In a bid to bolster its stable of technologies for G-protein coupled receptor screening and high-content cellular imaging, Molecular Devices announced last week that it has acquired Transfluor, Xsira Pharmaceuticals’ fluorescent protein-based assay for GPCR screening, for $11 million.
Xsira, which changed its name from Norak Biosciences in January (see Inside Bioassays, 1/4/2005), had announced at that time that it was actively shopping the Transfluor technology as it shifted from its role as a tool and screening services provider to one that will focus entirely on internal drug discovery. It turns out that it didn’t take long for Xsira to attract a buyer.
The acquisition confers to Molecular Devices an additional assay technology for screening GPCRs, one of the most prominent targets in drug discovery today. According to Xsira’s website, it is estimated that “nearly 60 percent of all prescription drugs on the market owe their activity in whole or in part to GPCRs.”
In addition, industry estimates are that GPCRs constitute anywhere from 30 percent to 50 percent of screening targets in current drug discovery, depending on whom you ask. Either way, it’s a sizeable chunk of the drug-discovery market place.
Molecular Devices’ flagship product for screening GPCRs and, according to company reports, one of its better selling products, is the Fluorometric Imaging Plate Reader (FLIPR). According to Mike Sjaastad, Molecular Devices’ director of marketing for imaging products, there are between 300 and 400 FLIPRs installed worldwide, most of which are used for high-throughput GPCR screening.
But FLIPR can’t do everything — thus the main reason for the Transfluor acquisition.
“The FLIPR is optimized to look at fluorescent calcium dyes, so it works best with GPCRs that are coupled through calcium,” Sjaastad told Inside Bioassays last week.
“But there are two areas that the FLIPR can’t reach as easily,” he said. “Those are orphan GPCRs, where you don’t know the ligand; and which, if they go through calcium — that’s great — but if they don’t, you would never know it because you’re looking at calcium with the FLIPR. The other [area] is all of the classes wrapped together that don’t go through calcium or some mechanism that’s easily manipulated to report with calcium changes.”
What makes Transfluor valuable, Xsira has always maintained, is that the assay is ideal for screening orphan GPCR receptors because no prior knowledge of the receptor’s signaling pathway is necessary.
“The Xsira assay is independent, it’s universal, and the way it reports, it doesn’t matter what second messenger is in play,” Sjaastad said. “So there are a whole bunch of GPCRs for which our customers can use this assay on our imaging system, and cover more GPCRs. They can easily look at orphan GPCRs, because this assay will do that.”
Molecular Devices also believes that Transfluor, being a so-called high-content assay because of its ability to track protein movements in cells, will provide a boost to the comparatively lackluster sales for its products for high-throughput or high-content cellular imaging, Discovery-1 and ImageXpress.
According to Sjaastad, customers for both of these instruments — even when they were sold by their original manufacturers, MetaMorph and Axon, respectively — used Transfluor assays on them.
And as Molecular Devices gears up to revamp its imaging product offerings, it considers Transfluor to be a good fit in that area, as well.
“We’ve fully integrated Universal Imaging and Axon into Molecular Devices, so we’re not just reselling their instruments,” Sjaastad said. “This year, we’re launching a new software platform that actually runs both of those instruments, [is] hooked up to a database, and runs application modules including modules for this assay.
“And I can’t comment on it too much, but regarding our future line of instrumentation, there’s a very big commitment to imaging at Molecular Devices, and we expect this assay to be a big part of it,” he added.
Sjaastad declined to provide an estimate of the market potential for Transfluor, but did maintain that it was a “very good deal” for Molecular Devices.
“I would not want to make any projections about sales,” Sjaastad said. “It’s very hard to predict when you sell an annual license how many people will take it for how long. Someone may have one target and do it for a year, or they may plan 20 years of work. So our projection and the way we valued it had a lot to do with what we can do in the next five years. But it’s better for us in our hands than it was in [Xsira’s].”
Although the sale of Transfluor fits with Xsira’s new drug-discovery focus, some industry insiders were left wondering if Xsira received fair value for a technology perceived as one of the most widely used in cell-based drug discovery.
One source — who is an expert in GPCR screening and intimately familiar with the Transfluor assay, but wished to remain anonymous because of possible future involvement in this market segment — told Inside Bioassays that the sale was puzzling.
“There are lots of things that I really don’t understand,” the source said. “You read about the GPCR assay field, and how much money is being spent by the companies, and it’s supposed to be anywhere from $300 million to $500 million for these receptors. And Transfluor, which is supposed to be one of the best assays, sells for $11 million? I thought it was pretty cheap.
“Why would you sell one of your assets like that?” the source added. “It is really odd — given the amount of effort put in to it, the costs involved, the legal costs, and the patenting — that they would sell it for a comparatively low amount of money.”
Phone calls and e-mails to Xsira executives seeking comment were not returned in time for this publication. In addition, Inside Bioassays left messages and e-mails for two of Norak Biosciences’ scientific co-founders and developers of the Transfluor assay, without response.
One answer might be that Transfluor is not as high-throughput as some in pharma and biotech may like it to be. The assay is based on the translocation of a chimeric cellular protein-GFP construct. Although GFP is one of the most widely used tools in basic research and drug discovery, its qualities are best exploited when used in conjunction with microscopy.
And since microscopy — high-content, high-throughput, or otherwise — is still not quite fast enough for primary screening campaigns, the Transfluor assay may not be ideal, either.
The source also told Inside Bioassays that it was surprising that GE Healthcare didn’t purchase the technology, considering that it holds the rights to the usage of GFP in any commercial assay technology, including Transfluor, under an umbrella licensing deal it made last year (see Inside Bioassays, 6/15/2004). In addition, GE Healthcare has its own high-content imaging system, the IN Cell Analyzer, on which customers are known to frequently run Transfluor.
Siam Godwin, GE Healthcare’s product manager for cellular analysis reagents, last week declined to comment on GE’s level of interest in Transfluor.
“I can say that it is one of the technologies that works very well on our IN Cell line of instruments,” Godwin said.
Molecular Devices’ Sjaastad told Inside Bioassays that the company will most likely continue to license out Transfluor independent of its other technologies or platforms to accommodate researchers who currently use or would desire to use Transfluor with another company’s instrumentation platform, of which there are many.
Molecular Devices may also inherit customers for Transfluor, as Norak/Xsira had inked deals with a plethora of big pharma firms and biotechs — including Merck, Hoffman LaRoche, Eli Lilly, Lundbeck, BASF, Purdue Pharma, and Curis — for screening service agreements centered on Transfluor over the past year.
However, it is unclear exactly how many companies Xsira had actually sold straight licenses for Transfluor to.
“Most of their contract screening relationships were winding down, and they were beginning to license the assay,” Sjaastad said. “And it was so well-accepted, it didn’t require as much hand-holding as it did in the early years. So it was the perfect time to transition it to a company that had worldwide sales support and instruments, to sell it in a more streamlined fashion.
“We believe that the customers are fully capable of taking the basic reagents and building up the assay and running it on our instruments,” he added. “So in terms of transitioning the deals, some may have to finish up, some we will take over, but people are pretty independent, and what they need is the IP. We own all of the IP that [Xsira] had in place — so we can enable people exactly the same way they did.”
Another tangential beneficiary of this may be Danish drug-discovery firm BioImage, which follows a business model along the lines of Norak’s former strategy, consisting of licensing an assay technology, providing screening services based on the technology, and conducting internal drug discovery.
The difference is that BioImage holds IP one step broader than the IP behind Transfluor. Its patent estate protects any assay in which there is a translocation of a fluorescently tagged cellular protein in a live cell.
“The Transfluor assay is a specific case of what we call Redistribution,” Len Pagliaro, BioImage’s vice president of business development, told Inside Bioassays last week. “Redistribution applies to any protein translocation in the cell. It’s a genetically encoded fusion construct of [a fluorescent protein] to a target protein, and using the translocation of that target is a primary readout in a drug-discovery assay.
“Transfluor is a special case of that,” he added. “We gave them an exclusive license for one target and one target only, which is beta-arrestin. Xsira … had a license, and when they sold an assay to a customer, that assay would include a sublicense to Redistribution specifically for that assay.”
It gets even more complicated than that, as for-profit customers of any Redistribution assay that uses Aequorea victoria GFP must also obtain a license for that through the aforementioned GE Healthcare conduit (see related story in this issue, “Once Shared with Clontech, GFP Now Offered by Invitrogen …” for more).
Therefore, Molecular Devices must now decide whether it wants to purchase a similar sub-license to Redistribution, or leave it up to its commercial customers to seek licensure from BioImage.
Pagliaro declined to provide details as to whether such a broad licensing agreement would be reached, but did say that it “would certainly be a logical way to go, and we’re optimistic that it can work out quite well.”