By Matthew Willett

The more human the better, or maybe just different.

That's how Xenerex Biosciences President and COO David Hansen describes his company's advantage in the human monoclonal antibody market. Xenerex antibodies aren't from transgenic mice or phage display production, but from human cells, and that could be the distinction Xenerex needs to compete in the burgeoning MAb market, he said.

Xenerex hit the biotech sector last week, a wholly owned subsidiary of San Diego-based small-molecule maker Avanir Pharmaceuticals Inc. Whether it'll spin off from Avanir or offer shares publicly remains to be seen, Hansen said, but he thinks his company's technology promises to give the competition a run.

"The platform technology is one using human cells to generate human antibodies," Hansen said. "That makes all the cells and all the molecules human. Are the human antibodies better? We don't know, but they're certainly different."

Using immuno-deficient mice, rather than transgenic mice, Xenerex can produce completely human antibodies faster and cheaper than its competition, big market players like Abgenix Inc., Medarex Inc. and Cambridge Antibody Technology plc, Hansen said.

"I'm not saying our antibodies are always better, but what we like to offer is the ability to say we'll give you a lot of choices, and the costs of generating that antibody are small compared to the costs and risks of taking something through the development process," he added.

Xenerex was founded on intellectual property that formed a part of the MAb technology genesis. Though financing nearly missed the company, Hansen said the foundation is strong.

"We have had the two original patents here at the parent company, Avanir, for several years, and we've been knocking around the idea of starting a monoclonal antibody business," he said.

"The trouble we had was when Avanir went through some tough times over the last two years," as the company first failed to get its docosanol cream oral herpes product through the FDA, then got it back on track through an appeal and finally got approval last month, following a collaboration with SmithKline Beecham Inc., of Philadelphia. That deal put the company back on its financial feet.

"It was only late 1999 when we won the appeal with the FDA. That allowed us the advantage of becoming financially stable," Hansen said. "It also allowed us to start putting together a business plan for Xenerex and take it to the board and get their approval to form a subsidiary and totally fund the company."

Further funding should come from alliances and parnterships with both small and large companies seeking monoclonal antibody therapeutics.

"Over the last 12 to 18 months, the idea of MAbs as therapeutics has risen dramatically. There've been a lot of approvals of products and those products have done well in the marketplace," Hansen said. "That, combined with another factor - that companies that are trying to develop antibodies to certain antigens like to start with human, rather than mouse or primate, antibodies. It's not in every case, but based on the success Abgenix and Medarex have had, the clear preference is to start with fully human antibodies. There are several reasons. One is tolerability."

Another is variety. Human antibodies can be slightly different among different humans. Those genetic differences could prove to be therapeutically relevant.

"We could selectively locate donors, and we're currently in the process of creating a library from different donor types, so that if someone comes to us and wants us to generate an antibody for a disease, we can draw from the genetic diversity of the platform," he said.

Xenerex's principal scientist Phil Morrow is a longtime MAb researcher. He said the variance between humans is only one of the benefits fully human antibodies promise.

"As a worker in the antibody arena for years, I've followed the technology closely. I knew that phage display and transgenic mice had a great potential, but I knew there were thousands of antibodies that could be generated," Morrow said. "The science has a lot of room left. Each of those methods had limitations, small ones, but I felt there was room for the technology that allowed for genetically different antibodies, and that difference, in some cases, can make better antibodies than phage displays or transgenic mice."

Hansen said Xenerex already is receiving interest from companies large and small.

"I think it's pretty well established that there are a lot of companies out there that are looking for ways to turn their discoveries into therapeutics," Hansen said. "Antibodies are going to be one of the most straightforward ways to turn those discoveries into therapeutic products. Even following the success of the two transgenic mouse companies, there are so many targets out there that I think there is more than enough room for us."

Avanir Shareholders Remain Top Priority

Once that market has been tapped, Hansen said, the company can consider its options for the future. He said the first consideration is Avanir's shareholders.

"We've got a responsibility to the holders of Avanir stock. We need to see if our formation and success in the marketplace will be reflected in the valuation of Avanir stock," Hansen said. "If so, we still have the shareholders to work for, and we need to keep that in mind. If, indeed, we don't feel it creates value for Avanir and Xenerex and we feel it's better to spin out, then that's another option. Right now we're funded by Avanir for the start-up and the next fiscal year. I think what we'll do as a company, and as management, is make a decision based on what's right for Avanir shareholders, and if that means we want to take the next step to venture capital, or whatever, then we would do that."

In the meantime, Hansen said Xenerex has plenty to do.

"We've got a couple of things we're looking at. There are some larger companies that we've had some discussions with, but we're early in the process," Hansen said. "We're a small company today, and that appeals to other small companies who have targets. People are approaching us and that's gratifying as we're starting up, but we know we'll be approaching others as well.

"We talk a lot about the technological aspect, but I think what we want to bring to light is the people aspect. Starting up a company is a very exciting time, and we've got some great people working very hard to make it as successful as possible. We've been able to attract some highly skilled immunologists, and we're getting calls every day from some great science folks who want to join us. To have that at this point in time, during start-up, we think we've got something here to be a success."

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