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ANALYSIS: Bayer Deal Fuels Curagen s Efforts to Strike Genomics Gold

NEW YORK, Jan 16 – Curagen’s $124 million toxicogenomic and pharmacogenomic deal with Bayer and its $1.34 billion agreement to collaborate on drug targets for obesity and diabetes provide Curagen with the R&D budget necessary to enhance its portfolio of genomics tools and mine the genome for blockbuster drugs, analysts and company executives said Tuesday.

“This is not only the biggest and most important deal for Curagen, it’s probably the biggest committed R & D support deal in genomics to date,” said Ahktar Samad, who covers Curagen for Bear Stearns. “It means that Curagen has close to a billion dollars in committed capital from Bayer and Abgenix combined. This means [Curagen is] certainly in possession of resources that are sufficient to strongly accelerate development of a pipeline of products.”

Additionally, Samad said, the agreement for the toxicogenomic and pharmacogenomic database enhances Curagen’s market power by allowing it to sell the finished database content to other pharmaceutical companies in the future, as long as it pays Bayer a royalty figure. Samad said the agreement calls for royalties of under 10 percent. The companies will jointly create this database of gene-based markers and information to help researchers predict drug toxicity, understand how a drug works, and identify disease indicators including SNPs.

This database will “complement and expand our high tech research platform and will further improve our selection candidates" [for drugs], said Jonathan Rothberg, chairman and CEO of Curagen, in a conference call to discuss the Bayer deal.

Currently, Curagen offers a menu of genomic tools including the SeqCalling sequence analysis tool, GeneCalling, which identifies gene expression differences between healthy and diseased tissues, PathCalling, which identified protein pathways involved in disease, and SNPCalling, which isolates disease-related SNPs. In addition, the company also has pharmacogenomics tools.

The completeness of Curagen's tool set is one reason companies like Bayer find it so attractive, said Samad. “Most genomics players have similar technologies, but the entire process is somewhat better integrated at Curagen. This simplifies a lot of complex mix-and-match that would take place if a [pharmaceutical] company were to partner with multiple tools providers.”

The toxicogenomic and pharmacogenomic database is particularly important to pharma, said Rothberg. “In general we now have 10 percent success rate in clinical development, with most drugs lacking efficacy or tolerability. We want to in the early stages predict which are the winners.” Pharmacogenomics and toxicogenomics are the logical next steps after genomics.

Despite this flurry of confidence, however, Bayer and Curagen can opt out of this collaboration at a certain ‘milestone’ point if the toxicogenomic and pharmacogenomic database fails to deliver on its promises, said Wolfgang Hartwig, head of global research for Bayer.

The obesity-diabetes drug development deal is less flexible, with no opt-out clause, Hartwig said. Under the agreement, the two companies will conduct drug discovery on 80 small molecule targets that Curagen selects using genomic data mining techniques over the next five years.

Though the miracle obesity drug has so far eluded modern medicine, Samad is confident that Curagen’s methodology for mining the genome will provide it with at least one drug target that pays off. “There are ways of validating drug targets which companies like Curagen are excellent at. Using applied genomics verifies or validates the functional significance of your target in a disease process early in the drug discovery process so [you] don’t end up taking targets of low quality into clinical development.”

Even if Curagen’s efforts to deliver the golden target for obesity and diabetes drug discovery efforts don’t pan out, Bayer still has another deal in its back pocket--the $465 million collaboration with Millennium pharmaceuticals.Under the terms of that deal, which began in 1998, Millennium is supplying Bayer with 225 targets for cardiovascular disease, cancer, pain, hematology, and viral infections.

While it may seem strange for Bayer to collaborate with both Curagen and its rival Millennium, Bayer executives stressed that the most recent deal is both complementary to, and more extensive than, the Millennium collaboration.

“We can’t compare these two deals,” said Hartwig. While Bayer is working with Millennium to identify new drug targets, the Curagen deal, he said, “is a joint venture, a true collaboration based on risk sharing.”

Millennium Pharmaceuticals could not be reached for comment on this collaboration.

Curagen also has its other bases covered as it pursues an ongoing collaboration to develop antibody drug targets with Abgenix and conducts its own internal protein target validation efforts.

“Mining the genome is similar to mining any other ore,” said Rothberg. “When you go in with a bucket loader, you get gold and silver and copper targets. In this case the gold are the small molecule targets, which we share with Bayer, the silver are the antibody targets, which we work with Abgenix [to explore], and the third are the protein targets, which we develop ourselves.”


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