A Tiny Biotech Startup Wages War Against AIDS

One of the most promising attacks on the dread disease was produced far from the meccas of biotechnology The message transmitted from the fourth International Conference on AIDS in Stockholm this June was bleak. Seven thousand of the world’s leading scientists had gathered to hear more than 3,100 presentations and to discuss what has been learned about the virus. “Not enough” was the answer. An estimated five million to 10 million people have been infected with the HIV virus, one million of these United States citizens. And, though scientific knowledge and understanding of the virus is expanding, little progress has been made over the past year toward a vaccine or effective treatment. But amidst the pessimism and gloom, a small poster display struck a rare, optimistic note. It showed clinical test results of a proposed therapeutic that appears to be effective in slowing the ravages of the wasting disease. Each day, more than a dozen clerks rustle through stacks of patient records as they photocopy, compile, and review an estimated 28,000 documents. The documents record data from clinical testing of what could, if approved by the FDA, be a new treatment for AIDS patients. The clerks are part of a small, highly motivated team employed by Imreg Inc., New Orleans. The tiny company is heatedly engaged in filing a new drug application for its promising Imreg-1, a therapeutic that is thought to impede progression from AIDS-related complex to AIDS. When the clerks are done, when the scientists sign off, Imreg will submit its all-important final report to the FDA. According to a statement issued by the company, the results of phase III clinical trials show that patients with AIDS-related complex who received a placebo were five times more likely to progress to AIDS than similar patients treated with doses of Imreg-1. The trial included 158 patients at eight medical centers, two-thirds of whom received Imreg-1, one-third of whom received placebo. The trial results have not yet been published in a scientific journal, although Imreg’s president Arthur Gottlieb says they have been submitted to a publication he will not name. A medical panel commissioned by the Gottliebs to review the trials wrote a two-sentence analysis concluding that use of Imreg-1 “was associated with a reduced risk of progression to AIDS,” but that “a number of questions remain to be answered by future studies.” Doctors not associated with Imreg have been slow to assess the product, in part because so little is known publicly. Such caution is to be expected in assessing AIDS biologics (natural products harvested from the immune system, as Imreg-1 is), says Dr. Myron Essex, chairman of the Department of Cancer Biology at the Harvard School of Public Health and a leading AIDS researcher, because of the complexity of the disease and the intricacy of the immune functions biologics seek to regulate. “We don’t know enough of the pathogenesis of the disease to know whether a given thing will work,” Essex adds. Immune system regulators, still a new technology might interfere with chemical “message transmission” within cells, Essex says adding that the therapies may have “some importance in five to 10 years, but not faster.” Essex’s predictions are shared by others. At a Senate hearing last month Commissioner of Food and Drugs Frank E. Young stated that based on the FDA’S past experience with experimental drugs, he expects "very few” of the more than 100 AIDS drugs currently in clinical trials to prove safe and effective. According to a statistical model developed at the FDA, only one or two therapies are predicted to be approved by 1991. This voice in the darkness emanated from Imreg Inc., a small biotechnology startup that few in medical science had even heard of before. A Subcommittee on Oversight and Investigations is said to be looking into the appropriateness of Imreg’s claims. Nevertheless the young biotech firm’s reported test results already prove at least one thing that AIDS breakthroughs, if they are to be made, may come from unexpected sources. Imreg, as it happens, is not located in Los Angeles or Boston, the acknowledged meccas of entrepreneurial biotechs, nor are its principals associated with the National Institutes of Health in Bethesda, M.D. Rather, Imreg is a fledgling in medical research, the brainchild of a 51-year-old immunologist and his wife, headquartered in an area of the country more often noted for jazz and Cajun cuisine than cutting-edge science— New Orleans. Imreg isn’t unique, of course. It is one of more than 50 U.S. companies entered in the race to develop an effective treatment for AIDS. Most are large, well-financed, pharmaceutical concerns, but Imreg is among a handful of small companies that are making noteworthy progress. For example, Ethigen of Los Angeles, Peninsula Labs of Belmont, Calif., and Advanced Biotherapy Concepts of Rockville, Md., all have products that they believe will be effective in modulating the immune system of patients infected with the HIV virus—building up their defenses so as to impede progression from AIDS-related complex to AIDS. But even among its peers, Imreg’s therapeutic is out in front. Imreg-1 is the fifth drug to make it through the FDA’s clinical testing process. Under the agency’s Investigational New Drug program, a proposed therapeutic must pass through three phases of clinical testing before a new drug application can be filed for final review by the agency Phase I tests the toxicity of the drug phase ll is designed to determine that the agent in question is, indeed, effective. In phase III the dosage is fine-tuned and definitive data on the side effects of the drug are gathered. Of more than 100 proposed AIDS drugs currently engaged in one or another of these stages in the clinical testing process, only nine had made it to phase III by the end of June. Imreg-1 is one of the nine. Indeed, it had completed phase III. That means that there are only four treatments “ahead” of it. Three have not only completed the process, but have been filed as new drug applications and moved into final FDA review for use in treating AIDS-associated conditions, such as pneumonia or Kaposi’s sarcoma. The fourth, Retrovir (more commonly known as AZT), has been fully approved by the FDA for use against AIDS. To get its contender to the finish line, Imreg is now engaged in the arduous process of submitting a new drug application. If the drug is approved, this tiny startup—with only 49 employees—could potentially have its hands on a gold mine: one of only two treatments approved by the FDA for use against AIDS (see chart.) “The future of this company is depending on a large measure on what happens with Imreg-1,” admits Imreg president Arthur Gottlieb, in what for him is an uncharacteristic display of openness. Studying Gottlieb’s experience is like opening a window onto the trials and tribulations of science entrepreneurs. Caught in the critical struggles to establish confidence in financial markets, credibility with science peers, and acceptance from the all-important federal agency that controls Imreg’s fate, Gottlieb as a scientist-entrepreneur has been dragged out of his lab and forced to become a businessman. Rather than entering the entrepreneurial arena by choice, Gottlieb entered out of necessity. Chairman of Tulane University’s Department of Microbiology and Immunology he worked throughout the 1970s to purify substances from white blood cells (now called “biologics”) that he believed could be used to regulate the immune system. These naturally occurring substances, he figured, could be harnessed to treat diseases that involve immune system disorders— diabetes, rheumatoid arthritis, and some cancers, for example. When neither the National Institutes of Health nor Tulane would invest the money he needed to pursue the science, he decided to turn to venture capital. “Had it not been that the resources had been limited in the academic field, I wouldn’t be here to day,” says Gottlieb. “When I graduated from medical school, I never thought I’d be CEO of a publicly traded company.” But in 1981, armed with the firm belief that the substances had market potential, he took what he calls a “leap of faith” and founded Imreg. Relying on a business knowledge that consisted only of having read the popular business press, he learned as he went. (Gottlieb says he attended school with Wall Street wheeler-dealer Carl Icahn, “But we didn’t discuss business.”) He hired an attorney, raised $3.25 million in venture capital from 30 investors, and rented 4,000 square feet of office space, complete with wet lab, only two blocks from Tulane. That Have Completed FDA Clinical Trials Burroughs Wellcome Triangle Park, N.C.) Hoffman-La Roche (Nutley, N.J.) Imreg (New Orleans, La.) Schering-Plough (Madison, N.J.) Syntex (Palo Alto, California) Scientists 189 129 9 245 125 Retrovir (zidovudine; AZT) Roferon-A (Interferon alpha) Imreg-1 Intron-A (Interferon alpha) Cytovene (ganciclovir) Product AIDS, ARC Kaposi's sarcoma AIDS, Kaposi’s sarcoma, ARC, PGL Kaposi’s sarcoma Cytomegalovirus University officials seemed puszled by such an undertaking, which was new to the conservative medical community there. There was no procedure for handling proprietaiy material, notes Gottlieb, adding: “I guess they felt nobody there would ever invent anything, so they weren’t concerned.” The parties reached an agreement that allowed Gottlieb to remain as chairman of Microbiology and Immunology at the medical school, a position which he still holds, and allocated to the company the rights to profits. The same agreement, however, dictates that Imreg pledge $750,000—to be made in payments of up to 2% of the company’s after-tax earnings each year—to endow a chair in immunology. Tulane officials will not comment on the arrangement, which a spokesman dubs a “private matter.” But, perhaps pointing to the anomaly that Gottlieb, as an entrepreneur, represents at Tulane, the same official could not resist commenting obliquely that “He’s the only doctor I know of here that has his own PR person.” Gottlieb feels strongly that starting with a potential product in hand allowed Imreg to develop faster and at less expense than many other biotech startups. Within three years, the staff had garnered the first of 17 patents Imreg now holds on six “unique” substances (including Imreg-1) in 15 countries. The company began testing the substances, all biologics, for effectiveness in cancer, diabetes, and arthritis—before AIDS was even defined as a disease. In 1982, the same year that Imreg-1 entered phase I trials, a doctor on Imreg's medical advisory board made what proved to be a prophetic suggestion: that the staff test the biologic in AIDS. At first Gottlieb resisted the suggestion because, he says, it seemed there would be too few cases. But the numbers of infected patients grew, and AIDS became recognized as a major public health problem. By the end of 1984 the company had focused all its resources on testing the efficacy of Imreg-1 in AIDS. “It is a simple law of economics,” Gottlieb says. “When things are needed, they get developed.” In January 1984, Imreg made a public offering that raised $10.5 million from stocks and $1.2 million in warrants. Later that same year, Imreg-1 entered phase II testing. For years, Gottlieb’s wife, Manse, an epidemiologist and associate professor at Tulane, had been reviewing clinical protocols in the evenings at the kitchen table in their suburban home. Suddenly, that task outgrew the kitchen. In fact, by 1986, Gottlieb was so overwhelmed with corporate activities that he had to turn the clinical side of the operation over to Manse, who was named vice president, responsible for overseeing the clinical trials of the biologic. One reason Gottlieb found himself so busy was the need he felt to open a second office and laboratory, in Cambridge, Mass. Gottlieb recites several motivations for making this move. Most important, he says, it made it easier to attract first-class scientists, who were not as plentiful in New Orleans and were not willing to relocate there. And it gave the company greater visibility and proximity to the science community of Boston, where many of the hospital trials were taking place. Another all-consuming activity involved managing the company’s growing image. “We spend a lot of time with public relations, Gottlieb says, explaining that AIDS research, in general, is closely scrutinized, and that Imreg, in particular, has been under a magnifying glass (he feels this is because the company is in the business for profit). As an example, Gottlieb says he’s had to counter suggestions that the company announcements are “hyping the stock” by promoting an unproven AIDS treatment, and he adds: “I don’t know what to do about the perceived credibility question.” But the critical questions dominating the Gottliebs’ time are—as always among science entrepre neurs—capital-related. Imreg has spent the majority of its $10 million capital developing Imreg-1. “We’re still lean and mean because we can’t afford to be other- wise,” says the president, who books cheap airline tickets and uses shared airport limousines rather than taxis. And all expenditure approvals, including those for ‘‘every test tube,” cross his desk. One solution would be to enter a marketing agreement with a well-known pharmaceutical company, as most of Imreg’s startup competitors have already done. This would not only raise desperately needed capital but it would enhance Imreg's credibility among doctors, acknowledges Gottlieb, who says that the company has, indeed, begun to look for a partner to help market Imreg-1. Meanwhile, the Gottliebs retain a tight grip over the public company’s operations and agenda. They own 38% of the stock, and have shareholder approval to appoint a majority of the board of directors. But what if Imreg-1 runs into obstacles? Gottlieb points to Imreg’s five other substances—one of which, Imreg-2 is in the second phase of clinical trials for treating AIDS—in asserting that the FDA review is “not a make-or-break decision” for the company. But market analysts do not appear to have quite as much faith in the New Orleans startup: They see the company’s future as tied directly to the FDA ruling on Imreg-1. If it is not approved, “then there’s no company,” says Stuart Weisbrod, biotechnology stocks analyst for Prudential Bache Securities. The Gottliebs are betting their company against the common wisdom; they believe that, over the long haul, they can build Imreg into a full-fledged pharmaceutical with internal development and marketing capabilities. If they’re right, then two scientists who never dreamed of becoming business people can invent a company as cleverly as they could invent a therapeutic. They hope they can because, financial pressures and public image notwithstanding, the couple say they are hooked by their work developing the biologic. To Manse Gottlieb, these days academic life is just something “to retire to.” David Graham is a Knight Science Journalism Fellow at MIT

A Tiny Biotech Startup Wages War Against AIDS

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