To raise cash for drug development, Exelixis is applying its technologies to plants and pests.
By Bill Oldendorf
It’s no secret that Exelixis wants to cure cancer. Nearly a third of its 300 employees are dedicated to cancer research, and the company has ongoing relationships with the US National Cancer Institute and several pharma heavyweights.
It’s also no secret that tomatoes have never been a miracle cure for anything. So why did Exelixis acquire Agritope, a Portland, Ore.-based agricultural genomics company with five acres of greenhouses and a wealth of data on weeds and tomatoes? Quite simply, because there’s a lot at stake.
Exelixis’ relationships are anything but garden variety. In addition to its Agritope acquisition, the cancer genomics company has alliances with two giants of the agricultural chemical industry — Bayer and Dow AgroSciences. In 1999 Exelixis recruited its senior vice president of corporate development, Lloyd Kunimoto, from Monsanto. Kunimoto is also the former CEO of ag company Calgene.
What do insecticides and tomatoes have in common with cancer research?
Company officials say Exelixis’ model-system genetics technology is applicable to any organism — plant, human, or pest.
And while human genomics is their main interest, they say revenues from agricultural deals will support Exelixis’ long-range plans to grow from a company that primarily offers research services to one that sells products and competes directly in the pharma market.
Lords of the Fly
Exelixis’ interest in agricultural products is no surprise considering that the company was founded to develop a technology platform based on a bug: the fruit fly.
Gerry Rubin, professor of genetics at UC Berkeley, was chair of the Exelixis scientific advisory board until January 2000, when he resigned upon becoming vice president for biomedical research at the Howard Hughes Medical Institute. Along with colleagues Corey Goodman and Spyros Artavanis-Tsakonas, he sought to commercialize a novel Drosophila research methodology in the early 1990s.
“The genome project was generating all these genes, but no one knew how they worked together. We had a proven method for linking genes together in functional pathways using the genetics of fruit flies,” Rubin says. “We had a deep-seated belief that the homologues of those genes in humans would fit together in the same kind of pathways, thereby giving you many more functional targets where you could intervene with a given pathway.”
Rubin says that having information on the activity of genes up- and down-stream of a disease gene could result in more potential targets. “And some of those other targets may be easy to design small molecules against,” he explains.
Even so, Rubin recalls that venture capitalists weren’t exactly bowled over by his team’s business plan: “It was ‘Flies? You want to work with fruit flies?’”
Nevertheless, with the support of cofounder Stelios Papadopoulos, an investment banker who is now chairman of the board, the researchers found funding and Exelixis sprang to life in 1995. Originally based in Cambridge, the company moved to South San Francisco when George Scangos took over as CEO.
Exelixis raised $126 million in its IPO last April. Now the original idea for using model systems for gene discovery is at the core of Exelixis’ activities and is validated by a mountain of data, Rubin says.
The picture-window offices of Scangos and CSO Geoff Duyk offer panoramic eastward views of San Francisco Bay and the parking lot of Sugen, a biotech competitor. In dress, both execs go California business casual, but there’s marked contrast in their communication style. Scangos paints broad brushstrokes at a relaxed pace. Duyk proceeds rapid-fire, lacing comments with detailed business lingo and scientific terminology.
Says Duyk, “One of the things you learn in biotech is you have to differentiate yourself from the competition. You have to be perceived as the best of something.” Offering mute confirmation, a champagne bottle labeled “April 2000, Exelixis, Initial Public Offering,” stands on a shelf behind Duyk’s desk.
“We very quickly expanded Exelixis to become a model system genetics company,” Scangos says. “Now we’re unique in that we have access to every major genetic organism,” including the fruit fly, C. elegans, yeast, fungi, and zebrafish.
Scangos says Exelixis bombards each one with “all the normal genomics tools, like transcriptional profiling, proteomics, tissue-culture knockouts, and the normal biochemical tools” using its own integrated platform to “choose the right tools for the question that’s in front of us.
“To be able to go back and forth between these high-throughput genomics tools and real biology really gets you the insight you can’t get from any of those alone,” Scangos says. Whereas a lot of research looks for up- or down-regulated genes, it can be something subtle in the biological pathways that makes a good target, he explains.
Those subtleties are what the company, whose name is Greek for evolution, is pegging its future on. For its internal drug discovery program, as well as its clients, Exelixis provides two basic services: new drug target identification and determining the mechanism of action for existing drugs.
If there’s a fly in the ointment, it’s the obvious one: flies are not humans and genetics of the two species only partially overlap. So far, this hasn’t been an obstacle. In Exelixis’ relationship with NCI, for instance, in which the company is studying thousands of compounds with anti-cancer properties, Exelixis is able to find the mechanisms of action for about 60 percent of the compounds.
Says Scangos, “When people give us 20 compounds we are very confident that we can find the targets for half or two-thirds of those compounds. Up until now, there are enough of those — and they are highly interesting — that we just focus on those.”
Different Breed of Bioinformatics
Using one species to find drug targets in another has also entailed taking a novel approach to bioinformatics. “We have a bioinformatics group whose core expertise is being able to take information from one of those models and extrapolate to the others, to go back and forth between the systems,” Scangos says.
To build a bioinformatics infrastructure, Exelixis recruited Christian Burks to the job of chief informatics officer in 1997 from Los Alamos National Laboratory where he was lab-wide leader for computational biology. Burks notes that while genomics companies have assumed that accumulating sequence data will lead to an abundance of drug targets, Exelixis’ model system genetics focuses instead on “protein pathways, so you think of this pathway module as a drug target.”
Says Burks, “I’m either moving around in the pathway or orthologous positions in other organisms. This combination of experimental methods and informatics tools we’ve built up key off of being able to migrate very quickly in a pathway, or jumping into the equivalent pathway [in another organism] in as automated a way as possible.”
Cultivating Pharma and Ag
One of the obvious applications of model systems was gene discovery for human disease. Focusing on cancer made sense, Scangos says: “In cancer, it’s easier for a company like ours to get things into the clinic because it’s a life-threatening disease. There’s such a need for improved therapeutic agents and the clinical endpoints are clearer than they are, for example, in a chronic degenerative disease.”
But for a company founded half a decade ago with fewer than 30 employees, establishing itself as a major player in pharmaceuticals would require time and money.
Looking for other revenue streams to fund infrastructure development, Exelixis developed a plan to make its technology platform the basis for either pharma or ag deals. Because model system genetics could be used to discover drug targets for killing insects as readily as targets for curing cancer in humans, and because the company already had a wealth of data on fruit flies, its first agricultural relationships were in agricultural chemicals — pesticides.
Now, Exelixis provides both targets and formatted assays to Bayer for insecticide development, and to Dow AgroSciences for fungicides and herbicide development. These deals, says Duyk, are “very useful not only for the near-term cash they provide in terms of building up our infrastructure, but I think there are real opportunities to work with our partners to commercialize compounds which have significant return.”
Duyk points to recent trends that suggest the agricultural market, which traditionally had smaller profit margins than pharmaceuticals and has lagged behind in adopting genomic technology, may become more profitable in the genome age. For example, he notes changes in the multibillion-dollar market for insecticides, which are directed at a limited number of targets and have long drawn concern over toxicity. Now, genomic technologies such as gene expression studies are being employed to overcome those drawbacks.
And there are other opportunities in the crop sciences sector for companies concerned with human genomics, including nutraceuticals — plants that incorporate nutrients, vaccines, or other valuable compounds — and molecular farming, which uses modified organisms to produce industrial compounds such as lubricants or enzymes.
For Duyk, who joined Exelixis from Millennium Pharmaceuticals, a company he helped to found, the entry of genomics companies into agriculture is déjà vu tinted with chlorophyll. Big pharma had just as much trouble accepting genomics, he recalls. “The people on one side of the table are trying to understand whether to make an investment in these new technologies, while at the same time they are simply trying to understand the technology,” he says. “This is further complicated by the fact they have to navigate this changing landscape.”
Does Exelixis’ blend of agriculture and pharmaceutical research make investors wary? Apparently not.
Eric Schmidt, biotechnology analyst at SG Cowen Securities, says that what is more notable than the diversity of Exelixis’ deals is their girth. “The size of the deals that Exelixis has signed, especially for a company at its stage of development, are really significant and provide real validation that these guys have something that no one else has.”
Commenting on the company’s business plan, which uses this revenue to fund internal drug discovery, he adds, “This model has probably only successfully been commercialized by one other biotech player that I’m aware of, and that would be Millennium Pharmaceuticals, one of the most successful biotech companies in the past five years.” If there is something to be cautious about, Schmidt says, it is that any type of drug development is a “long and tortuous” process.
But to expand from pesticides into the potentially profitable crop sciences, Exelixis needed to acquire expertise in large-scale plant biology. “We started discussions with a number of agricultural biotech companies, and Agritope seemed like the best fit,” Scangos says. CEOs of both companies use the word “complementarity” to describe their rapport.
Where Exelixis uses fruit flies and C. elegans, Agritope uses Arabidopsis and microtomatoes as model systems. And where Exelixis has proprietary technology for gene discovery using its model systems, Agritope has proprietary technology, termed “activation tagging,” for gene activation in plants.
Exelixis’ well-developed bioinformatics platform made the merger especially attractive. Those tools will allow the companies to make comparisons among many more model genomics systems. Now genes from Arabidopsis and tomato can be matched up with the fruit fly.
Going to Seed
Another strength Agritope brought to the table was a number of ongoing crop science deals, including with two of the world’s largest vegetable seed companies: European Aventis CropScience, and the French company Vilmorin Clause & Cie.
Duyk says the Agritope acquisition gives Exelixis all the research and discovery components it needs to be able to work with the crop science industry and the chemical part of the ag industry.
Meanwhile, Exelixis’ oncology program continues to grow, highlighted by two hires within the past year. Mike Morrissey, vice president of discovery research, came from Berlex Biosciences and Gregory Plowman, vice president of pharmaceutical research, jumped across the parking lot from Sugen, a Pharmacia company, where he most recently served as vice president of molecular biology.
“People have been working on cancer, and there are a lot of targets,” says Scangos, “but to find the really high quality targets is not easy.” He adds that Exelixis research has also revealed targets for therapeutic antibodies. “If we make antibodies against those molecules, we know they will kill cancer cells.”
Scangos says Exelixis is determined to file its first investigational new drug application by the end of 2002, and file two per year thereafter. That sort of progress, he says, would allow the company to compete head-to-head with major pharma companies in the area of cancer. “We’ll compete effectively, with a critical mass, with anybody,” he says.