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Gene Logic Sells Genomics Assets to Ocimum To Focus on Drug Repositioning, Development

In signing an agreement to sell its genomics assets to Ocimum Biosolutions this week for $10 million, Gene Logic is betting its future entirely on its drug-repositioning and drug-development efforts.
Under the terms of the deal, Gene Logic still retains full rights to use the genomic databases it is selling to Ocimum as “key elements” in building its drug-repositioning and -development business, the company said in a statement. Additionally, Gene Logic will retain assets related to molecular diagnostics “and will continue to explore strategic alternatives for these assets.”
Ocimum will pay Gene Logic $7 million at closing, with the remaining $3 million due 18 months later, Gene Logic said, adding that the purchase price may be adjusted “based on certain potential revisions to the balance sheet at date of closing.”
The sale will close upon the authorization of Gene Logic’s shareholders. The company said it will hold a special meeting for this purpose.
"This is a transforming event of significant strategic proportion," Gene Logic CEO Charles Dimmler said in a statement. “This agreement stands as another major milestone on the company’s path to build a drug-repositioning and development business.”
Singular Focus
Gene Logic, now singularly focused on becoming a pharmaceutical development company through drug repositioning, has been in a continual state of flux over the past year, repeatedly chipping away at its various divisions. Last November, the company got rid of its preclinical division, refocused its genomics arm, and said it was pinning its hopes on its drug repositioning activities [see PGx Reporter 11-15-2006].
In the following months, Gene Logic spoke about selling off its genomics division. In April, the company said it was “considering strategic alternatives” for the unit, and in August hired Aquilo Partners to help outline some of its options regarding the sale of its genomics assets.
A Gene Logic spokesperson told Pharmacogenomics Reporter this week that the decision to sell the genomics division was precipitated by the drop in revenue from subscriptions and perpetual licenses to its databases. Indeed, annual revenue for the genomics division fell to $24.3 million in 2006 from $56.6 million in 2005.
“A strategic review determined that the company had enough revenue to develop only one of its divisions and the drug repositioning offered the best long-term shareholder value,” the spokesperson said.
Revenue to date for the drug-repositioning division has hardly been robust, however. The company reported $36,000 in annual revenue for the business in 2006, compared to $588,000 in 2005. Gene Logic has not given guidance regarding time-to-profitability for this business.
Nevertheless, there is a strong potential upside in drug repositioning. According to a recent filing with the SEC, milestone payments for its repositioning deals range from $60 million to $100 million per compound. Gene Logic also receives “royalties on marketed drugs,” a Gene Logic spokesperson said. “Those royalty payments, as a percentage of sales, range from single- to low double-digits.”
The company has penned repositioning deals with Pfizer, Roche, Abbott, Merck Serono, Organon, Solvay, and H. Lundbeck. As of June 30, according to SEC filings, the company had evaluated more than 70 drug candidates for these partners and was able to develop “alternative indication hypotheses” for 25 percent to 33 percent of these candidates. Gene Logic does not expect any of these candidates to re-enter clinical trials until after 2007, however.
As of June 30, the company had $20.8 million in cash and cash equivalents and $15.8 million in marketable securities.
Under the terms of the agreement with Ocimum, Gene Logic will retain access to the information in its BioExpress database, a collection or more than 20,000 transcription profiles originating from experiments on more than 20 human tissues, spanning more than 400 diseases.

“The global market opportunity for IBD is estimated to exceed $1 billion per annum. The unmet need in this therapeutic area offers the company significant opportunity for value creation.”

“This is a core component of the repositioning work we do,” Thomas Barnes, Gene Logic’s senior vice president of drug repositioning discovery, told Pharmacogenomics Reporter this week. “This is one of the ways we can understand how individual genes vary their expression across diseases. So, it was important in this deal to be able to continue to use this information in the way we have been.”
Additionally, Gene Logic recently announced it would submit quality-control metrics to the US Food and Drug Administration and work with officials across its divisions to improve the agency’s understanding of microarray-based genomic data that companies submit as part of regulatory submissions [see PGx Reporter 09-19-2007].
According to a Gene Logic spokesperson, the FDA collaboration will continue under Ocimum, and the team in Gene Logic’s genomic division overseeing that project will shift under the Ocimum umbrella.
In addition to the BioExpress repository, Ocimum also gained from Gene Logic access to its clinical network for targeted sample accrual, data generation capabilities on multiple platforms including Affymetrix, Agilent, ABI and others, and biostatistical data analysis services. Ocimum said in a statement that the Gene Logics group will continue to operate out of its lab facility in Gaithersburg, Md.
Repositioning Business
The sale of the genomics division “represents the culmination of a rigorous assessment of the company's business strategy undertaken last year and that led, as a first step, to the sale of the company’s preclinical division,” Dimmler said in a statement. “It enables the company now to execute with singular focus: to concentrate its proprietary know-how in this newly emerging segment of drug development, a business the company believes will produce great value potentially for our shareholders.”
Barnes said the company uses “omics” strategies to find alternate applications for drugs that have failed clinical trials for a particular indication based on lack of efficacy. The company does not reposition drugs that have failed clinical trials due to safety reasons or that have a narrow therapeutic index.
Drugs that “fail for those reasons are less amenable to repositioning, because you’ll have that issue no matter what you do with the molecule,” Barnes said.
He explained that rather than trying to annotate large collections of genes in single experiments, Gene Logic tries to annotate compounds. “What we’re doing is taking one compound and understanding the complete set of interactions it has in living systems,” Barnes said.
In repositioning a drug, Gene Logic will look at how a compound might impact genes, the promoter or enhancer elements of genes, as well as metabolites or proteins in the body.
“It’s not like a systems biology sort of approach, but it’s a fairly pragmatic reduction of that to something that can be implemented in a fairly short turnaround, at a moderate throughput, where you can look at a number of different molecules and figure out what else this compound does to living cells and organisms in addition to what is already known,” Barnes said.
The company studies its repositioning hypotheses in mice for various pharmaceutical partners. If these early studies prove positive, then the pharma companies study these drugs in human trials.
“We have transgenic mice that express luciferase under the control of a variety of promoter and enhancer elements, and we give unlabeled compounds to those mice, and we look at the differences in how the mice glow after we administer a compound. And those differences could be anywhere in the body, and the effects could peak many hours after administration,” Barnes said.
“Ultimately the goal is to take this hypothesis all the way back to the clinic,” he added. “Most of our molecules come from our partners, and we try to get our partners to take these molecules back within their own pipelines. They’ll be able to pursue it most diligently and specifically.”
According to the company, Gene Logic has reported to its partners approximately one new indication for every three compounds introduced for evaluation.
In the case that a pharma partner chooses to not invest in a repositioned molecule, Gene Logic usually has the option to internally take up the development of the compound. This is how the company began developing GL1001, originally an obesity drug the company was studying for Millennium, for which it identified new indications in the area of inflammatory bowel disease.
However, since Millennium was not interested in getting into the gastrointestinal space, Gene Logic decided to develop the drug in IBD itself. The company plans to file an Investigational New Drug application for GL1001 ahead of conducting additional clinical trials in the United States.

“The global market opportunity for IBD is estimated to exceed $1 billion per annum. The unmet need in this therapeutic area offers the company significant opportunity for value creation,” the company said in a statement, adding that it is looking for commercial partners to market the drug.

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