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OGS, MDSP Sign New Contracts with Biopharma: A Proteomics Comeback?

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Defying recent prophecies of doom for proteomics service companies, both Oxford GlycoSciences and MDS Proteomics announced new research partnerships last week that will provide them with fresh revenues and bring OGS closer to its stated goal of leading its proteomics division to profitability this year.

While OGS reached a new agreement with its longstanding partner Pfizer, MDSP signed a five-year contract with biotechnology company Cephalon.

Additionally, Activx Biosciences entered a collaboration in a somewhat novel application of proteomics in drug development with Japanese biotechnology company Sosei (see article below).

This fresh harvest of deals is bound to encourage proteomics companies knocking on the doors of big pharma, amid venture capitalists’ recent warnings that pure proteomics doesn’t sell (see ProteoMonitor 1-6-03). Significantly, at least two of these new deals do not just focus on target discovery, as early proteomics partnerships did, but on more downstream applications of the technology.

MDSP’s deal with Cephalon, which it had hinted at for several months, provides MDSP with a much-needed financial shot in the arm. As a result of the contract, MDSP plans to fill 15 of its 135 positions that are currently vacant.

For Cephalon, founded in 1987, with its 1,200 employees in the US and Europe and three drugs on the US market, the MDSP collaboration is the “largest investment in a technology partnership” the company has ever undertaken,” according to Robert Grupp, Cephalon’s vice president for corporate communications.

Cephalon made a $30 million investment in MDSP by buying a five percent note that is convertible into MDSP’s common stock by 2010. “There are certain rights we have and certain rights they have to convert it into common shares by that date,” commented Anil Amlani, MDSP’s CFO and executive vice president, on the structure of the investment.

MDSP will also receive undisclosed payments for reaching milestones and obtain royalties on sales of products resulting from the research.

The size of the payments is kept confidential in order to maintain MDSP’s negotiating power in upcoming talks about possible partnerships with three pharmaceutical companies with whom it has initiated pilot projects, said Amlani.

In the collaboration with Cephalon, MDSP will use its proteomics technologies to study the effects of compounds on cellular activity. These will include a yet-to-be-defined number of Cephalon’s pre-clinical compounds.

The goal is to “assist Cephalon in their decision-making process as to which of those discovery compounds might be worthy clinical candidates,” said Frank Gleeson, MDSP’s president and CEO.

Furthermore, one or several of three compounds that Cephalon currently has in clinical trials will also be included in the project.

The collaboration will concentrate on Cephalon’s area of expertise, the central nervous system, as well as on oncology. According to Gleeson, the initial focus will be neurodegenerative diseases but may broaden into other areas of CNS disorders later.

Although the companies currently do not plan to study drugs that Cephalon has on the market or compounds that have failed in clinical trials, they did not exclude the possibility of adding them to the project later. “The agreement allows us to use the technology on any molecule we have,” said Grupp.

MDSP plans to study the effects of Cephalon’s compounds on protein pathways in cell lines as well as in human tissues. Company researchers will be looking at differential expression of proteins, using gel-free approaches; changes in posttranslational modifications, in particular phosphorylation; as well as protein interactions and protein-drug interactions, according to Gleeson. “By combining and understanding pathways, regulatory effects, as well as a basic disease understanding in a particular area, one can make certain inferences” as to possible disease indications for a new drug, he said. These can then be validated — or discarded — by further experimentation, he added.

Cephalon hopes the relationship will “accelerate molecules in the pipeline and hopefully lead some to clinical development,” said Grupp. Cephalon does not have any proteomics capabilities of its own, and believed it would be both less expensive and quicker to buy them than to develop them in-house. “Our strategy overall is not necessarily to acquire and build all the technologies internally but rather [to] access those when the expertise is elsewhere,” said Grupp. “We have a history of doing that.”

This opinion was echoed by Pfizer, which started a new collaboration with OGS in an undisclosed area of research. “We don’t suffer from ‘not-invented-here-syndrome’,” said Kate Robins, a spokeswoman for Pfizer in the UK. “We recognize that we can’t do everything, and that there are a great many companies out there that are up to full cruising altitude in areas where they are experts, and that is makes best sense for us to form research collaborations.”

The two companies have been collaborating since 1998, focusing initially on discovering biomarkers and drug targets for Alzheimer’s disease and atherosclerosis. This agreement, which provided OGS with about $5 million per year and was last extended in December 2001, expired recently.

Neither company would disclose the duration, the financial terms, or the disease or research area of the new collaboration. However, investment bank SG Cowen issued a note to investors last week indicating that the new agreement may not be in a different therapeutic area, and is likely to be focused on the use of biomarkers in clinical trials. “We understand the deal will initially run until the end of 2003 with an option to extend,” the note said. “In terms of financial size, we understand the deal is similar in size to the previous deals and have estimated revenues for 2003 of £1 million [$1.61 million].”

Neither Pfizer nor OGS would confirm or deny these statements.

— JK

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