New Cancer Drugs Spawning From Illinois Lab

 

CHICAGO – So you think you have to go to downtown Chicago to hear some great blues?

Early last fall, a good friend took me up to Woodstock, Ill. to hear blues guitarist Popa Chubby and his group play in a small club off the main town square. After hearing two sets, I was blown away by this strange-looking dude who laid down some original music that had guitar riffs blended from Leslie West, Jimmy Page, Eric Clapton and Stevie Ray Vaughn.

Popa (also known as Ted Horowitz from Brooklyn) is surprisingly better known in Europe than in the U.S. In fact, if you check out his Web site, you will see that he is on tour in Holland, Denmark, Switzerland and France (more than in his native New York much less the rest of the U.S.). There are obviously savvy and appreciative blues audiences there.

The moral of the above story is that not everything is going to be found where you think it’s going to be found. Who would have thought a small blues club in upstate Illinois would have featured such a startling blues artist and that he would have already established a solid audience in Europe?

To take this point even further, a recent article in the Wall Street Journal featured a biotech company in Madrid called PharmaMar S.A. (literally “sea pharmaceuticals”), which is developing new cancer drugs from marine organisms (not fish but marine invertebrates such as sponges and tunicates that have potent immune systems).

PharmaMar’s first cancer drug appears to be up for approval in Europe in 2003 and in the U.S. in 2004. It will be marketed in the U.S. by Johnson & Johnson’s ortho division (which paid $175 million to license this drug). Can you guess where this drug and PharmaMar’s initial drugs came from? Guess again.

The answer is the University of Illinois at Urbana-Champaign (more specifically, from the lab of natural products chemist and professor Ken Rinehart). Dr. Rinehart in fact has been a member of the board of directors of PharmaMar since its inception (see here).

I mentioned earlier this year the first of expected consolidations and mergers within the biotech industry (Johnson & Johnson acquiring Scios). The latest merger comes from the well-known Enzon (based in New Jersey and not to be confused with Enron) and NPS Pharmaceuticals (located in Salt Lake City) in a $571 million stock deal.

The combined company would have more than $300 million in cash and could have sales of $200 million in 2003. Of note here is that Enzon’s chairman and CEO is ex-Abbott senior executive Arthur Higgins, who will become CEO of the combined company. I’m sure we will continue to see more of this activity.

Icelandic biotech company deCODE genetics, which acquired Chicago’s Medichem in 2002, was in the news last week when it obtained $5.2 million for a drug discovery contract. The company signed a contract with Families of Spinal Muscular Atrophy (SMA), a network of 5,000 families across the U.S. and Europe with children afflicted with a rare neurological disorder that causes muscle weakness and often death.

As there appears to be no therapy for this disease, the families themselves have banded together to fund the development of new therapy. The U.S., European and Japanese governments have recognized the need for research for “orphan” diseases (in the U.S., the government’s definition of orphan disease is a disease that has a prevalence in fewer than 250,000 patients).

They have also created some incentives (tax incentives, some funding and market exclusivity when the drug to treat an orphan disease comes to the market). Still, most major pharmaceutical companies don’t pursue such research since the commercial market often doesn’t justify the research and development expense. This task is then left to smaller biotech companies to pursue such research and drug development.

Genzyme in Boston was built on such a strategy. With annual sales of more than $600 million a year, Genzyme has proven that this can be a successful business strategy and can provide novel treatment for such diseases.

According to the Journal, 25 million people suffer from 6,000 rare or “orphan” diseases. Of interest is the trend for families to band together and provide funding for such research.

Numerous examples of this can be found. The Cystic Fibrosis Foundation, the Hereditary Disease Foundation for Huntington’s Disease and the Crohn’s and Colitis Foundation of America are just a few. In the case of Families of SMA (a genetic disease affecting about 25,000 people in the U.S.), a group of families in Chicago banded together in 1984.

Since then, they have been able to raise $12 million across the nation to fund research into this disease (specifically to find the gene that is the cause of the disease). Many babies with SMA die before their second birthday. These families have pooled their genetic histories and DNA samples and have been able to link the disease to a specific chromosome.

There is also a National Organization for Rare Disorders. This brings a new approach to angel investing (often the first round of funding for new companies). In this case, the growth of patient groups banded together by a common cause to fund research into life-threatening diseases is spurred on by the fact that these patients often don’t have time to wait for new disease treatments.

There are about 400 new biotechnology medicines in the drug development pipeline. According to Ernst & Young data, the R&D dollars are focused in the following major areas: cancer (28 percent), nervous system (11 percent), infectious and viral diseases (9 percent), vaccines/adjuvants (4 percent), cardiovascular (6 percent), blood and coagulation (6 percent), metabolic (5 percent) and respiratory/pulmonary diseases (5 percent).

Steve Burrill, the well-known CEO of Burrill & Company (a San Francisco-based life sciences merchant bank), is very involved in investing in the Midwest (his roots are in Wisconsin) and has invested in Midwest companies such as Madison, Wis.-based Third Wave Technologies.

He is also the chairman of Pyxis Genomics in Chicago. Burrill has noted that biotech is not just about money. Rather, he says, it’s about humanity, health and the preservation of the planet. That’s the real return on investment, according to Burrill.