"Clearly over the past two years, we have not generated an acceptable return for our shareholders," Mark Gessler, CEO of Gene Logic, said at the opening of a March 17 conference call that laid out the company's 2005 financial guidance.
At the heart of this strategy is the company's plan to shell out as much as $42 million into a new "drug-repositioning" business over the next three years in hopes that the new service, as well as changes in its preclinical research business and its genomics and toxicogenomics services, will bring Gene Logic into profitability in 2007.
The drug-repositioning scheme is based on a simple premise with thousands of failed compounds sitting on the shelves of pharma companies, Gene Logic figures it can identify a few that might have a future in unintended indications.
At first blush, this is familiar territory for pharmacogenomics vendors. DeCode Genetics, Genaissance Pharmaceuticals, and Perlegen Sciences each has a business that in-licenses and "revives" failed, often non-toxic drugs, whether by narrowing the group of patients who should receive the compounds, or by finding new uses for them. The companies then shepherd the drug through the approval process. In contrast, Gene Logic only wants to help drug makers revive their own non-toxic compounds, rather than developing drugs to call their own.
Large pharmas are not excited by the prospect of letting one of their compounds enter another company's pipeline, especially if it eventually proves profitable for its new owner, Gessler told Pharmacogenomics Reporter. But is there a market in repositioning drugs for their original makers? It appears so, but defining that market is tough. As evidence of the potential of Gene Logic's approach, Gessler cited a Sept. 3, 1998 study in the New England Journal of Medicine showing that nearly 90 percent of newly marketed drugs are found to have additional indications within five years. That figure could not be verified by press time.
As for potential customers, "we are looking to major pharma," said Gessler, responding to an analyst's question during the conference call about whether the service would continue to target mid-level drug makers such as Millennium, with whom Gene Logic has a similar agreement. According to Gessler, big pharma companies have "anywhere between 20 and 200 compounds that fit" Gene Logic's criteria for repositionable drugs. Earlier in the call, he said Gene Logic is speaking with a "large number of top pharmaceutical companies" about partnerships.
To be sure, it isn't like Gene Logic has the market to itself. "Repositioning is something we can do in collaboration with our pharmaceutical partners," or through in-licensing efforts, said Paul Cusenza, a spokesperson for Perlegen. The company has partnerships with "six of the top 10" pharmas using "both ways" of repositioning drugs in-house versus finding new uses for another company's product though neither method is predominating, he said. Whether a pharma is willing to let its compound go to another developer "depends on the company," he added.
Although it lacks the genomic capabilities of Perlegen, Genaissance, Gene Logic and the rest, Combinatorx performs in-licensing and repositioning co-development arrangements, but it tries to find new indications by combining non-toxic drugs with already-approved drugs. "We have a technology that screens large numbers of combinations of compounds, including existing drugs, to find new synergies that you would otherwise not know about," said Daniel Grau, vice president of corporate development at Combinatorx.
Combinatorx seeks only drugs with low or no toxicity, and its model depends on combining unapproved drugs with patent-expired drugs, so its market may differ somewhat from toxicogenomics-savvy Gene Logic. However, the two pools of starting material and therefore the companies' markets must overlap somewhat. "How many compounds past Phase I were discontinued for reasons other than toxicity? You'd feel comfortable saying there were at least another couple thousand," based on a rough estimate of compounds that typically make it to Phase II per year, said Grau.
Repositioning is also performed by Ewing, New Jersey-based Vela Pharmaceuticals, United Kingdom-based Arakis, and Japan-based Sosei, said Grau. But the field is not yet crowded, he added. "I think there are a growing number of companies that are entering this particular space, but I don't think it's reached critical mass yet," he added.
Gene Logic's Edge
One typical drug-repositioning limitation Gene Logic believes it can partly overcome is toxicity. Using its ToxExpress platform, the company believes it can take a somewhat toxic compound and find a new use for it in tissues that are less susceptible to this toxicity, said Gessler. The company also brings its ADME capabilities, pathway analysis, and BioExpress database to bear on repositioning, he said. The work of competitors in the field "has been with only one technology or a single platform," he added.
Asked whether the company competes with the likes of DeCode and Genaissance, Gessler said, "perhaps … certainly."
Gene Logic officially began its shift to drug repositioning in late July, with the $4.5 million acquisition of Millennium's Horizon technology group. Gene Logic originally planned to invest $8.5 million into the division within a year-and-a-half, but increased that amount to $14 million for 2005, with investments possibly equaling that level for the next two years, according to the company's 2005 guidance. Within Millennium, the group had been developing the obesity drug MLN4760, which the company pulled out of clinical trials because of efficacy concerns, Gessler said during the conference call.
Working under Lou Tartaglia [see Perspectives in this issue], former Millennium vice president of new ventures and metabolic diseases, and now general manager of the project at Gene Logic, the research group began looking for new uses of MLN4760 in February, and has since added six more compounds to its repositioning pipeline from a single, undisclosed partner. "So far, it's really looking quite good," Gessler said during the conference call. By the end of the year, Gene Logic hopes to be working on as many as 20 compounds, and it plans to have at least two more repositioning agreements under its belt, he added.