As big pharma has tightened the purse strings for technology spending, proteomics companies who rely on research deals for revenues had to make cuts — including MDS Proteomics. But there is a silver lining on the horizon: MDSP is expecting to sign a deal with a large pharmaceutical company “within 4 to 6 weeks,” and has initiated three pilot projects with pharmaceutical companies that bring in some revenue, according to Anil Amlani, MDSP’s CFO.
The company desperately needs a new source of income: During the quarter that ended October 31, its revenues fell to $430,000, from about $640,000 the previous year. The company has been promising a new pharma collaboration for months: In a letter to shareholders in September, John Rodgers, CEO of MDSP’s parent company MDS, stated, “We are confident that we will be able to complete a strategic collaboration with a customer by the end of our fiscal year,” which ended October 31. MDS owns 87 percent of MDS Proteomics.
Amlani said that MDSP always anticipated closing the pharma deal by the end of the calendar year, and there were no delays in the negotiations. “We are just going through the many phases that it takes to put together this type of relationship,” he said.
The three new pilot studies, one of them with Eli Lilly (see ProteoMonitor 10-28-02), will continue into 2003 and provide the company with revenues “in excess of $1 million,” said Amlani. The goal is to demonstrate to potential partners, “as a first step towards a larger relationship,” that MDS Proteomics’ technologies have value in the later stages of drug discovery, said Mike Moran, the company’s CSO. These technologies include differential expression proteomics, as well as methods for identifying posttranslational modifications, and studying protein-small molecule interactions.
At least two more pilot projects with other companies are currently under discussion, but MDSP is focusing on the ongoing projects, and would prefer to sign deals rather than further pilots. “We expect naturally to evolve away from having to do this type of work as the technology and our ability to do relationships is verified by the deals we are in the process of closing,” said Moran.
But trying to sign new deals is only one part of the equation to survive. The other one is slashing costs: over the last year, MDSP reduced its workforce by about 35 people to 135, Amlani said, and abandoned its efforts to map the human proteome. As a result, it has reduced its burn rate — which was reported as $53 million in 2001 — by $10 million, he said. Next year, the company is expecting to spend $24 million, or $2 million a month — a burn rate MDSP has already reached, according to Amlani. Once the pharma deal is signed, the company also plans to hire more personnel again.
In terms of its own drug discovery initiative, MDSP is still collaborating with part-owner Abgenix, which is currently preparing antibodies against oncology targets provided by MDSP, Amlani said.
— JK