Aiming to join the diagnostics field, German protein-analysis firm Protagen is preparing to close its fourth financing round to help it develop its diagnostics platform, its new CEO, Stefan Müllner, told ProteoMonitor this week.
The financing round is expected to close at the end of February, and though Müllner did not disclose the target amount, he said that the company will use the funds raised to initially develop diagnostics for prostate cancer and multiple sclerosis.
“We will be a diagnostic company in a couple of years,” Müllner said.
The new funding would mark the company’s fourth in its history and would bring the total since its founding in 1997 to more than €10 million [$13.6 million]. Its foray into the diagnostics arena would provide another aspect to a business model that the Dortmund, Germany-based firm has been rewriting during the past year.
Funds raised in the current round will be used to develop assays based on Protagen’s biomarkers for prostate cancer and multiple sclerosis in a manner that can be ISO-certified and would pass muster with regulators such as the US Food and Drug Administration, Müllner said. Such assays are anticipated to hit the market in two to three years.
Its prostate cancer biomarkers were developed in collaboration with Georg Bartsch at the University of Innsbruck, Austria, while its MS biomarkers were developed with collaborators in Bochum and Lüedenscheid, Germany.
Müllner pointed out that, in particular, the market is ripe for a blood-based diagnostic test for MS. About 2.5 million people worldwide have the autoimmune disorder, which can be diagnosed currently only with imaging technology.
Müllner said that Protagen is capable of designing and developing the assays for both prostate cancer and MS on its own, but as a business venture, diagnostics is unchartered waters for the company. It is hiring people with business development and sales and marketing experience in the space.
Us? Diagnostics? Why not?
Protagen’s decision to enter the diagnostics field came about as it tried to lift its products business. A year ago, former CEO Christopher Hüls told ProteoMonitor that Protagen was focused on repositioning itself as a product-development firm after encountering resistance from potential investors to fund the company because of its original business model as a fee-for-service company [See PM 12/20/07].
This week, Müllner acknowledged that that move was not going as well as had been hoped, saying that Protagen’s service revenues are doing “much better than the products.” In particular, he said, market reception to its UNIarray technology, launched in the spring of 2007 and directed to diagnostics development, has been lukewarm.
While big pharma has come around to accepting the technology, the diagnostics space has not, he added.
“We will be a diagnostic company in a couple of years.”
“It took some time because it’s a totally new approach, and [when] you come up with a new technology, you have to convince [people] that it really works,” Müllner said. But while validating the technology, Protagen took notice that the technology could form “a very good basis for the development of a diagnostic company.”
“Since we have now very good investors, they would like to capture the value within the company,” he said. Existing backers of the company include institutional investors MIG AG Beteiligungsgesellschaft, S-Venture Capital, and
Kreditanstalt für Wiederaufbau.
Though Protagen is willing to use the UNIarray in work with other companies, it will do so only in a collaborative format, not “as a service” for other firms, Müllner stressed. In that vein, Protagen announced last month a deal with Bayer Healthcare using the UNIarray platform for biomarker discovery directed at atrial fibrillation [See PM 12/11/08].
For now, the company is still relying on revenues from its three core businesses: the biochip business, which includes its UNIchip as well as UNIarray products; its bioIT products; and its protein services.
Divestiture ‘Always an Option’
If Müllner fulfills his promise of turning Protagen into a diagnostics player “in a couple of years,” the company will add its name to a growing list of proteomics tool vendors that have shifted to the diagnostics field, among them Vermillion, Tyrian Diagnostics, formerly called Proteome Systems, and Miraculins.
Müllner said that Protagen has no current plans to abandon its other businesses but made no guarantees for the future, either. The three core businesses are profitable, “or close to it,” he said, but “it’s always an option” to shut them down or divest them. “Presently, there’s no need to change anything in the structure of Protagen,” he said.
Still, recent announcements by the company make clear its diagnostics goals, which are tied to its biochip business. Describing Progaten’s agreement with Bayer, Müllner said that his firm is not especially looking to get into atrial fibrillation as a disease area of interest, and the purpose of the Bayer collaboration from Protagen’s point of view would be to validate the UNIarray platform.
“Bayer’s interested [in stratifying] patients before they get heart valve surgery, and we are interested [in] getting into deals with big pharma with regard to our UNIarray technology,” Müllner said.
Before the two firms enter into a large collaboration Bayer wanted to “see that [the UNIarray] works in a very precisely defined and relatively rare indication, which gives us the opportunity to show that the technology really works,” Müllner said.
According to Müllner, about one-third of patients who receive heart valve transplants develop an immune response to the new valve within a week after surgery, regardless of whether the new valve is a pig valve or an artificial one. If such patients can be identified beforehand, it would allow for treatments to prevent the immune response.
Bayer did not respond to a request for an interview.
As part of its Bayer deal, Protagen will use its panel of 40,000 recombinant human proteins, called MacroArray, to screen for auto-antibody signatures associated with atrial fibrillation. Müllner declined to share details about the deal but said that the dollar amount is in the five figures.
Protagen has received serum samples from Bayer and is currently looking for biomarkers for atrial fibrillation but has no results to share yet.
In October, the company said it had joined NeuroAllianz, a government-funded consortium consisting of a dozen partners charged with developing therapies and diagnostic tools aimed at neurodegenerative diseases. The company’s role in the consortium will be to use its UNIarray technology to “pick out either diagnostic [Alzheimer’s biomarkers] or auto-antibody signatures, which correlate to the disease,” Müllner said [See PM 10/16/08].
“In this case, we would like to [develop] an in vitro diagnostic to pre-select patients … for imaging diagnostics,” he said. Work is set to begin soon, he added.
Protagen is also working to expand its 40,000-protein library to an even larger panel, which Müllner said could encompass 80,000 recombinant human proteins eventually. The new library will be called GigArray.
The MacroArray contains proteins expressed from human fetal brains while the GigArray will include new proteins expressed in T-cells, liver, colon, and lung.
“We have all the DNA sequences of those libraries, but we also want to be sure that those clones will express a protein … of interest,” he said.
Müllner added that the company has been in contact with regulatory agencies about the UNIchip. The technology may be able to detect potential side effects of antibodies so could be used for specificity analyses.
“It’s really useful to predict the behavior of antibodies in immunohistochemistry … and to get some more information of therapeutic antibodies,” he said, citing a study done by Protagen in which its researchers were able to identify an interaction between Enbrel and one of Protagen’s proteins, predictive of a rare side effect of the rheumatoid arthritis drug.
The hope is that the agencies would then recommend use of the technology to other firms, Müllner said.