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Tinkering with Structure for Third Time This Year, Clinical Data to Spin Off Vilazodone, Replace CEO

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Clinical Data will spin off its vilazodone business and replace its chief executive and chief financial officers in a reorganization that casts its PGxHealth division squarely as a molecular diagnostics player.

As part of its third reorganization so far this year, Clinical Data has replaced CEO Israel Stein with Drew Fromkin, the former executive vice president and president of the PGxHealth division. Also, CFO Mark Shooman has stepped down, and Stein will take his place as interim CFO until the company can find a permanent replacement. Clinical Data did not offer a reason for either change.

On the vilazodone front, instead of finishing Phase III trials of the selective serotonin-reuptake inhibitor that Clinical Data began in February the firm will spin off the business to a new company called Precigen Therapeutics that will finish the project. Clinical Data's PGxHealth division will continue developing a companion diagnostic for identifying patients likely to respond to the SSRI.

Clinical Data has said in company statements that it plans to finish clinical trials by the middle of 2007, file a new drug application based on these data in 2008, and, depending on US regulators, possibly launch a drug-diagnostic companion product one year later. Even though Precigen Therapeutics has not yet been staffed, "nothing has changed with that; in fact, we're on target," Fromkin told Pharmacogenomics Reporter this week.


"I think that we're going to get a lot more aggressive here, in terms of our interest in … looking at biomarker discovery and validation and leveraging those biomarkers to commercialize genetic tests."

"We are focused on what PGxHealth endeavors to do in the diagnostics and genetic testing side, and vilazodone had really nothing to with the clinical chemistry side, which is our Vital Diagnostics" division, the incoming CEO said. "Vilazodone was our sole product from a therapeutic perspective, so it's not the sort of thing that we're pursuing at this time."

Selective serotonin reuptake inhibitors generated around $13 billion in combined revenue last year, according to industry figures. Two popular SSRIs, Pfizer's Zoloft and Wyeth's Effexor, had 2005 sales of $3.1 billion and $2.6 billion, respectively, according to IMS Health. Yet the efficacy rates of SSRIs are spotty, and all carry adverse events that could be severe or even lethal. No drug currently owns more than 30 percent of market share, and vilazodone may be able to "differentiate" itself with a companion diagnostic, Carol Reed, Clinical Data's CSO, said in a February interview.

How Much Change?

Unlike Clinical Data's previous two reorganizations this year, this one is limited to the spin-off and the management changes. "The three divisions [of Clinical Data] are as-is, the management of those divisions are exactly the same, so there's no change to the daily operations," said Fromkin.

Indeed, spinning off the vilazodone project fits with the general course the company has been following since it announced plans to acquire Genaissance last June, and seems likely to continue following under Fromkin. "I think that we're going to get a lot more aggressive here, in terms of our interest in … looking at biomarker discovery and validation and leveraging those biomarkers to commercialize genetic tests," he said.

"There are numerous things that we're going to do, in terms of finding ways to move this science into clinical utility, and our primary objective is to focus more on how these biomarkers can improve outcomes for patients" in order to decrease drug unit costs and drive down the cost of medical care, Fromkin said. He declined to specify how the company planned to do this.

And What Is This Precigen?

Details about Precigen are scarce. Until Clinical Data files documents with the US Securities and Exchange Commission related to the spin off, its officers are constrained from issuing any information that might appear promotional. Asked when Clinical Data would file the relevant documents, Fromkin said, "We'll know that better in the next couple of weeks."

The new firm will be separately financed, and Clinical Data said it will issue shares of the company to its own current shareholders as tax-free stock dividends. Separate financing will "allow us to optimize those assets," said Fromkin. On the diagnostics side, Clinical Data will be doing things the same way it would have if the compound had stayed in-house, he added.

Clinical Data will relate to Precigen in "exactly" the way that it relates to other drug makers wanting to develop diagnostics, said Fromkin. "PGxHealth will provide to this organization the same types of services it would to many of its other pharmaceutical and biotech clients," he said.

Precigen may not have exactly the same relationship with Clinical Data as other clients in every respect, however. Given its beginnings as a project of Clinical Data, it is not unreasonable to assume that some of Precigen's employees will be drawn from the parent company — possibly including managers. But in its statement announcing the spin-off, Clinical Data said recruitment for the new company's management is currently underway.

When asked whether Precigen might draw employees from Clinical Data, or whether the two firms might share directors, Fromkin said, "Some of those things will also continue to be looked at within the coming weeks and months." He declined to elaborate.

Heading for Molecular Diagnostics

Clinical Data inherited vilazodone with its acquisition of Genaissance last June. Genaissance licensed the drug from Merck KGaA after it twice failed clinical trials — for reasons other than toxicity — and Genaissance committed to developing a companion diagnostic capable of identifying responding patients.

So far, Clinical Data has yet to produce a molecular diagnostic of its own, but it provides Genaissance's Familion test for predicting the risk of Long-QT Syndrome, and it has also inherited from that firm the thiopurine S-methyltransferase intellectual property licensed to Prometheus Labs.

Clinical Data also has other tests in the molecular diagnostics pipeline, including a test to identify patients likely to suffer an adverse reaction from the schizophrenia drug clozapine. The company plans to offer that test as a service from its own CLIA lab before the end of the year, Carol Reed, the firm's CSO, said in an April interview.

This week, the firm announced a project with Duke University to discover genetic variants associated with baseline lipid parameters and the response of these parameters to statins (see Snippets).

— Chris Womack ([email protected])

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