NEW YORK, April 20 - Canadian population genetics company Xenon Genetics has kept a low profile since its founding four years ago, but since Xenon raised $45 million earlier this month in a private placement, despite current market conditions, some in the genomics community have begun to sit up and take notice.
"It's pretty impressive that they raised that amount of money in this market," said Toni Schuh, CEO of Sequenom, who views Xenon as a potential customer for Sequenom's products. "We are excited that investors are interested in [Xenon]," he said.
But why Xenon? With proteomics as the current buzzword in recent months, attention and capital have mostly flowed to companies interested in studying proteins, not genes and epidemiology.
The answer, say those within and outside the company, is Xenon's fast, clinically-based strategy for identifying genes and druggable targets associated with patients' diseases. This strategy, which the company calls “clinical genomics,” involves identifying and studying a population with a particular disease in order to identify a disease-associated gene, then further determining the gene’s function using animal models.
This strategy, said people familiar with the company, is more focused on specific disease populations than those of DeCode Genetics and Gemini Genomics, which involve studying large isolated populations and mining these general populations for disease-associated genes.
"As opposed to DeCode or Gemini [Genomics], Xenon has shown that it can reduce it to the practical," said Nancy Harrison, a senior vice president at Ventures West Management, an investor in the company.
In 1999, Xenon scientists practically demonstrated the clinical genomics strategy by discovering the ABC1 gene, then tying it to low levels of HDL cholesterol. Looking at populations of patients in the Netherlands and Quebec with Tangier's Disease, which contributes to extremely low HDL cholesterol levels, Xenon identified the ABC1 gene, and then showed that the gene also plays a role in patients with only moderately low HDL cholesterol levels.
Xenon took just 12 to 18 months to identify ABC1 as the gene associated with low HDL levels, said Harrison, and another 12 to find a suitable drug target. "They've shown they can turn it into a high-throughput screen," she said.
While "high-throughput" may be a subjective term, the company's scientific strategy certainly draws on a global team of experts. Two of the three founders, medical researchers Simon Pimstone and Michael Hayden, studied medicine in South Africa before relocating to Canada, and the third, John Kastelein, directs a cardiovascular disease research group at the University of Amsterdam. The three founded the company in 1997 after first working together in an academic setting.
The founders' contacts with clinical researchers in other countries form one of the company's strengths, said Shafique Fidai, Xenon's manager of business development, because the company has used these contacts to access 28 different patient populations in the US, Europe, Canada, and South Africa. After picking a genetically associated disease to study, "we then look around the world to find a population which we think will get us to those genes the quickest," said Fidai.
Xenon's other plank in its science platform, said Fidai, involves searching for populations with extreme forms of genetically associated disease, as in the case of Tangier's disease for ABC1.
Once the company has identified a particular gene associated with a disease, Xenon's researchers turn to animal models to precisely determine its function. "We use a lot of technology and tools available to everybody," said Fidai, "but the key is first finding genes in the human population and then testing them in animal models to validate them."
Aside from its scientific platform, investors say Xenon's management team also appealed to them. The company's CEO, Frank Holler, co-founded ID Biomedical, a company specializing in gene identification and vaccines, and was the founding director of Angiotech Pharmaceuticals, which specializes in drugs to fight inflammatory diseases.
"A company can have the greatest science, [intellectual property], and competitive profile, but if it doesn't have well-rounded, experienced management, it's not worth the investment," said Justin Stephenson, a managing director at Royal Bank Capital Partners in Vancouver, an early investor in Xenon. "That's one of the differentiating features here. These guys have been around the block."
The management team has had reasonable success so far with the company's ABC1 research. The work attracted the attention of Warner-Lambert, a subsidiary of Pfizer, which signed an agreement in May of last year to acquire rights to any drugs that result from the research. In a windfall deal for Xenon, Warner-Lambert made an upfront payment of $87 million, combined with commitments to pay research milestone fees.
"We're particularly excited about the Warner-Lambert deal," said Stephenson. "It's a particularly chunky deal."
That arrangement, combined with the money raised early in April, has put the company in expansion mode. In the near term, said Fidai, Xenon will expand its drug discovery programs to other diseases, including diabetes and obesity, as well as neuropsychological disorders such as epilepsy and schizophrenia.
Further down the road, Xenon is looking to build or buy its own library of small molecule compounds, and develop screening assays to determine which compounds interact favorably with its drug targets.Schuh, of Sequenom, certainly thinks Xenon is on the right track. "This is another company that promotes the overall strategy of taking the human body and screening the entire genome to find disease genes that really hurt people."