Yecuris, a biotech company spun out of Oregon Health and Science University in April, is in the final stages of hammering out a deal to license technology from the school as part of its quest to commercialize a mouse “factory” for producing human hepatocytes for drug discovery in 2008.
In addition, Yecuris is courting a management team and seeking investors as it looks to break into an estimated $2 billion market for human liver cells. The company is currently subsisting on legal and accounting services provided to it through the OHSU Office of Technology and Research Collaborations Springboard program.
Yecuris was founded on research conducted in the laboratory of Markus Grompe, professor of molecular and medical genetics and pediatrics at OHSU’s School of Medicine. Specifically, Grompe and colleagues have developed immunodeficient mice, Fah-/-/Rag2-/-/Il2-/- (FRG) triple mutants, that can be serially repopulated with human liver cells and act as a constant source of new cells.
“We can routinely make mice that have a high percentage of actual human hepatocytes in them, functioning as hepatocytes should, to support the metabolism of the animal,” Grompe told BTW sister publication Cell-Based Assay News last week. “What that means is that the cells in those mice are equivalent to normal human hepatocytes.”
Along with OHSU’s OTRC, Grompe filed for patents on the method earlier this year. The patent application has not yet been published by the US Patent and Trademark Office. However, last month, Nature Biotechnology published a research paper authored by Grompe and colleagues describing the work.
Arundeep Pradhan, director of the OTRC, told BTW that it is standard practice to file the appropriate patents on a commercializable method before peer-reviewed publication in order to preserve international patent rights, should an entity choose to pursue that route.
“Under current patent law, when you publish in the US, you still have one year from your publication date to file for patent protection in the US,” Pradhan said. “From a business perspective, you want to make sure that when you know when your publication is going to hit the newsstand, your patent applications have been filed, so if you choose to pursue international patent protection, you have the ability to do that.”
In conjunction with filing the patent applications, Grompe and OHSU also incorporated Yecuris as a spinout company to commercialize the human hepatocyte production method. Yecuris’ underpinnings actually began several months ago, Pradhan said, with the support of a National Science Foundation grant program at Portland State University called Lab-to-Market, and through a program run out of the OHSU OTRC called Springboard.
Created in 2004 through a $600,000 NSF grant, the Oregon Lab-to-Market program at PSU was intended to facilitate the commercialization of technologies and create jobs by linking private-sector business expertise and research at Oregon universities.
Pradhan said that PSU’s College of Business provided an intern to OHSU’s OTRC to help Grompe develop a business plan for Yecuris.
“There is an educational component to it, which is giving the business students the opportunity to learn,” Pradhan said. “Then there is the faculty entrepreneurship education component to it. We’ve been putting together some of the issues related to [Yecuris’] business plan for the better part of nine months – identifying the necessary components it will take to make the company a success; identifying target markets and areas of opportunity; and identifying the different product mix that it will take to make this successful.”
The Springboard program was established by OHSU’s OTRC in 2004. It basically budgets a modest amount of income from royalty payments and licensing agreements into a fund that is used to purchase local services, such as intellectual property lawyers and accountants, for OHSU spinouts. The program also provides business management mentoring services contracted by OHSU.
Pradhan said that the budget for Springboard has varied between $21,000 and $28,000 each fiscal year since the program started.
“One of the common causes of failure for university spinoff companies is inappropriate corporate structure and inappropriate financial and legal expertise,” Pradhan said. “The Springboard program was designed to address that particular issue.”
Yecuris’ business proposition is to sell human hepatocytes, manufactured by the immunodeficient mice, on demand to pharmaceutical companies seeking to use the cells in drug discovery assays.
Grompe said that scientists currently must get their cells from leftover human liver specimens such as cadavers and surgical specimens, and that the cells are often of poor quality and their availability is unpredictable. In addition, prior efforts to produce primary human hepatocytes in rodents have revealed a number of disadvantages including poor breeding efficiency, a narrow window for transplantation, and a tendency to develop renal disease.
“People want to ideally do their experiments on fresh cells,” Grompe said. “So if the cells become available on Friday afternoon, you must do your experiments on Saturday; however, if we farm the cells in mice, we can take them out any time we please.”
In addition, Grompe said, the cells are of consistent quality because they are harvested only as needed. Another selling point, he added, is that researchers can choose to experiment on the cells while still in vivo, albeit in a murine system, rather than testing a drug on cultured cells.
Grompe and OHSU estimate that the worldwide market for human liver cells in pharmaceutical testing is about $2 billion, and that the potential US market will be $5 million to $10 million per year five years down the road, based on the current market for human hepatocytes in the US.
“One of the common causes of failure for university spinoff companies is inappropriate corporate structure and inappropriate financial and legal expertise. The Springboard program was designed to address that particular issue.”
If Yecuris is successful, OHSU will receive some sort of financial return, the nature of which has yet to be decided. Pradhan and Grompe said that Yecuris has taken an option to license the pertinent IP from OHSU, but that an actual license agreement is still a work in progress.
“It’s a pretty typical scenario,” Pradhan said. “In order for the company to launch, we need a commitment, so they have an option to acquire an exclusive license. We want to see certain things the company needs to put into place in order to be successful, and we’re just finalizing the details of that now.”
In the meantime, Yecuris may be able to move forward with its business plan by contracting for services from OHSU, even though it does have a small office space in an area tech park, Pradhan said.
“Because these are immune-deficient mice, you have to set up these facilities appropriately,” he said. “Initially, I think, we’ll just contract for services to the company to breed mice for them, because we already have the facilities and the capacity to do that. We can provide that initially, and over time, transition the commercial aspect completely back to the company.”
Grompe said that Yecuris hopes to have its own facility by 2009, but that it is aiming to make the hepatocyte production service commercially available on a limited basis in the coming year. In addition, Yecuris is actively seeking investors to help it realize its plan, and recruiting a management team. Grompe said that Yecuris hopes to hire about three people initially, including a business development manager and two scientists to produce the mice.
“I know Markus has been talking with a few individuals who have approached him directly and have some interest in managing the company,” Pradhan said. “A lot of individuals are available to provide that expertise, and I think for something like this, personalities become very important in terms of finding a good fit.
“Also, a number of individuals are very good at taking the company to a certain stage, versus coming in at a later stage,” Pradhan added. “It’s a question of defining what the company really wants and needs, and going out and actively looking for that.”