By Jennifer Van Brunt
Gene therapy companies may have come full circle. Once upon a time not so long ago, these companies were the darling of investors; they managed to attract considerable interest from venture capitalists and Wall Street bankers alike. Young biotechnology companies that focused on devising ways to cure diseases at the genetic level were a hit. The tantalizing promises of the fledgling science kindled everyone's imagination.
But these dreams were temporarily shattered as the cold hard reality of the difficulties inherent in the technology hit home. The final blow was delivered in 1995 by the National Institutes of Health (NIH), which wrote a report stating that gene therapy was not ready for commercialization. That report underlined the fact that even after 10 years of clinical experience with gene therapy, not one protocol had demonstrated efficacy in the clinic. In essence, the NIH report stated that all the work so far had been experimental, with man as the animal model.
Needless to say, investors fled from the stocks. But the large pharmaceutical companies did not. They had already mounted their own programs to develop gene therapies, and had expended considerable effort to access the technology — whether by research and development collaborations with young gene therapy companies or by outright acquisition of those firms.
To this day, big pharma continues to bolster its own programs in gene therapy through biotech alliances. In fact, several of the deals announced since the beginning of the year have been rich enough and important enough to have made the pages of The Wall Street Journal — and to have swung the spotlight back onto gene therapy.
As recently as two months ago, the chief financial officer of French gene therapy company Transgene SA claimed that his firm had no plans to go public. Yet just last week, that's exactly what it did. The 19-year-old company raised about US$57 million in an international initial public offering (IPO), placing shares on the new Paris stock exchange, the Nouveau Marche, as well as on the U.S.-based Nasdaq National Market (as American Depositary Shares). Transgene, which is based in Strasbourg, turned its IPO around from start to finish in less than a month, too. The company, which has an impressive armamentarium of vectors for delivering genes (the essence of any successful gene therapy approach), has attracted a number of high-powered partners in the interim. It's got a deal with Rockville, Md.-based Human Genome Sciences Inc. (NASDAQ:HGSI) that covers at least 10 genes. Human Genome Sciences will license them to Transgene, which for its part will incorporate those genes into its various vectors and turn them into gene therapies. Human Genome Sciences pledged to buy a 10 percent stake in Transgene's IPO as well.
Furthermore, Transgene attracted the interest of Schering-Plough Corp. (NYSE:SGP), which is turning out to be one of the major players in the gene therapy arena at the present time. In February, Schering-Plough pledged to pay Transgene as much as $88 million to access the French firm's adenoviral gene delivery systems for use with Schering-Plough's p53 tumor suppressor gene as well as other (unnamed) genes in the big pharma's clinical trials.
Schering-Plough, based in Madison, N.J., already has mounted a serious clinical program in p53 gene therapy for treating cancer. It initiated clinical trials for its recombinant adenovirus encoding human p53 (rAd/p53) gene therapy in a Phase I trial in non-small cell lung cancer in 1996. It's also got early-stage trials investigating the intratumoral administration of rAd/p53 in head and neck cancer, intraperitoneal administration in ovarian cancer, and intrahepatic arterial administration in patients with liver malignancies. The effort first came to light in October 1994, when the pharmaceutical major inked a research collaboration with Canji Inc., which had been developing p53 gene therapies. It subsequently acquired the San Diego-based private gene therapy firm in February 1996.
The arrangement with Transgene was Schering-Plough's second gene therapy collaboration in 1998: In January, it struck an $80 million deal with Framingham, Mass.-based Genzyme Molecular Oncology (a division of Genzyme Corp.), giving it access to Genzyme Molecular's lipid delivery system for p53 and five other genes. Thus, the big pharma company already has promised $186 million to biotech companies in 1998 in support of its gene therapy efforts. And the year is young.
As well, Genzyme Molecular Oncology this year signed a collaboration with Merck & Co. Inc. (NYSE:MRK) that also bears on the p53 gene. Merck, of Whitehouse Station, N.J., will pay Genzyme Molecular up to $8 million for use of the latter's methods for screening small molecule compounds that inhibit binding of the cancer-related protein MDM2 to the p53 protein. The MDM2 protein, which has been found to be associated with a wide variety of cancers, is thought to wreak its havoc by preventing the p53 protein from activating the genes that control cell division.
Schering-Plough is covering another base as well. It signed a deal with OncorMed Inc., of Gaithersburg, Md., in January for access to the latter's pharmacogenomic services. OncorMed (AMEX:ONM) will use its p53 assay to screen cancer patients who may qualify to participate in one of Schering-Plough's rAd/p53 clinical trials. The assay will identify those individuals with a missing or defective p53 gene.
By The Numbers
One week shy of the end of the first quarter of 1998, there was a total of 51 new research and development-based collaborations signed between biotech firms and big pharmaceutical houses. The precommercialization value of these deals, which is based on a best-case scenario for each and every one, comes to a total of $1.02 billion. As usual, not all the new alliances disclose the financial details. For the 51 new deals announced between Jan. 1 and March 24, 1998, only 45 percent assigned any dollar values. A few of those deals are exceptionally rich — including Iceland-based deCode Genetics Inc.'s $200 million population genetics-based collaboration with F. Hoffmann-La Roche Ltd. and U.K.-based PowderJect Pharmaceuticals plc's $321 million DNA vaccine agreement with Glaxo Wellcome plc.
There were fewer new biotech-big pharma alliances in the first quarter of 1998 than there were in the fourth quarter of 1997, but this is not unusual. Since 1994, in fact, the number of new alliances has escalated as the year progresses. The first quarter has always been the lowest.
And, lest these numbers deceive, it's also clear that the number of marketing alliances has continued to climb. As well, more and more big pharmas are renewing their pledges to their biotech partners as they extend and expand the ongoing collaborations. These last categories will be covered in detail in the April 13, 1998, issue of BioWorld Financial Watch.