Two Companies: Microscopic Collaborations

The Scientist 14[20]:0, Oct. 16, 2000 NEWS Two Companies: Microscopic Collaborations By Arielle Emmett Some of the more established companies seem to hedge their bets by forming complex, multiple collaborative relationships with a number of companies. Neose, for example, a Horsham, Pa.-based biotech venture specializing in complex carbohydrate development, now has five formal corporate collaborations in place, according to P. Sherrill Neff, president and CEO. "One of the partnerships is with McNeil at Johnson & Johnson; it’s a formal joint venture company dedicated to the production of nutritional products. We also have collaborations with Wyeth Nutritionals, part of the consumer division of American Home Products, to develop additives to infant formula products. There is a third collaborative relationship with Bristol-Myers Squibb for the production of ganglioside compounds ¼. We also have a formal collaboration and investment agreement with Neuronyx in the area of Parkinson’s disease and a formal corporate collaboration with Novazyme Pharmaceuticals." In addition to the five formal arrangements, Neose has numerous academic collaborations and another group of partnerships in the business unit called GlycoAdvance. These are technologies for glycosolation of recombinant proteins. "So we have over a half dozen active collaborations, many of which we expect to result in formal commercial relationships," Neff says. Neose, which has 80 employees and a market cap of $700 million, builds its platform of relationships by offering a unique technology development expertise -- intellectual property, in other words. "Some of the simple collaborations have to do with a large company that would like a particular molecule as a commercial product, and either has a way to make the product, or has no way of making the molecule," explains Stephen Roth, an executive at Neose. "When it comes to a company like Neose, a [potential partner] will say, can you make the molecule? And we’ll pay you XYZ; that’s straightforward." But relationships can become much more complex as time goes on. For example, "we also have a relationship with Johnson & Johnson, which is a true joint venture. When we met with J&J, we didn’t know if we could even make the compound they wanted, so we couldn’t decide on a fair agreement and didn’t feel it was fair to give them rights to all the commercial products they would develop [based on a speculative result]. So we sat down and came out with a 50-50 joint development agreement. We also estimated a period of time to make the molecule they wanted; and J&J agreed to pay expenses to see what we came up with." That process took 21/2 years before the companies knew they had a viable commercial product (e.g., an enzymatic way to make carbohydrate-based agriculture products]." Moral: relationships must be flexible and their definitions constantly evolving. "In the beginning it’s simply a scientific collaboration; and the average person thinks that science is black-and-white," Roth says. "But as you get to know the people more and more, and know more about the product, the clinical successes, and our technology, we learned that what seems very clear-cut in fact is not. After spending a year on and off with 12 people from another company, for example, the interactions become richer and more complex." One of the most complex set of partnerships has evolved at Cephalon Corp., which has followed a development arc that typifies many successful mid-size biotech companies today. Founded in 1987 by neurobiologist Frank Baldino, the company (named after the Greek word "head") set out to become a niche pharmaceutical player in nervous system diseases. Cephalon struck an early deal with Shering-Plough in its Alzheimer’s disease program in1991; Baldino approached the pharmaceutical giant for an R&D partnership, with ultimate commercial rights for outcomes ceded to Shering-Plough. This enabled Cephalon to go public by 1992. A spate of international collaborations followed, with Cephalon signing on Kyowa Hakko Kogyo, a Japanese pharmaceutical firm, to do cooperative R&D on compounds that now comprise "two of our most important clinical leads," according to Cephalon’s John Farah. By 1994, Cephalon had begun another relationship with Bristol-Myers Squibb to co-promote that company’s product called Stadol N.S. (nasal spray), a mixed opiate used for acute pain indications (such as episiotomy). "The deal offered Cephalon an ability to build a commercial opportunity in North America while affording Bristol-Myers Squibb an opportunity to form a target audience of physicians [that] they would be unable to reach otherwise. That’s because Bristol didn’t have a neurology sales force at the time," Farah explains. The deal enabled Cephalon to receive the benefit of sales revenues above a forecast amount of sales this year; "so if we made the product grow better, we received payments for that commensurate with the sales increase." Farah says the early Bristol-Myers Squibb deal was "platform building in terms of the company asset base." And it gave Cephalon the muscle to build a network of European and Asian collaborations. "Most are actually regional and have both R&D and commercial elements to them," he says, "in which Cephalon preserves North American rights and partners out other territories where we do not expect to build infrastructure in the immediate future." The company struck a deal with the Danish company Lundbeck A/S to develop a product called CEP-1347 (also known as KT 17-15), which Kyowa Hakko Kogyo had originally identified. "Kyowa had granted Cephalon rights to certain parts of its proprietary library, and we discovered among those a kinase inhibitor KT 7515, which prevents death of neurons in animal models. We realized going into trials that it would be costly and time-consuming, so Lundbeck was interested in doing justice as a co-development partner," Farah recalls. Cephalon, in fact, approached Lundbeck several years ago because Lundbeck is a known player in psychiatric products. Today, Lundbeck pays research fees and retains European rights to CEP-1347, Cephalon retains North American rights, and Kyowa enjoys both the milestone payment royalties and its own commercial rights in Japan and other territories. Farah likens the complex relationships "to building your first model car. One group is working on chemistry for scaling up compounds for use in clinical studies. Another will focus on issues related to chemical formulations, and another focuses principally on R&D backup compounds." Backup research is now considered a must in expensive and time-consuming collaborations. "Backups may be able to overcome a shortcoming if it’s discovered in the lead molecule," Farah says, "or it will offer a second generation of product for the partners." Arielle Emmett (arielleem@snip.net) is a contributing editor for The Scientist. Editor's Note: This article did not appear in the print edition of The Scientist.

Two Companies: Microscopic Collaborations

Two Companies: Microscopic Collaborations

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