This article has been updated to include a statement from Perlegen CEO Bryan Walser.
This article was originally published on Jan. 7, 2010.
By Turna Ray
Perlegen Sciences quietly closed operations on Oct. 30, 2009.
Just a month earlier, the company had announced the launch of a blood-based breast cancer risk stratification test, called BREVAGen, intended to help guide treatment for women whose clinical information places them at “intermediate risk” for developing the disease. The initial launch was limited to a select markets, but the company had planned to expand sales of the $600 BREVAGen test “nationwide over the next few months.”
Pharmacogenomics Reporter received sparse answers to questions about the exact reasons behind the company's closing. Perlegen's website consists of a landing page that announces the launch of BREVAGen and provides information about a collaboration with a government research entity. The page also includes a phone number, which when called immediately goes to a voice-mail message. There is an e-mail address directing written queries to financial consulting firm RoseRyan, which is handling Perlegen's closing issues.
An e-mail to RoseRyan received no response ahead of press time. Perlegen CEO Bryan Walser confirmed to Pharmacogenomics Reporter this week that the company did stop on-going operations at the end of October. He added, however, that the company "is continuing to meet its contractual obligations, and seeking partners to carry forward its various programs and assets as it winds up ongoing operations."
But how did Perlegen get to this point? A review of the privately held pharmacogenomics company's activities from when it opened its doors in 2000 to just before it shuttered in late 2009 suggests that despite partnerships with academia and industry; opportunistic R&D investments in key markets, such as type II diabetes and breast cancer; and at least one recently launched commercial diagnostic product, the company was unable to remain solvent. Disappointing R&D results, losses related to a government contract, and the economic crisis may have directly forced the company to close.
Conceived a decade earlier as a subsidiary based in Mountain View, Calif., Affymetrix spun off Perlegen in March 2001 with $101 million in financing. In subsequent rounds of private equity financing, Affy sold its portions of Perlegen to third parties. As of Sept. 30, 2009, Affy's ownership stake in the company was around 22 percent. In a filing with the US Securities and Exchange Commission dated Nov. 6, 2009, Affy said that as of “June 30, 2005, [it] had reduced the carrying value of its investment to zero through the recording of its proportionate share of Perlegen’s operating losses.” Furthermore, Affy noted it “has no obligations to provide funding to Perlegen nor does it guarantee or otherwise have any obligations related to the liabilities or results of operations of Perlegen or its investors.”
An Affy spokesperson issued the following statement to Pharmacogenomics Reporter this week: “Affymetrix is an investor in Perlegen. The company previously wrote the basis of its investment to zero; therefore it has no remaining exposure.”
Lost Hopes of Going Public
Other than Affy, Perlegen previously identified Maverick Capital, CSK Ventures, and Eli Lilly as significant stakeholders. Additional investors in Perlegen included board member Alejandro Zaffaroni, private Swiss bank Lombard Odier Darier Hentsch, and Vulcan Ventures [see PGx Reporter 01-04-2006].
In 2006, Pfizer also became a 12 percent stakeholder in Perlegen, in a deal estimated to be worth at least $50 million. Pfizer had promised to invest more if Perlegen went public . Records suggest that Pfizer's investment four years ago was the last infusion of cash for the company.
Dwindling funds, on top of R&D setbacks and losses related to a government contract, ensured the company would never go public, documents filed with the SEC show. Perlegen filed with the SEC to go public in April 2006. However, the company subsequently withdrew its registration a year later.
In a request to the SEC, Perlegen Board Chairman Stephen Fodor cited “uncertainties of market conditions.”
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In the letter, Fodor notes that in May 2006, Perlegen's board of directors advised against proceeding with an initial public offering on Nasdaq. The decision to not go public was precipitated by pending results of “certain genetic studies in connection with an important, ongoing research initiative,” the letter notes.
Additionally, in early 2005, Perlegen had billed the government $1.3 million for materials purchased in relation to a contract. However, those funds “were not properly recoverable,” the letter states. Perlegen had “voluntarily reversed the billing, and had credited the government for the full amount” in 2005.
Due to these two events, Perlegen in 2007 withdrew its registration from the SEC and made no further attempts to go public.
Pipeline Failures
In 2006, when Perlegen's finances appeared solid enough for an IPO, Perlegen was still bringing in revenue from providing pharmacogenomcis services to academia and big pharma [see PGx Reporter 04-12-2006].
The company was even trying its hand at drug development and for a time held in-house two investigational therapeutics: netoglitazone for type 2 diabetes and for type 2 diabetes with dyslipidemia, and bezafibrate for dyslipidemia.
With netoglitazone — an insulin-sensitizing thiazolidinedione falling in the same class as blockbusters such as Takeda's Actos and GlaxoSmithKline's Avandia — the company was hoping to get a slice of the type 2 diabetes market by pharmacogenomically differentiating its product from the competition.
However, in May 2007 the company nixed plans to develop netoglitazone for type 2 diabetes, after a study yielded disappointing results on the product's potential as a pharmacogenetically guided drug. In an article in the San Jose Business Journal, Perlegen's Walser was quoted as saying of the investigational diagnostic: “While it worked, it didn't work well enough, in our judgment, to market the drug commercially.” Perlegen had licensed netoglitazone from Mitsubishi, which retained rights to the compound in Asia.
Even after deciding to nix commercialization plans for netoglitazone, it seemed Perlegen still harbored hopes of developing a pharmacogenetic test in this area, particularly after the release of a controversial study associated Avandia and Actos with increased risk of heart attacks and cardiovascular death. In July 2007, Perlegen told Pharmacogenomics Reporter that it was conducting a pharmacogenomic study and could potentially develop a diagnostic for predicting patients likely to experience adverse reactions to TZDs [see PGx Reporter 07-11-2007].
With bezafibrate, the investigational pre-Phase III dyslipidemia treatment, the company was also planning to develop a genetically targeted drug for launch in the US. Non-targeted versions of this drug are marketed outside the US as Bezalip and various other trade names for the treatment of hyperlipidaemia. The status of this product following Perlegen's closing is currently unknown.
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In the diagnostics space, the company seemed eager to develop prognostic tests in breast cancer, its lead product being BREVAGen.
Perlegen discussed with Pharmacogenomics Reporter in September 2008 plans to research and develop a diagnostic test with proprietary genetic variants to identify women at high risk for developing breast cancer following hormone replacement therapy. For the development of this test, the company planned to use data from the Women's Health Initiative, which includes data on more than 160,000 women, to gather information on women who took estrogen and progestin and subsequently developed breast cancer [see PGx Reporter 09-24-2008].
The company had also inked a collaboration with an undisclosed electronic medical records provider and planned to mine its collection of clinical treatment and outcomes data to identify genetic markers and develop diagnostic tests that could help physicians personalize treatments for heart attack, breast cancer, hepatitis C, and nicotine addiction [see PGx Reporter 04-02-2008].
The company had recently engaged in and completed several academic collaborations. Data from a genome-wide association study on Parkinson's disease Perlegen conducted with the Mayo Clinic and the National Human Genome Research Institute was released in March 2008. And the company's website still posts an announcement that under a contract with National Institute of Environmental Health Sciences, Perlegen identified over 8 million SNPs and other genetic differences in 15 strains of inbred mice.
However, it seems now these contracts and collaborations didn't yield enough revenues or draw additional investment to keep the company afloat through tough economic times.