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Gene Logic CEO: New Investment in Drug Repositioning Won t Undermine Informatics

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Gene Logic CEO Mark Gessler told BioInform last week that the company’s recent move into “drug repositioning” — in which it intends to find new indications for compounds gathering dust on the shelves of pharmaceutical firms — is not a sign that the company is abandoning its core genomics information and software business.

“We’re not taking away from one to give to the other,” he said.

In a 2005 financial guidance issued on March 17, Gene Logic said it plans to invest $14 million in 2005, and as much as $42 million over the next three years, into its drug-repositioning business, which it is building around technology it picked up in its $4.5 million acquisition of Millennium Pharmaceuticals’ Horizon group in July.

At the time of the acquisition, the company said it planned to invest $8.5 million through the end of 2005 to further develop the technology, which included in vivo compound imaging, in vitro pathway screening, predictive and genetic ADME capabilities, and metabolomics methods.

But the new level of investment — which was ramped up in order to “fund development of compounds, not just the platform,” according to Gessler — won’t eat into R&D or marketing for the company’s genomics and preclinical businesses, he said.

Gessler noted that Gene Logic has “scaled up its marketing activities” for its software and data business over the last six months, and cited the recent hire of Dennis Rossi, a former Accelrys exec, as general manager of the genomics unit as further evidence of the company’s commitment to its core business.

Indeed, the company launched a number of new informatics products and services in recent months, with an upgrade of its Genesis software product released in mid-March [BioInform 03-14-05], and the launch of its latest software product, ToxShield, in late February [BioInform 02-28-05]. In early March, the company also announced a new microarray analysis service offering based on its in-house bioinformatics expertise. Gene Logic will also “continue to upgrade” its BioExpress and ToxExpress databases, Gessler said.

Nevertheless, Gene Logic has been forced to seek new options for growth as revenues for its informatics business have remained flat over the past few years. The company reported revenues of $52.2 million for its information business in 2004, up just a hair over revenues of $52 million in 2003. The information business generated revenues of $54.8 million in 2002.

Gessler conceded last week that the company has “tapped out pharma” for its database products, and can only grow this business by expanding into the academic and biotech markets — a strategy that hangs on its Ascenta product, which is essentially a “lite” version of its BioExpress database — or by selling new products and services to its existing customer base.

This latter strategy served as the basis for the company’s purchase of preclinical services firm TherImmune in 2003 and the more recent acquisition of the Horizon technology. Gene Logic’s current pharma customers comprise the target market for the company’s preclinical services offering as well as the new drug-repositioning service.

TherImmune contributed a bit to Gene Logic’s top line in 2004, making up for the information business’s flat revenues and leading to total sales of $75.9 million in 2004 — a 9-percent increase over $69.5 million generated in 2003. But Gene Logic wants to bust into double-digit-growth territory.

The company now describes its overall operations in terms of two groups: the genomics and preclinical business, and the drug-repositioning business. The company has predicted that it will be able to grow revenues in its genomics and preclinical contract research businesses by at least 10 percent in 2005 — to between $83.5 million and $85.5 million — and that it will make “significant progress” in moving this business genomics and preclinical business towards profitability. Losses for this portion of the business are expected to be in the range of $12 million to $14 million in 2005.

Gene Logic does not anticipate generating any revenue from the drug-repositioning business in 2005, but pegs its company-wide losses at around $26 million to $28 million, including the $14 million that it will invest in the new segment. This is about level with the company’s net loss for the full year of 2004, which was $28.5 million.

The company didn’t provide any revenue guidance for 2006, but said that the drug-repositioning business will drive it to profitability in 2007, with total revenues exceeding $100 million.

Gene Logic has already begun looking for new indications for a Millennium compound originally developed to treat obesity that was discontinued in clinical trials, but had no safety issues. The company has also begun repositioning work on six other compounds from an undisclosed pharmaceutical customer, and anticipates beginning work on 20 compounds in 2005.

According to Gessler, based on Gene Logic’s ongoing discussions with pharmaceutical customers, the company could have access to as many as 200 compounds for the service over the next year or so.

Gessler added that Gene Logic will bear the bulk of the “up-front risk” in an effort to appeal to pharmaceutical firms that are wary of investing additional resources in compounds that may prove ineffective, but are also reluctant to out-license compounds to biotech firms only to see them succeed. The pharmaceutical company will retain IP rights to the compound, and Gene Logic expects to negotiate milestone, royalty, and co-ownership rights for those compounds that are found to have promising new indications.

Gessler said that he anticipates a turnaround time of “less than a year” for a typical repositioning deal. The goal, he said, is to “take a Phase II failure, repurpose it, and drop it back into Phase II.”

Proof of principle will be crucial, however, as the company seeks to bring more pharma customers on board. Gessler acknowledged that it will be important for the company to deliver new indications for the compounds in its pipeline “as quickly as possible,” but added that the company already found some “interesting leads” that have proven “persuasive” to its current customers.

— BT

 

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