Gene Logic plans to help Organon Pharmaceuticals find new uses for a number of failed compounds, the company said last week. In a twist on Gene Logic's standard repositioning deal, the company will own half of any compound that Organon decides to pursue.
Separately, Gene Logic reported a decline in first-quarter revenue and widened net losses, but said the Organon deal signals that its drug-repositioning business is starting to gain steam.
Organon has not yet decided which or how many compounds Gene Logic will attempt to reposition, Organon spokesperson Monique Mols wrote in an e-mail to Pharmacogenomics Reporter this week. Terms of the multi-year agreement call for both companies to "mutually decide which compounds … qualify for and/or are available for repositioning efforts," she said. "The compounds will be screened for a wide range of therapeutic areas."
Neither company would disclose the indications for which the failed drugs had originally been developed, but since the partners will add new candidates to the list as time goes on, they might include ones that are currently in clinical trials. Currently, Organon has in phase III or later study at least seven drugs for schizophrenia, contraception, fertility, hot flashes, anesthesia, osteoporosis, hormone therapy, and sexual dysfunction. (See the list here.)
Gene Logic typically takes on compounds for repositioning that have failed phase II or phase III clinical trials for reasons other than toxicity.
Unlike the case in its other repositioning deals, Gene Logic will own half of any compound that Organon decides to pursue.
The companies recently completed an 18-month toxicogenomics services deal in which Gene Logic supplied ToxScreen and mechanism-of-toxicity reports to Organon to evaluate compound safety and toxicity, though it was not immediately clear what -- if any -- relationship exists between the two agreements. The drug maker began its relationship with Gene Logic in December 2000 when it subscribed to the firm's GeneExpress database.
As part of the new deal, the companies will co-develop compounds as they are revived and moved through the pipeline, said Mols. In Gene Logic's four other repositioning deals, the pharma partner has agreed to pay the company milestone and royalty payments.
Organon has a growing interest in pharmacogenomics, and said earlier this month that it had just concluded a collaboration with Clinical Data in which the firms identified biomarkers related to drug response in undisclosed psychiatric areas.
In addition, Organon in January tapped Shanghai Genomics to help it identify selective steroid hormone receptor modulators.
Gene Logic Q1 Earnings
Gene Logic last week reported a 35-percent drop in first-quarter revenues amid widened net losses.
Although the company announced in a late-February guidance that it might experience lower revenues for the first half of 2006 than in the same period in 2005, "the level of variability we had this quarter was a little bit greater than what we had expected," said Robert Burrows, senior director of corporate communications at Gene Logic. "We're trying to be more responsive to the budgetary and research needs of the life-science industry, and we're in the midst of that ongoing transition," he said.
For the quarter ended March 31, Gene Logic's total revenue fell to $12.8 million from $19.7 million in the first quarter of 2005. Revenues fell across all three of the firm's operating divisions: Genomics Division revenue declined to $8.7 million from 13.2 million in the prior-year period; Preclinical revenue fell to $4 million from $6.4 million in the prior-year period; and Drug Repositioning revenue dropped to $20,000 from $67,000 in the same period of 2005.
Gene Logic said in a statement that the Genomics Division has been "transitioning" over the past five quarters from a model based on database subscriptions and a few large customers to one with multiple sources of revenue -- including revenues "from perpetual licenses and microarray data generation and analysis services" -- and a broader customer base. The company added that the division's results are likely to be "variable… when certain opportunities fail to materialize or are deferred."
The results for the Genomics Division also reflect "lower sales due to the non-signing of a previously anticipated perpetual license and the deferral of several opportunities until later in the year," the company said.
Despite the genomics division's the recent downturn, Burrows said the company "absolutely" stands behind CEO Mark Gessler's February prediction that SNP genotyping would be a growing area of new business in 2006. SNP genotyping, gene expression, data analysis, and other services "are being applied not only from a discovery standpoint, but our data and our services are migrating further into the clinic -- there [are] clinical trial applications for some of these services."
"Our SNP facility just opened in December, and it's been ramping up ever since then," said Chris Culotta, a Gene Logic spokesperson.
The repositioning business is intended to generate milestone payments when Gene Logic is able to make progress in redirecting therapeutic compounds, so reports of quarterly revenue for the unit can be misleading until the company actually produces a drug, according to Burrows. "We have no revenue expectations really at all," he said. "That's going to take a fair bit of time here."
In a statement last week, Gene Logic said it will continue to make a "significant" R&D investment in the drug repositioning division. In that statement, Gessler said that the company is making "favorable progress" with its existing partners.
R&D spending increased to $2.4 million from $1.5 million in the first quarter of 2005.
Gene Logic's net losses ballooned to $11.8 million, nearly three times the company's net loss of $4.1 million in the first quarter of 2005. The company attributed the widening losses to the revenue shortfall in the Genomics Division.
Gene Logic had $28.4 million in cash and cash equivalents as of March 31, and $63.9 million in cash, cash equivalents, and marketable securities available for sale.
-- Chris Womack ([email protected])