THE STATE OF SPINOFFS

By Frank DillerTHE STATE OF SPINOFFSThree different beginnings show the variety of ways to evolve from an idea to a company. In the late 1990s, scientists from R.J. Reynolds Tobacco Company published many papers and abstracts about neuronal nicotinic receptors (NNRs). Knowing that such receptors respond to nicotine explains why a tobacco company would study them. Moreover, some research indicates that NNRs could play a role in tobacco's toxic effects. For example, bronchial epithelial cells express NNRs. Nonetheless, NNRs might lead to more than toxicity. Targacept, a spinoff from Reynolds, hopes to put NNRs to healthy purposes.© LISA KLUMPP Headquartered in Winston-Salem, NC, Targacept started out as a subsidiary of R.J. Reynolds. Now on its own, Targacept plans to turn tobacco research into a pharmaceutical pipeline. Moreover, this strategy appears to be working. At the beginning of this year, Targacept started a Phase I trial of its TC-2216, which targets NNRs to reduce the symptoms of depression and anxiety disorders. So far, results seem encouraging. Targacept claims that preclinical studies indicate that TC-2216 could have a higher potency than selective serotonin reuptake inhibitors, which are in common use today.Although spinning danger into repair might arise infrequently, scientific and technologic discoveries in North Carolina often spawn new companies. North Carolina generates so many spinoffs that one article cannot mention even a fraction of them. Instead, this article explores various pathways from discovery to spinoff. Targacept, for instance, came from a larger company. Another company, described below, came from a mixture of academics and industry, and a third came strictly from academic scientists.MIXING IT UP AT METRICS In the early 1990s, Phil Hodges worked as a Burroughs Wellcome chemist at the company's Greenville, NC, plant. He hadn't come far in miles, because he grew up in the nearby town of Beargrass in Martin County. Hodges knew Greenville well by then, having earned his bachelor's and master's degrees at this town's East Carolina University. That university connection expanded through a project with John Bray, then a faculty member in East Carolina's chemistry department. Hodges and Bray teamed up to found Metrics, a company aimed at testing potential drugs to come up with the best ways to make and take them. To get started, Hodges and Bray needed money, and East Carolina Bank helped them to secure a loan. That got Metrics going, but it started with a staff of only four people. With so few resources, Metrics concentrated on contract analytical-development work. Moreover, Hodges immediately learned the value of not burning bridges when spinning off. Luckily, he left Burroughs Wellcome on very good terms - so good that the company became Metrics' first customer in November 1994. In a spinoff, however, bridges can get burned from beneath you. Soon after Metrics started doing work for Burroughs Wellcome, Glaxo bought the company. After that merger, Glaxo Wellcome pulled all of its business from Metrics. Years later, Hodges would reflect on that early loss of business and say simply, "It did make me nervous." Perhaps that is understated, or it could be the sign of someone who is extremely calm. To keep Metrics afloat, Hodges and Bray cut their own salaries by half. Eventually, the company developed more clients. © DON W. FAWCETT / PHOTO RESEARCHERS, INC After 13 years, Metrics employs more than 180 people, including 80 analytical chemists and 20 pharmaceutical development scientists. Moreover, Metrics now works out of a facility that covers 44,000 square feet. As Metrics grows so does the company's demand for trained scientists. "We hire a lot of chemists," Hodges says, "and we spend months getting them to understand regulations and training them to do things the way we want them done." Hodges says he thought of having someone else conduct the training. So Hodges and Bray approached the East Carolina University and the local DSM Pharmaceuticals about collaborating to develop a good manufacturing practices (GMP) lab in East Carolina's chemistry department, which opened in 2005. In addition, Metrics continues to contribute to the program. For example, the company's regulatory affairs manager, Bill Tilghman, teaches a GMP course to 10 upper-level, analytical chemistry majors. "The focus of the class isn't so much technical as it is regulatory," Hodges says. "Everything we write up is subject for an audit, either by the client or by the FDA, so we want to make sure it's done right."In many ways, Metrics represents a spinoff that keeps on spinning. Burroughes Wellcome and East Carolina served as the sources of Metrics, which then spun resources back to East Carolina to train students. Now, three graduates who completed Tilghman's course are working alongside him at Metrics. "There's been a positive result for the people that we have hired," Hodges says, noting that his lab supervisors were impressed with the new graduates' skill set during company training. "We probably would have liked to have hired more of them," Hodges says. Phil Hodges © LISA KLUMPPDOING GOOD DEEDSIn the late 1990s, Robert Johnston, director of the Carolina Vaccine Institute at the University of North Carolina (UNC) at Chapel Hill, experienced what he calls "a little dip into the for-profit pond" as a cofounder of AlphaVax, which develops new vaccines. Over time, he realized that maximizing profits prevents industry from always making sure that a vaccine reaches the target population. So, Johnston founded Global Vaccines, a nonprofit. "I decided with Global that I wanted not to have to think in terms of profit," he says. "I wanted to think in terms of global public health." By developing vaccines that can subsequently be licensed to commercial manufacturers, Global Vaccines will be able to subtract some of the most-expensive steps in a for-profit's equation. To succeed, however, Global must work with the university labs that develop the initial technologies. "Unlike most biotech companies," Johnston says, "we feel like the people who invent the technology: A, have the most expertise in it; and B, have an interest in seeing it used." It's an idea that could revolutionize the way universities license technology and commercial manufacturers develop it. But revolutionary ideas don't pay the bills. John Bray © ROB FLYNN Clayton Beard, a virologist with experience as both a patent agent and a researcher, joined Johnston's UNC lab in 2003 because he was interested in developing the nonprofit concept. "Bob hired me at 80% time, and that allowed me 20% of my time to donate to the start of Global Vaccines," says Beard. For almost three years, Beard discussed technology transfers with UNC, developed the necessary legal and scientific documents, and sought out lab space. As the project gained traction, money started flowing. The International AIDS Vaccine Initiative (IAVI), a nonprofit familiar with Johnston's work from his AlphaVax years, provided $100,000 in annual low-level funding. In December 2005, IAVI also awarded Global Vaccines a grant as part of its Neutralizing Antibody Consortium, providing at least $1.2 million per year through 2012. A loan from the North Carolina Biotechnology Center also helped to cover intellectual property analysis and business development. In February 2006, Global Vaccines licensed two technologies from UNC: an adjuvant that enhances systemic and mucosal immunity when used with inexpensive vaccines, and an approach to creating new live attenuated vaccines from scratch. Johnston hopes this is just the beginning of licensing opportunities. "Right now, our relationship is with UNC and my laboratory," he says. "But as far as Global is concerned, we hope that we can establish multiple relationships like that across the country." Robert Johnston © ROB FLYNN In May 2006, Beard left Johnston's lab to become the full-time director of research at Global Vaccines. Three other members of the Vaccine Institute and a researcher in the university's department of microbiology round out the full-time staff. Global also gathered more funding. In July 2006, IAVI committed another $1.7 million annually through 2011 to study novel viral vectors identified for potential use in HIV vaccines. Two months later, the National Institutes of Health awarded a $5.3 million, four-year grant to study the adjuvant technology that Global Vaccines licensed from UNC. "For years, the dogma has been [that] if you wanted to generate mucosal antibodies, you'd have to give a vaccine across the mucosal surface," Beard says. "The big thing about this adjuvant is that it will allow one to stimulate this mucosal response by giving a systemic vaccination. And it works great in mice." Successful development could cut vaccine dosages, thereby making it cost-effective to disseminate vaccines to the developing nations that need them most. Johnston is cautiously optimistic. "There's a saying in the vaccine world that mice lie and monkeys don't always tell the truth. Our next step is to get this into primates and see if the technology is successful," he says. "That actually is a milestone on two different tracks. On the science track, it's a milestone because perhaps now we should consider human trials. And on a business track, that's a point at which we can start to discuss potential commercial licenses." Such companies also represent milestones for the state. Each new biotechnology spinoff leads to more jobs, more products, and potentially more spinoffs ahead for North Carolina.

THE STATE OF SPINOFFS

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