It's still one month shy of the first anniversary of Aurora Biosciences Corp.'s (NASDAQ:ABSC) initial public offering (IPO) — and perhaps years until the still-small San Diego firm can report a profit in its quarterly earnings statement. Yet, since its founding in May 1995, the company has signed on more than a dozen partners to help it develop, refine and expand its core drug discovery technology. Its most recent partner is privately held Systems Integration Drug Discovery Co. Inc. (SIDDCO), located in Tucson, Ariz. Under the combinatorial chemistry agreement, signed in April 1998, SIDDCO will synthesize diverse libraries of up to 2.4 million discrete compounds for Aurora. Through its relationship with SIDDCO, Aurora has become the fifth member of the former's combinatorial chemistry consortium, which it formed to build a broad-based technology platform. In turn, Aurora will incorporate the new compound libraries into its constantly expanding pharmaco-informatic database, which it already offers to its multiple collaborators through its screening services.

SIDDCO is Aurora's eighth biotechnology company partner in the last two years — and certainly not its last. According to chairman, president and CEO Timothy Rink, "In 1998, Aurora plans to continue to make strategic investments . . . that should increase our near-term business opportunities and provide an additional basis for long-term revenues."

This intense partnering activity places Aurora in the top tier of biotech firms that love to partner. None of the biotech companies can top ArQule Inc., however. The Medford, Mass., drug discovery company (NASDAQ:ARQL) has signed on about 28 corporate partners — biotech and big pharma alike — since the beginning of 1996. Four of the biotech deals have been accomplished in the first four months of 1998: with San Diego-based Acadia Pharmaceuticals Inc. in April; Seattle-based Immunex Corp. in March; Sepracor Inc., of Marlborough, Mass. (also in March); and New Haven, Conn.-based CuraGen Corp. in January. According to ArQule's president and CEO, Eric Gordon, the company "collaborates with biotechnology companies to accelerate the process of lead generation and lead optimization, thereby dramatically reducing the discovery research timeline."

Thus, Aurora Biosciences and ArQule — which have themselves joined forces in a collaborative arrangement — provide high-profile examples of the partnering trends occurring within the biotech industry today. Especially over the last several years, biotech companies are increasingly seeking each other for new relationships. In the biotech-biotech partnering arena, the number of new collaborations has soared from about 50 annually in 1993 through 1995 to 50 per quarter in 1998. At the same time, biotech firms are forging more and richer deals with big pharmaceutical houses. Keeping all those balls in the air at one time has got to be a formidable challenge for even the most agile of the bunch.

Aurora's Screens

Aurora started with a powerful technology — fluorescence-based screens that use mammalian cells engineered with disease pathways to judge the biological effectiveness of drug candidates on enzymes, proteins, ligands and receptors associated with a specific disorder. The feedback from this method is almost immediate, alerting researchers as to whether a drug candidate has activated or inhibited targeted molecular events.

The company has gone on to design an ultra-high throughput screening system (UHTSS) that allows for assay miniaturization. Its goal is to be able to crank out assays on hundreds of thousands of compounds every single day. But developing such a sophisticated system — which includes automated storage and retrieval, microfluidic dispensing devices, special "nanoplates" in which the assays are performed, specialized fluorescence detectors as well as the software to analyze the resulting data — requires significant financing. So Aurora formed a syndicate of heavy-weight pharmaceutical powerhouses to foot the bill. In return, the big pharmas get access to Aurora's fluorescent screening technology and co-exclusive access to the UHTSS system for several years after development has been completed. Although Aurora has stated in the past that it would consider as many as six partners in the UHTSS syndicate, it's already met its plan with four. The first member of this consortium was Bristol-Myers Squibb Co., of New York (NYSE:BMY), which signed a deal worth at least $40 million (and perhaps as much as $100 million) in December 1996. In rapid order, Aurora then lined up Indianapolis-based Eli Lilly and Co. (NYSE:LLY) in a $20 million deal in January 1997; the Parke-Davis research division of Morris Plains, N.J.-based Warner-Lambert Co. (NYSE:WLA) in a $65 million collaboration in September 1997; and Merck & Co. Inc., of Whitehouse Station, N.J. (NYSE:MRK), in a $100 million arrangement in December 1997.

Partnering With Biotechs

Aurora's first biotech partner — long before it came public — was Southern California neighbor Sequana Therapeutics Inc., in April 1996. Sequana made a $1.5 million equity investment in Aurora as part of the agreement, which centered on screening and functional analysis of positionally cloned disease genes. But the two companies were joined by more than mere geography; they had both been spawned by Avalon Medical Partners LP, of La Jolla, Calif., a venture capital fund that was formed in 1991 by Swiss pharmaceutical giant Sandoz Ltd. (now Novartis AG) and Avalon Ventures, also of La Jolla. Moreover, Kevin Kinsella, the managing general partner of Avalon Ventures, was also the president and CEO of Sequana Therapeutics, which has since merged with Arris Pharmaceutical Corp. to form AxyS Pharmaceuticals Inc., of South San Francisco. In fact, Avalon Medical Partners, along with a number of other venture capital firms, infused $13.6 million into Aurora's coffers in March 1996.

Since then, Aurora has completed an IPO, raising $40 million in June 1997, and garnered commitments of as much as $225 million from its four big pharma partners in its own sort of product development consortium. As well, Aurora has signed deals with a number of other biotech companies. These include Alanex Corp., of San Diego (in November 1996), Allelix Biopharmaceuticals Inc., of Mississauga, Ontario (in January 1997), and La Jolla-based Lidak Pharmaceuticals (in August 1997) and Sibia Neurosciences Inc. (in January 1997). It's also got a screening agreement with Roche Bioscience, of Palo Alto, Calif. (a division of Swiss pharmaceutical giant Roche Holding Ltd. ), signed in December 1996.

Aurora's business approach has been to invest its capital resources in sharpening its technological edge and expanding the technology platform, explained Rink. The company does not intend to self-fund any therapeutic drug discovery beyond lead identification. "We sell our technology and services in a way that makes business sense," Rink said. That could mean total technology transfer — as is the case with Aurora's big pharma partners in its UHTSS syndicate. Or it could mean no transfer at all, with the partner's compounds being worked on at Aurora. Or, in some cases, it's a little of each, with Aurora doing some of the research and then transferring the technology, Rink explained. "We will outlicense the technology under the right conditions," he continued.

"The classic 50/50 biotech-biotech collaboration model doesn't work for Aurora's core business, which is to create and sell technology services in high-throughput screening and functional genomics," Rink said. That generates the revenues — as will any future royalties coming from sales of products discovered with Aurora's technology.