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With New Lease on Life, Interleukin Genetics Banks on Osteoporosis Dx to Kick-Start Sales


When the parent company of vertical-marketing giant Amway tossed Interleukin Genetics a lifeline this spring, it did more than save the struggling pharmacogenomics firm from insolvency.

The move, which gutted Interleukin’s board of directors and made the Amway parent, Alticor, a majority shareholder in the company, also aims at imbuing Interleukin’s novel genetic data with mass-market appeal.

This week, Interleukin and the University of California, San Francisco, disclosed an R&D collaboration that may take that effort one step closer to reality: Interleukin and UCSF researchers will begin studying genetic mutations linked to bone fractures in patients with osteoporosis — and perhaps use the data to develop a home-brew test that Interleukin would market.

“We feel that [women at risk for osteoporosis] are particularly interested in understanding everything they can about their own bodies, and about their risks, and do what they can for themselves,” said Kip Martha, chief medical officer of Interleukin Genetics. “Any research we do has the potential to be applied in [the direct-to-consumer] area.”

CEO Philip Reilly said he expects a home-brew test to be ready for marketing in one year. He said it would cost between $100 and $200.

During the collaboration the researchers will study and compare SNPs and haplotypes that Interleukin found in the interleukin-1 gene cluster, along with mutations in the vitamin D receptor gene, the estrogen-receptor gene, and the col-1A gene, which UCSF owns.

Specifically, Interleukin, which uses Applied Biosystems’ TaqMan platform, will bring to the table data on certain common SNPs in the Il-1 genes that are linked with an increased risk of osteoporosis. “Any one of [these] different IL-1 SNPs leads to altered levels of inflammation and is associated with an increased risk of bone fractures,” the company said. UCSF’s contribution, meantime, comprises data from the Study of Osteoporotic Fractures, a 17-year trial that followed 10,000 elderly women with osteoporosis. The risk of developing the disorder and of suffering bone fractures share these mutations, said Martha.

Terms of the deal also call for Interleukin to pay UCSF an undisclosed fee to access its gene database, and will pay for all of the R&D costs, according to Reilly.

To be fair, the UCSF collaboration is a follow-up to a smaller pilot study Interleukin recently wrapped up with the university. The research is also an offspring of a study Interleukin conducted with the Sheffield Institute for Studies on Ageing.

“We believe the outcome of this will be a risk test for women … that will [likely] be linked to a nutritional supplement that would be offered to women [who are] at increased risk” for osteporosis, Martha told SNPtech Reporter. Though Martha said that Alticor may help Interleukin market the product, he stressed that this “is not definite.”

“We hope that this will be something that will eventually be attractive directly to consumers,” he said, adding that if a product arises it may be marketed to pre-menopausal and younger women.

Whatever scope the test covers, or whatever form it takes — Reilly said the test will likely start out as a home brew and may later become an FDA- approved diagnostic — the size of the osteoporosis market is enormous.

Osteoporosis, which is characterized by low bone mass and structural deterioration of bone tissue, affects 10 million people in the United States today. It is estimated that an additional 34 million adults are at an increased risk of developing it, according to the National Osteoporosis Foundation.

The prevalence of bone fractures triggered by the disorder is even greater: Half of all women and a quarter of all men over age 50 will have an osteoporosis-related fracture in their lifetime, the NOF reported. Indeed, the disorder is responsible for more than 1.5 million fractures annually, including 300,000 hip fractures, 700,000 vertebral fractures — which is what Interleukin Genetics is focusing on — 250,000 wrist fractures, and 300,000 fractures at other sites. US-based hospitals and nursing homes spent $17 billion to treat osteoporotic and associated fractures in 2001, the NOF estimates.

The UCSF collaboration is the first — and thus immensely important — partnership for Interleukin since the company, which had one week’s worth of cash on hand at the time, was bailed out. Following the deal with Alticor, which had agreed to pay as much as $16 million in stock, credit, and cash, four of five Interleukin directors resigned and were replaced by Alticor executives (Reilly was the sole board survivor).

The deal, announced in early March, was to allow Interleukin to continue developing consumer goods, especially skin care products and nutritional supplements. Alticor, which generates $5 billion in annual revenue, focuses on these kinds of products.

Alticor’s life preserver came three months after Pyxis Innovations, an Amway sister company, paid Interleukin the third of three $500,000 interim-funding tranches in the form of a promissory note. Though it would have run out at the end of February, this cash included an equity investment, a multi-year R&D agreement, licensing and royalty agreements, the deferment of outstanding loan repayments, and the refinancing of bridge financing obligations, like the first two $500,000 tranches.

Alticor also purchased around 50.3 percent of the company’s common stock. Upon reaching an undisclosed milestone, Alticor will contribute an additional $2 million to Interleukin, and provide it with $5 million in R&D funding that will be payable over the ensuing 24 months. “It was much needed,” Reilly told SNPtech Reporter this week, of Alticor’s financial backing. “We were hurting.”

However, despite the investment and Alticor’s influence and stature in the consumer-products arena, Reilly stressed that Alticor played no role in directing Interleukin to pen the UCSF partnership.

“This was our doing,” he said. “The osteoporosis testing project is one they knew we were going to do, they support us doing it, and they see it as a women’s wellness play — and that’s right up their alley.”

Today, Interleukin’s sole commercialized product is a poor-selling test that determines an individual’s risk of developing periodontal disease. “Thus far, it has not taken hold in the dental community,” said Reilly. “We have not succeeded there.” He retains hope that the product will gain traction in the dental market.

Currently, Interleukin has enough cash on hand — around $5.5 million — to last it around two years, Reilly said. Revenue in the second quarter increased to $633,000 from just $14,000 in the year-ago period, and the company is keeping tabs on R&D spending, which shrank to $476,000 in the second quarter 2003 from $850,000 in the second quarter 2002.

— KL


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