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Deal With Japan Distributor Reinforces Protagen’s Move From Services to Products

In an effort to raise its new profile as a product company, Protagen last week announced it has tagged Tokyo-based Tomy Digital Biology to exclusively distribute in Japan its software for the detection of post-translational modifications.
No details of the deal covering Protagen’s Modiro — the PTM Explorer were released. Prior to the deal, the company had had no presence in the Japanese market and limited distribution of its products worldwide. But as it moves away from being exclusively a service-based business to a product firm, the collaboration with Tomy represents a major step in its transformation.
Established in 1997 in Dortmund, Germany, Protagen originally offered fee-for-service protein analysis to pharmaceutical clients. But as demand for such services began to stagnate, Protagen had to rehaul its business, company President and CEO Christoph Hüls told ProteoMonitor this week.
“The fee-for-service business is not scaleable at all,” Hüls said.
Indeed, during the past few years, numerous shops that sprang up hoping to ride the proteomics tide by offering protein-analysis services have been forced to either redo their business plans or shut down completely.
Protagen was no different. The shift, Hüls said, was also made in the face of the realities of the private equity funding environment.
“The only chance … to raise venture capital, to develop quicker, was in using … business models [with a focus on commercializing products],” he said. “As you can imagine, no venture capitalist would ever invest in a solely fee-for-service type business.”
Still, Protagen has not completely abandoned its services business, and earlier this year began offering protein analysis designed specifically to fulfill the requirements of regulatory agencies such as the US Food and Drug Administration.
Since rejiggering its business model about three years ago, the company has completed two rounds of financing — one in 2004 and one in 2006 — worth a combined €4.3 million [$6.3 million]. It is currently working on another financing round.
Protagen’s first commercial product, introduced in 2005, was its Unichip biochip for antibody development. The company has been collaborating with Bruker BioSciences on development of the Proteinscape database since 1999, but Bruker is the sole seller of the database.
The chip allows researchers to look at off-target activities of an antibody and the binding curve to decide more efficiently which antibodies to develop as a therapeutic, Hüls said. Unlike other general all-purpose chips on the market with which the user has to work out the application, the Unichip is designed specifically for one application, “and we’re guaranteeing that it’s working and it’s performing” as it should, he said.
Hüls declined to identify users of the chip but said they included “big biotechs” and top-10 pharmaceutical firms.
PTM Specific
In March, Protagen launched Modiro, designed specifically to capture post-translational modifications in proteins. According to Hüls, the software captures more than 200 post-translational modifications, including common ones such as glycosylation and phosphorylation, as well as uncommon ones such as methylation.
A user can also search for unknown ones, Hüls said.
“If you have an idea that there might be a strange modification because of chemical treatment, or whatever, in your preparation of a protein, you can train the software to detect that also,” he said.
Other protein-detection software, such as Matrix Science’s Mascot product, can detect post-translation modifications, he said. But no other offering contains such comprehensive ability to study such modifications, which has become an important area of study in protein analysis.
“If you are going into the analysis of proteins, about 70 to 80 percent of the mass spectra that you are acquiring from your machine cannot be explained. And that is due to the [fact] that the peptides are modified in some way,” Hüls said. “By using this tool, a huge amount of the unexplained spectra can now be explained.”
According to Protagen’s website, Modiro performs a second pass search, restricting the search to proteins that have been identified already, and enables users to automatically screen large tandem mass spec datasets in a single step for unknown mass shifts, isoform detection, unspecific enzymatic cleavage, and enzymatic transpeptidation products, in addition to post-translational modifications.

“The fee-for-service business is not scaleable at all.”

Hüls declined to provide any sales numbers for Modiro, but acknowledged that it has had difficulty penetrating the market, hence the deal with Tomy. In a statement, the company said that the deal gives Protagen “an established distributor for the commercialization of its product in the Japanese market,” a move necessary to do business in that country because the Japanese market has long been impenetrable to outsiders, Hüls said.
Protagen distributes the product itself in the US and Europe, but is also planning to use other distributors with “strong experience in the market of software and algorithms” for proteomics research.
Heike Schäfer, a postdoctoral fellow at the Agroscope Liebefeld-Posieux Research Station ALP in Switzerland doing research in proteomics and metabolomics, began using Modiro four years ago when the software was in development. Her work has looked at how lenticular alphaA-Crystallin, one of the main structure proteins in the eye lens, changes with aging.
In work published last year, she and fellow researchers using proteomic techniques and Modiro software identified and localized eight phosphorylation sites, including four that had not been published before. They also observed quantitative N-terminal acetylation of alphaA-Crystallin and variable C-terminal truncation, which also had not been published in such detail before.
“With the software, I can search for many [post-translational] modifications at one time,” she said, adding no other product on the market that she knows has the same capabilities as Modiro.
Shortly after Modiro was launched, the company in the spring introduced its Uniarray program for the detection of patterns that may be indicative of disease. The company is developing protein-based diagnostic tests for a number of diseases such as rheumatoid arthritis, Alzheimer’s disease, and prostate cancer.
Its multiple sclerosis test is the furthest along in the pipeline. Protagen has a prototype test, which to date has higher than 80-percent specificity and sensitivity. The company is conducting further clinical tests with larger patient cohorts, and may market it in 2009 if no complications or problems develop.
Despite the more recent emphasis on products, Protagen’s services business still breathes. Last year, the company received Good Manufacturing Practice certification and began offering GMP protein analysis services that meet requirements of the FDA and the European Medicines Agency to a limited number of customers. The company began offering those services to the entire market in April this year.
With many larger pharmaceutical companies still continuing to outsource their proteomics and protein-analysis needs, Hüls said that that has provided a tailwind to its GMP protein-analysis business.
“In the other part [of the services business], there is steady business, but it is not growing very much,” he said. “But in this GMP protein analysis, it’s really ramping up, it’s really a nice growth for the company and that’s exactly why we introduced it, because we saw the need of the market. You need special expertise, you need special instrumentation, and you need a lot of experience to perform these types of analyses.”

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