BERKELEY, Calif.--With 1999 P&Ls in the black and endorsements from such illustrious customers as Celera, Novartis, Monsanto, and the Institute for Genomic Research, Neomorphic Software could be considered a bioinformatics success story. The company’s young officers--Cyrus Harmon, Martin Reese, and Gregg Helt--started up the firm three years ago with licensing fees paid by SmithKline Beecham for an early product they developed as graduate students at University of California, Berkeley. They’ve since grown to a staff of 27 and turned profitable without ever calling on venture capitalists.
But, according to CEO Harmon, the Neomorphic team isn’t content anymore just hawking its Java-based visualization tools. Now it wants a shot at applying them to the human genome.
In an exclusive interview last week with BioInform, Harmon described his ambitious new business plan, which calls for Neomorphic to close its first financing round in the second quarter, add about 100 staff within a year, and drop the word Software from the company name. "We’re expanding what we do," Harmon explained. "We’re making the shift from being a software
company to a genomics company that uses tools and algorithms to identify good drug targets in the human genome." A suite of proprietary genomic analysis technologies called Disease Informatics will be the born-again business’s platform.
BioInform: Why is Neomorphic changing its strategy?
Harmon: We got into this business because we were scientists interested in exploring the genome and understanding genes, their functions, and their roles in development and disease. We realized there was an opportunity to develop exciting tools to ask the kinds of questions that we wanted to ask, so we developed the tools and built up a business around them. But at the core, we’re really scientists devoted not just to developing tools but to asking those questions they solve.
Now we’re moving from being tool developers to tool users. We’ve always been using our tools, but now we’ll be applying them in an industrial fashion to the entire genome to identify every gene and understand each gene’s function and role in various processes in the body.
BioInform: Does this mean you found you couldn’t make a living as a bioinformatics software company?
Harmon: You can make a very nice living as a bioinformatics software company. However, you can’t really revolutionize medicine. You can’t directly affect bringing new therapies to market. You don’t get to participate in the exciting scientific changes that are happening.
BioInform: That question was asked in the context of recent news from other bioinformatics companies such as Molecular Applications Group, Pangea Systems, and Compugen that have folded or reinvented themselves.
Harmon: Certainly some companies found it was difficult to make a living. We found there was a solid business here, but it was a business that would only grow so large. We saw some of those same trends, but we didn’t think it was a bad business to be in. It’s just that we saw greater opportunities in not simply developing our tools, but in applying them in ways that could affect the science and affect our body of knowledge about biology, life.
BioInform: Will Neomorph-ic’s software products continue to be available commercially?
Harmon: We will continue some technology licensing, but the focus is moving away from licensing the technology and toward doing scientific collaborations with partners to identify good drug targets. I don’t want to say categorically that we won’t be licensing software, because there are relationships that we will be continuing, but the focus of the business is changing. We’ve found that the market wants these sorts of relationships. Scientists are more interested in getting to the results than they are in licensing tools.
BioInform: Have you commenced any such partnerships yet?
Harmon: We’ve started discussions with a number of companies. The kinds of partnerships we want to establish take a long time to develop. We’ve gotten some very positive feedback from a number of the companies we’ve been talking to. We haven’t formally established any relationships, but we feel pretty confident about the way things are going.
BioInform: Will you give an example of how such a relationship would work?
Harmon: We can collaborate with pharmaceutical or biotechnology companies to help them analyze the entire genome, identify every gene, and, most importantly, identify which genes are likely to be relevant for their therapeutic areas of interest. We can deliver novel targets based on our analysis of the genome that are likely to be good small molecule drug targets, protein therapeutics, or antibody drug targets.
BioInform: Would you say that you’re moving from being a tools company toward becoming a consulting firm?
Harmon: Only if you look at the entire biotech industry as a consulting industry to the pharma industry. I look at us more as partners in discovery. You could also consider it outsourcing, but I think there’s a difference between the external solution that we provide and traditional outsourcing. This is a much more collaborative process where we’ll be working closely with our partners--integrating our technologies with their proprietary data in some cases--to enable us to work together to identify the genes of interest.
BioInform: Then the partners will hand over to you the proprietary data they want you to analyze?
Harmon: It’s not just about taking their data and analyzing it. It’s about our ability to take the entire genome and identify genes, functions of those genes, and potential targets, and being able to consider additional data the partner brings in to help us narrow or focus the search for interesting genes within the genome.
For example, we might deliver a set of potential targets to a customer and then we might get data back from them about the nature of variations of those genes within various patient populations and integrate that data into our analytic framework so that we can say something about the variations and correlations between phenotype and genotype.
BioInform: Don’t big pharmaceutical companies already have people in-house doing these things? Would your typical customer more likely be a small to midsize biotech company?
Harmon: This is an extremely complex process. There’s an incredible amount of data here. We want to provide something that the in-house departments haven’t been able to do because they’re working on nuts-and-bolts data management, providing bioinformatics services to their scientists.
We have a real competitive edge in our ability to analyze the genome and identify relevant genes. We want to offer that technology in a way that provides a competitive advantage to our partners. Depending on the therapeutic area, the kinds of molecules we’re looking for, we envision working with large pharma and large and small biotech.
The distinction comes down to a scientific problem. We’re probably more likely to be working with biotech companies when it comes to identifying new protein therapeutics, and pharmas where we’re identifying small molecule drug targets.
BioInform: Does Neomorphic have any intention of developing its own drugs or therapies?
Harmon: Currently we’re not looking to bring therapeutics to market ourselves. We’re looking to partner with organizations that have that capability in place.
We see a real opportunity to take advantage of the genome and the fact that there’s this incredible scientific event happening. Now we have the complete blueprint of the human being that we can use to identify potential targets very quickly rather than spend our time and resources building up sales and distribution infrastructure for drugs.
We’re going to work with our partners to get to stronger intellectual property positions more quickly and divide up the results appropriately.
BioInform: Will you describe your Disease Informatics platform?
Harmon: Disease Informatics is the key to commercializing the human genome and generating valuable knowledge that will enable our partners to better treat disease. Disease Informatics applies information technology and molecular biology to the human genome to convert DNA sequence into knowledge and intellectual property.
There are three components of the platform. There’s a comprehensive gene discovery effort, computational genomics, and drug target identification. The raw material is the genome. At each step along the way we’re creating value in the genome. We’re identifying the genes. We’re figuring out what they do and how they’re regulated, and figuring out which ones are good targets. At each step there’s the opportunity to bring in additional data from our partners. But the core, the ore that we’re mining, is the genome.
Our gene discovery initiative is where we take the complete human genome sequence and integrate various kinds of biological information and apply our proprietary tools to identify the genes in our computational genomics program. We have technologies for identifying functions of genes, for comparing genomes, for analyzing regulation of genes and gene families, and for saying as much as we can about the biological role of these genes. Then our target identification program is where we apply the technologies from the other two efforts along with some additional technologies to analyze these genes in the context of a specific therapeutic area to identify genes that are likely to be relevant targets.
BioInform: Who do you see now as your competition?
Harmon: Our competitors are folks like Incyte, Celera, and CuraGen. We’re competitive with parts of those companies’ businesses, but we’re not competitive with their core businesses. For instance, Celera’s focus is on generating the genome sequence database and competing with the human genome project. We’re doing the next step, which is converting that sequence information into genes and ultimately into targets.
We’re not competing with Incyte’s LifeTools, we’re not competing with Celera’s Genome Database, and we’re not competing with the therapeutic products that CuraGen is planning to bring to market. But there are components of what we do that are very similar to those three companies. And I would argue that those three are the leaders, and we see them as the competition that we’re going after.