, and it's created an amplification of the supply issue. On the poultry side, Avigenics that could be dominant in that field," he said, admitting "it's a little early" to dub that firm the guaranteed leader in a zone where lab work is still ongoing.

Already, Avigenics has created several flocks of transgenic chickens that are stable through multiple generations, and expressed the human protein alpha-interferon in eggs, while working to nail down the regulatory details for product testing and approval ¿ and securing partnerships.

Speculation is the name of the game, Hohnke said.

"In plant-based antibody production, EPIcyte [Pharmaceutical Inc.] appears to have a strong and controlling intellectual property position," he said. The firm, which in April raised $16 million through a Series D financing with the reputable Johnson & Johnson Development Corp. as lead investor, said it would use that cash to push its infectious disease and sexual health antibody products to the clinic. Tullis-Dickerson is helping.

HX8, EPIcyte's lead product, is an anti-herpes antibody bound for the clinic in early 2003, and the company has an anti-sperm antibody for birth control in development, as well as preventive agents for pulmonary infection by respiratory syncytial virus and Clostridium difficile-associated diarrhea. EPIcyte, also founded in 1996, started out using tobacco leaves, and then moved to corn seed.

"At this point, we get to the edge of what we don't know," Hohnke told BioWorld Financial Watch. "We don't know what the final economics will be for goats vs. chickens vs. plants. And even in plants, will corn be less expensive than tobacco? Will tobacco be less expensive than duckweed?"

Still, the huge advantage over other production methods, an advantage that experiments are steadily clarifying, is too tempting to ignore ¿ even though regulatory hurdles are still among the unknowns, he said.

Elsewhere in transgenics, "for non-antibody production, I think ProdiGene [Inc.] has a clear shot," Hohnke said. In March, the company raised $9 million in a private placement for its work with plants to make recombinant proteins.

Founded in 1997, ProdiGene has among its projects an edible AIDS vaccine. The focus is a transgenic corn type that expresses a glycoprotein used as a major component in most HIV and simian immunodeficiency virus vaccines. ProdiGene was awarded a Small Business Innovation Research grant from the National Institutes of Health for the work.

Hohnke said Tullis-Dickerson will stay in biotechnology, maybe to the current degree, and maybe more.

"I don't see us cutting back," he said. "As we try to balance our portfolio, in terms of stages of investment, I think we're pretty comfortable with our mix."

The market, he added, "continues to love the biotech story. There's a certain romance that exists there, that doesn't seem to die. Investors are more sophisticated, so they are more cautious, and they demand higher quality management teams, and you have to be prepared to stay longer. It's not the dot-com, in and out in a year, with huge multiples. If that's your game, you won't be investing in biotech."

In transgenics, Hohnke said, Tullis-Dickerson has "placed two or three bets, and so far we're very pleased" ¿ and it's all in plants, though transgenic mice have gotten most of the attention over the past few years, with the likes of Medarex Inc. and Abgenix Inc. making deal after deal.

"Clearly, those technologies work, and they've attracted a lot of investor interest," Hohnke allowed. "But are you going to be able to get the quantities you need for certain large markets? I don't know. You may even see collaborations by an Abgenix or a Medarex with these other transgenic platforms. The jury is still out."

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