The SARS Cash Cow

No vaccine or treatment for severe acute respiratory syndrome has yet appeared, and government money has just begun to flow to SARS research. Yet biotech companies have already cashed in on SARS fears, thanks to investors who scrambled to place their bets on the winners in the race against the new global scourge. At biotech after biotech, the story was the same: a press release claiming connection to the search for a cure for SARS brought a nice bump-up in the stock price and a hefty increase in trading activity, no matter how small or struggling the source. RIDING THE WAVE On April 24, Genomed of St. Louis was selling for a penny a share in off-exchange trading. Then came the first of a flurry of SARS-related press releases, and the company's posted selling price quadrupled, to 4 cents per share. The most recent Securities and Exchange Commission documents reflect that Genomed had $2,732 cash on hand to accomplish its ambitious objectives, which include clinical trials involving Alzheimer and Parkinson diseases, blindness, osteoporosis, diabetes, kidney failure, sickle cell disease, and emphysema, as well as SARS. These objectives were itemized in company press releases from only May and June of this year. Shareholders of Philadelphia-based Hemispherx Biopharma have not seen a profit since the mid-1980's. Ampligen, its flagship product, has spent more than 13 years in clinical trials, with no FDA approval to show for the effort. Hemispherx played the SARS card several times in its press announcements and won a ride up from below $2 per share to almost $3 per share. On May 19, about 6.5 million shares of Viragen sold for between 11 cents and 13 cents per share. The next day, 175.7 million shares changed hands, at prices as high as 66 cents per share, thanks to an announcement that the company had filed for a SARS drug patent. The Plantation, Fla.-based developer of natural interferons owns most of an international subsidiary that trades in the over-the-counter market. That company's stock also got a nice SARS jolt, rising from 15 cents per share to as high as 45 cents per share in the same day. Viragen showed only $68,819 in cash on its books at the end of March 2003, and the company is already stretching to get its natural interferon into the big global market for hepatitis C treatments. How can a company of such limited resources take a flier on an unknown disease such as SARS? "The way to explain it to our investors is that the market for this company is in hep[atitis] C and oncological," says Douglas Calder, Viragen spokesman. "Assuming the best-case scenario, if we do prove effective against SARS, it would still be a small market opportunity, but a good opportunity to heighten attention on the company." SARS-related hopes fueled deals as well as stock price increases. New York-based SIGA Technologies saw its price spike in intense trading on May 20. That was the day it announced that the company it was in the process of buying, Plexus Vaccine of San Diego, Calif., had filed a patent on technology to validate antigens for SARS and other diseases. Plexus' patent grew out of work at Technical University of Denmark (DTU) and the University of Copenhagen. Søren Brunak of DTU headed the computational side of the research team, which came up with an iterative process looping bioinformatics and experiments to get targeted data. That's important for SARS, Brunak explains, because epitopes that give researchers something to aim at differ across ethnic boundaries. "In the immune system, the epitopes that work for a Caucasian will not work in China," Brunak says. Other companies are capitalizing on the possibility of a SARS vaccination. On May 21, Toronto-based Generex Biotechnology's stock was selling for $1.37 per share, at a volume of about 117,000 shares. The next day, it announced a collaboration with privately owned Antigen Express to develop a SARS vaccine; 2.2 million shares of stock sold, at prices as high as $1.72 per share. By June 6, Generex announced it was buying Antigen Express, in a deal valued at $4 million. By then, Generex had good news of its own: its oral formulation of insulin is moving to market. That success gives Generex cash to develop Antigen Express' technology for boosting helper T-cell response. HIV and cancer are the target markets for this technology, the subject of more than 40 papers in peer-reviewed journals. Antigen Express commanded more than $2 million in federal small- business grants, but the biotech couldn't catch a break from venture capital investors, says CEO Joseph Gulfo. The company was casting about for deep pockets when SARS brought the small company onto the radar screen of Generex, which develops drug-delivery technology. The Toronto firm saw SARS as an insult to national honor and reached out to Antigen Express. "What is SARS going to do for us? SARS got Generex interested in the company," Gulfo says. "Did it lead to the acquisition? I'm not so sure, but it got them interested." FED SCREEN-FOR-ALL In the United States, federal authorities scrambled to set up a system to screen compounds for activity against SARS, at no cost to anyone interested in pitching in. A three-way material transfer and intellectual property agreement was cobbled together at top speed, assuring companies that patent rights and confidentiality would be protected if they sent compounds to be screened at the US Army Research Institute of Infectious Diseases (USAMRIID), Fort Detrick, Md. "I have no idea how many suppliers have sent compounds for testing, [but it's] a lot," says Robert Baker of USAMRIID. "It is a tremendous workload." The National Institutes of Health stepped in to cover the Army's extra costs and rake through results, looking for a compound that could treat, diagnose, or guard against SARS. "It's been very gratifying, actually," says Catherine Laughlin, chief of virology at NIAID. "A lot of pharmaceutical firms both large and small, as well as a number of chemists, academic investigators, and government researchers have had ideas about what might be effective and have been generous in sharing them." Birmingham, Ala.-based Southern Research Institute (SRI) had a government contract in place when the SARS rush hit. "Our role for NIAID is to filter what comes in and focus on things that make sense, and don't bother with things that don't," says Jack Secrist, SRI's vice president of drug discovery. "In the initial stages we talked about it and felt we should err on the side of screening most everything and then become more selective." Nothing in SRI's contract gives it the job of reviewing biotech finances or the credibility of public claims. "The companies recognize obviously that there will be great visibility if something they have turns out to be good," Secrist says. BioCryst Pharmaceuticals, also in Birmingham, Ala., announced on May 28 that it had an amended agreement with the government to test its drug-design skills against SARS and West Nile virus. Trading activity the day before came in at 77,700 shares, and the stock ended the session at $2.87 per share. The day of the announcement, 934,400 shares were traded and BioCryst's stock closed at $3.69 per share. BioCryst chairman and CEO Charles E. Bugg says he was impressed with the speed with which the government cleared the way for the biotech community to contribute to the fight against SARS. Late one Friday afternoon, April 25th, Bugg e-mailed USAMRIID and suggested that it would make sense to amend the agreement to include SARS. He got an answer the following Sunday at 11 am, including the amended draft pact. As for the extra attention it gained from SARS, BioCryst doesn't mind at all. "Biotech investors are really interesting," Bugg says. "They're not just interested in making money; they really do relate to the prospect of making a difference in the world." Peg Brickley can be contacted at pegbrickley@hotmail.com. function sendData() { document.frm.pathName.value = location.pathname; result = false if (document.frm.score[0].checked) result = true; if (document.frm.score[1].checked) result = true; if (document.frm.score[2].checked) result = true; if (document.frm.score[3].checked) result = true; if (document.frm.score[4].checked) result = true; if (!result) alert("Please select") return result; } .myradio{background-color : #94bee5} Please indicate on a 1 - 5 scale how strongly you would recommend this article to your colleagues? Not recommended 1 2 3 4 5 Highly recommended Please register your vote

The SARS Cash Cow

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