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With No New Deals in Sight, GeneProt to Close Its Doors

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GeneProt will be closing its doors, possibly as soon as at the end of this month, after failing to negotiate new deals in 2004, ProteoMonitor has learned.

Keith Rose, the former chief scientific officer at the company, said GeneProt had not run out of cash but was shutting its doors "because closing down was seen as the best way to preserve and not squander the remaining resources."

Rose, who left GeneProt last June but kept his CSO title and continued consulting with the company until Jan. 1, said GeneProt has already sold off virtually all of its mass spectrometers to "some sort of reseller or surplus warehouse," and the company is currently selling off more of its equipment.

The company has about half a dozen employees left, said Rose. At its peak, in 2002, GeneProt employed 117 people, Rose said. That was about two years after the company was founded, and a year and a half after GeneProt signed a pivotal, $91-million discovery deal with Novartis.

Under that deal, Gene Prot would analyze proteomes relating to three disease states in order to identify potential diagnostic markers or therapeutic proteins. In return, Novartis would pay GeneProt $41 million in fees and make a $50 million equity investment (see PM 1/7/2002).

Bertrand Damour, the CEO of GeneProt, said he preferred to give no comment at this time.

Rose said that part of the reason no additional major deals were ever signed was because investors began to realize that proteomics wasn't "delivering" in the way they had thought it would.

GeneProt's business model of taking a biological sample, analyzing it, and delivering a list of the most important proteins, began to suffer when investors realized that the important proteins were not necessarily going to be blockbusters, Rose postulated.

When investors first began making deals with proteomic shops, they thought the companies would deliver major therapeutics, Rose said. "Investors thought, 'Hey, what are the million dollar drugs? They're EPO, they're insulin and GCSF. So these proteomic guys will be churning these things out quite rapidly,'" said Rose.

A few years later, when it became clear that blockbluster protein therapeutics were not in line with what proteomics was likely to deliver, proteomic companies, inlcuding GeneProt, began to focus on finding biomarkers. This was of less interest to investors because they were less likely to bring in large amounts of money, Rose said.

"Everybody went away from, 'I'll find you the next big depot,' to biomarkers," Rose said. "People are still interested in [biomarkers], but they'll only pay you $100,000 or $200,000 for them, and they'll expect the results quickly."

In addition, biomarkers are hard to sell because there's a large amount of competition in discovering and developing them, Rose noted. Groups that are working on biomarkers include university researchers, small and medium-sized companies, and some pharmaceutical companies.

Other proteomic companies that had platforms similar to GeneProt's began to suffer as well. The Netherlands-based Glaucus Proteomics closed down (see PM 11/4/2002); Large Scale Biology closed its contract proteomic business (see PM 11/21/2003; PM 12/5/2003); MDS ceased investing in its daughter company MDS Proteomics (see PM 6/4/2004); and Oxford Glycosciences was bought by Celltech, which decided not to maintain the proteomic services part of the company (see PM 11/21/2003).

"The big 'I'll find you the next depot' type of company just found it difficult to have the money coming in," said Rose. "Everyone that was in proteomics was in trouble, except for the very small groups that were doing cheap high-throughput stuff."

GeneProt did manage to sign one other deal in addition to its agreement with Novartis, this one with small Danish pharmaceutical company H. Lundbeck. Under that agreement, signed in April 2004, GeneProt would analyze plasma samples from a rodent model of schizophrenia to find biomarkers in return for undisclosed financial returns.

It is unclear what will happen to the cash and other assets that remain with GeneProt, and what will happen to the research projects that were underway under collaboration agreements.

Rose said that it is likely that GeneProt will distribute its remaining cash among shareholders and investors.

Jeff Lockwood, the director of external communications at Novartis, said that due to confidentiality agreements, his company could not give any comments on GeneProt's closing.

Edmond Fischer, a member of GeneProt's scientific advisory board who won the Nobel Prize in medicine/physiology in 1992 for his discovery of protein phosphorylation, said that GeneProt had over 50 mass spectrometers, in addition to enormous computer facilities and a highly-developed bioinformatics group.

"GeneProt had very sophisticated capabilities, superb instrumentation and know-how in the field of proteomics," Fischer said. "I suppose that it became just too expensive to run all these facilities and operations."

— TSL