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Entelos Acquires Iconix for $8.3M to Improve Safety Modeling, Further FDA Agreement

The future of biosimulation technology could get a boost from a company with a strong presence in providing genomics data in bulk.
On Aug. 30, Entelos announced that it had acquired Mountain View, Calif.-based Iconix Biosciences in an all-share transaction valued at $8.3 million.
While the companies currently operate in very different segments of the informatics market — Entelos specializes in in silico disease modeling while Iconix sells toxicogenomics databases — the move should not have come as a surprise. After all, it came on the heels of the news that Entelos is developing a version of its PhysioLab simulation platform to predict drug-induced liver illness for the US Food and Drug Administration [BioInform 08-10-07], which is already a longstanding Iconix customer.
The FDA’s Center for Drug Evaluation and Research has been using the Iconix DrugMatrix database as part of its voluntarily genomic data submissions program since 2003.
James Karis, president and CEO of Entelos, told BioInform that the FDA deal was one of drivers for the acquisition and that the DILI PhysioLab project will be “accelerated” by the preclinical toxicology information from Iconix.
Karis added that Entelos has so far applied its simulation technology primarily to efficacy testing, and the acquisition is expected to strengthen its capabilities in predictive toxicology and safety assessment.
Entelos is “focused principally on trying to develop and create opportunities to do a better job of predicting around therapeutic development,” he said. “Our technology is primarily focused on efficacy, although we [do] some work on toxicity,” which is a big issue in drug failure.
“We’ve been looking for some time at how we can have a broader footprint in the safety area,” he added.
Potential Purchase Price of $39M
Entelos, based in Foster City, Calif., trades on the London Stock Exchange’s Alternative Investment Market, while Iconix is privately held. The initial proposed transaction value was up to $14.1 million and was based on Entelos issuing up to 12,776,658 shares to Iconix stockholders at a price of 55 pence per share. Entelos shares closed at 32.5 pence on Aug. 29, the last practicable date prior to the close, placing the value of the agreement at around $8.3 million.
Karis confirmed that the deal fully closed Aug. 31.
The companies also agreed to a potential earn-out payment of up to $25 million if “certain milestones” are achieved within a year following the close of the deal. This deferred consideration also would be paid in Entelos shares.
Following completion of the acquisition, Iconix will become part of Entelos’ Technology and Services Division.
Jim Neal, CEO of Iconix, will become chief business officer of Entelos. Neal said that the acquisition has led to the attrition of three Iconix administrative staff, but no further layoffs are expected.
Iconix reported fiscal 2006 revenue of $4.9 million with a net loss of $11.2 million. Entelos expects Iconix’s operations to add roughly $1 million to its 2007 revenues. Entelos posted $21.6 million in revenues in 2006 and a net loss of $753,864.
Neal told BioInform that while the business models of the two firms “were not that dissimilar, the technology is very different,” which made the acquisition attractive to Entelos. He added that the companies have a very similar history in the bioinformatics space.
“We were formed in roughly the same time frame, the late 90's; we have a common investor in Abingworth; and a common chairman, Jon Saxe. We're both in the Bay Area, and we're both trying to convince pharma partners to embrace paradigm shifts in their discovery/development processes, and our technology base is heavily leveraging IT/computing to get our clients to move from a 'trial & error' discovery approach to a more systematic approach based on mathematics and statistics,” Neal added via e-mail.
Thus, the companies view their capabilities as highly complementary. Iconix has not been involved in the simulation space, but neither has Entelos been a master of data mining and assimilation.

“We’ve been looking for some time at how we can have a broader footprint in the safety area.”

Neal said Iconix has studied hundreds of compounds at the gene expression level in model animal livers. “We will look to integrate that data where appropriate into the DILI initiative with the goal of ultimately being better able to model and predict human liver response to therapeutic intervention.”
Indeed, according to Neal part of Iconix’s allure is that “we have a lot of strength” in certain areas such as being able to access these compounds. The company’s DrugMatrix database contains gene expression patterns for more than 350 drug compounds with known toxicities. Customers use these expression patterns to help gauge the potential toxicity of novel molecules in vitro before running costly in vivo studies.
 “We have a wealth of information about drugs and drug compounds in the rat liver, and that’s an important piece of data that could refine Entelos’ models, he said.
Neal said that now Iconix can “augment gene expression with response to drugs [via] feed[ing] the modeling and algorithms that Entelos puts in place.”
Iconix is not the only predictive toxicology informatics firm on the market. The company’s chief competitor, Gene Logic, also sells toxicogenomics databases, and announced earlier this summer that it is considering the sale of that part of its business in order to focus on its drug repositioning capabilities. However, the firm has not disclosed a potential selling price for the genomics business, which generated revenues of $24.3 million in 2006 — a steep decline from $56.6 million in 2005.
Karis declined to comment on whether Entelos had considered buying Gene Logic’s database business, other than to reiterate how well Iconix’ technology fit into the Entelos business model.
Gene Logic principals were not available for comment this week.
Fishing for Fresh Clients
One question surrounding the acquisition is whether the “new” Entelos will be able to broaden its customer base, since the firms already share many of the same clients including the FDA, Bristol-Myers Squibb, Abbott Laboratories, and Eli Lilly.
When asked about the client roster, Karis said the company had a “dozen or more” clients prior to the acquisition and the Iconix presence doesn’t necessarily add more.
However, he noted that the new toxicology capability that Iconix brings could help the firm reach out to a new type of customer within its existing pharma clients.

“We already work with some of the same customers,” said Karis, but added that the company will now approach “different people within the customer base, such as safety and tox organizations, than we did in the past. “


“We already work with some of the same customers,” said Karis, but added that the company will now approach “different people within the customer base, such as safety and tox organizations, than we did in the past. “

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