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Sigma-Aldrich Moves to Fill a Gap in Molecular Biology Tools Product Line

When Sigma-Aldrich announced a licensing agreement with St. Louis-based InGex last week, the chemical giant was not only sealing a deal to add an entirely new product line into its molecular biology tools portfolio, and sell more oligonucleotides and reagents from its website, it was also also taking an option on a platform with the potential to spin off new products to meet future market demands.

The company last Wednesday announced an exclusive licensing agreement to develop InGex’s TargeTron gene disruption technology. Financial details were not disclosed, but Mike Hogan, Sigma-Aldrich chief financial officer, told BioCommerce Week that the company expects TargeTron to reach financial break-even within 30 months.

Sigma-Aldrich will market the product to customers conducting research in gene regulation, expression, drug discovery, and metabolic pathways. The company estimates the gene-disruption market has a value of $120 million this year.

The TargeTron technology is somewhat analogous to RNA interference and other gene-silencing techniques, which are regarded as important components for genomic research and part of the evolving set of technologies that are seen as keystones for the emerging systems biology market.

Previous to this deal, Sigma-Aldrich did not have a product addressing this fast-growing market segment in its sales offerings.

The licensing deal with InGex allows Sigma to sell TargeTronbased products to institutions for research purposes. Five US patents (5,698,421; 5,804,418; 5,869,634; 6,027,895; and 6,001,608) protect the technology, with patent applications pending in Canada.

The technology is essentially an algorithm for designing group II introns that can target disruption of sequences within a host genome. Currently the TargeTron tool resides on a website operated by InGex, a holding company owned by Paul Gold, a St. Louis entrepreneur who in 1996 sold Genome Systems, a company he co-founded, to Incyte for $8 million in stock.

The TargeTron technology was developed in the University of Texas laboratory of Alan Lambowitz, director of UT’s Institute of Cellular and Molecular Biology. Gold licensed the technology from Ohio State University and the University of Texas, Gold said.

InGex sells the TargeTron kit for $750, which grants the user a limited license to analyze 10 target sequences of up to 10 kilobases each using the InGex Group II analysis computer program.

Gold first heard about the technology in a seminar appearance by Lambowitz some four years ago.

“It sounded interesting to me, and I pursued it,” he said. “Basically, I took a flyer on the technology. It seemed like it was going to develop further.”

Gold said that in the last year and a half, it has taken an “intense investment of time” to maintain and pay for the patents on the technology. He declined to say how much money he put into the effort. “It wasn’t about the money, I did it because it was interesting and intriguing,” he said.

Negotiating the deal was helped along by the fact that Gold and Sigma are both in St. Louis.

“I could swing by Sigma and meet with them face-to-face, without getting on a plane,” Gold said. “It was the right match. This was something they were looking for, and something we had. We just hit it off and went from there.”

Negotiations for the deal took almost a year, Tony Favello, Sigma’s spokesman, said.

“They were quite laborious; Paul Gold is an excellent negotiator,” he said. “We looked at it for about a year, validating the technology and doing a review of the intellectual property, weighing the risks and potential successes to make sure it did make sense for us to license it.”

“It’s a small bet, and most life sciences companies make many small bets,” Hogan told BioCommerce Week. “But, we invested in the technology because we thought it was a great tool and they are right on the cutting edge of gene knockdown.” The company used discounted cash-flow models to do financial forecasting for the investment decision, he said.

A product offering based on the TargeTron technology will not be available until early in 2005, Favello said.

“We are taking it beyond the algorithm,” he said.

Sigma-Aldrich plans to add hire two new scientists to help develop TargeTron, said Hogan.

The technology currently works for prokaryotic genomes, but Sigma said that future systems are planned for targeted plant and mammalian gene disruption.

Today, the program available through the InGex website generates a group of oligonucleotides that are scored based on the expected success of knocking out a targeted gene. Sigma plans to transfer this capability to its own website, where a sale could include the oligonucleotides, plasmids, and restriction enzymes to cut the plasmid.

“Part of the revenue we expect to generate from this is in sales of Sigma-Genosys oligos,” he said. “We would like to drive the customers that are using this system to buy the oligos from Sigma-Genosys, and try to facilitate that by simplifying the order process.” That strategy aligns well with an Internet marketing initiative outlined by David Harvey, president and chief executive officer of Sigma-Aldrich, at last month’s UBS conference in New York.

Harvey said the company, which traditionally markets its product line through catalogues, is boosting its investment in Internet technology from $5 million to $6 million a year.

Sigma-Aldrich operates three businesses units — scientific research, biotechnology, and fine chemicals. The biotechnology unit markets immunochemical, cell culture, molecular biology, cell signaling, and neuroscience biochemicals and kits for biotech, genomic, and proteomic research.

The biotech group led the three units with approximately 10 percent growth from 2001 to 2003, but posted a 6 percent loss in the first two quarters of 2004. The scientific research group is the leader with $769 million of the company’s $1.3 billion 2003 revenue.

Compensation of top executives of the company is determined in part using metrics derived from revenue, earnings, and operating cash taken from a “peer group” that includes Applied Biosystems, Invitrogen, Waters, Fisher Scientific, and Apogent Technologies, according the company’s 10-K annual report.

— Mo Krochmal ([email protected])

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