MICROBE MANAGEMENT | June 7, 2004 Issue - Vol. 82 Issue 23 | Chemical & Engineering News
Volume 82 Issue 23 | p. 17
Issue Date: June 7, 2004

MICROBE MANAGEMENT

Microbia's Precision Engineering unit brings in cash to fund a drug discovery effort
Department: Business
SHARPSHOOTER
John C. Royer, Microbia team leader on the Ranbaxy project, works in the firm's Cambridge, Mass., labs.
Credit: MICROBIA PHOTO
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SHARPSHOOTER
John C. Royer, Microbia team leader on the Ranbaxy project, works in the firm's Cambridge, Mass., labs.
Credit: MICROBIA PHOTO

In the cozy world of directed microbial evolution technology, the publicly traded companies Diversa and Maxygen garner much of the attention. Lately, however, venture-capital-backed Microbia is the firm bringing in the money.

ced that it raised $40 million in its fourth round of venture-capital investment. Paperboy Ventures led the financing, joined by backers from previous rounds as well as new investors Invus, BioOne Capital, Alton, and Linkagene. The new money brings Microbia's total funding to $99 million.

And later this week, Microbia is expected to announce the receipt of milestone payments from India's Ranbaxy Laboratories for its work in helping Ranbaxy improve the fermentation-based production of a leading statin drug.

VENTURE CAPITAL
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VENTURE CAPITAL

Diversa, Maxygen, and Microbia all own technologies for the rapid evolution, or improvement, of microorganisms that express pharmaceutical ingredients and fine chemicals. Maxygen's technique, for example, is called MolecularBreeding, while Microbia's is Precision Engineering. Although the technologies differ in their specifics, all seek to improve what microbes normally do--or to modify them to make molecules they normally don't.

Microbia's approach, which relies on the fine-tuning of microbial circuitry, is rooted in research done in the early 1990s at the Whitehead Institute for Biomedical Research, a nonprofit institution affiliated with Massachusetts Institute of Technology. The company was founded in 1999 by Peter M. Hecht, a Whitehead fellow who wanted to harness the technology both for internal drug discovery and for outside customers.

The latter effort, which took the Precision Engineering name, began in earnest in late 2001. It is now headed by Richard B. Bailey, a veteran of Monsanto and Kelco who joined Microbia in early 2002 as senior director of biomanufacturing business development. Since its launch, Bailey's business has struck seven deals and has seen two of its fermentation strains--one for Ranbaxy and one for Israel's Teva Pharmaceutical Industries--go into commercial production.

Although several companies offer metabolic engineering technologies that claim significant expression improvement, Bailey argues that Microbia is distinguished by the speed with which it delivers results. In the Ranbaxy statin project, he says, the partners went from deal signing to commercial manufacture in just 12 months.

Govind K. Jaju, global supply chain director at Ranbaxy, says his company contacted Microbia as part of an internal effort to improve efficiency and reduce costs. Ranbaxy surveyed the competitive landscape, Jaju relates, and went with Microbia because of what it saw as an edge in expected efficiency improvement and project timeline adherence.

An out-of-the-blue e-mail query was Bailey's first contact with Ranbaxy. He responded, and three months later the firms had signed an agreement that included an extended visit by a Ranbaxy scientist to Microbia's Cambridge, Mass., labs. Within six months, Bailey says, Microbia was able to deliver a "much improved" microbe strain that is now being installed at Ranbaxy's fermentation facility in India's Himachal Pradesh state.

Microbia reported a similar success last October in its efficiency improvement collaboration with Teva. In March, the two firms struck a multiyear, multiproduct deal that features success-based milestone and royalty payments by Teva.

Bailey says his business's other, unannounced collaborations involve bacterial and fungal strains modified to make pharmaceuticals as well as specialty chemicals. In one project, Microbia is developing an all-new fermentation route to a specialty chemical now made by what Bailey calls "rather messy" classical chemistry.

Of the 70 people employed by Microbia--half of them Ph.D. scientists--about 25 work on Precision Engineering projects, Bailey says, going back and forth from the firm's drug discovery effort as needs dictate. The rest of the staff is devoted to drug discovery.

Indeed, although the Precision Engineering technology is what got Microbia off the ground, the company is much more than that today, asserts Hecht, now chief executive officer.

AROUND THE TIME that Bailey came aboard, the company enhanced its chemistry capabilities by hiring John J. Talley, the medicinal chemist who invented the COX-2 inhibitor Celebrex, as vice president of drug discovery. It brought Harvard University chemist E. J. Corey onto its scientific advisory board and has added other drug discovery capabilities.

Of the three drugs now in development at Microbia, only one stems from the original Whitehead technology, Hecht says, although he notes that elements of the technology play a role in all of the firm's discovery efforts. Today, Precision Engineering's main function is to generate cash to fund the advancement of new therapeutics.

Maxygen, which pursued a similar two-pronged business strategy when it was formed in 1996, eventually turned its third-party business into a separate subsidiary called Codexis. Codexis is now part owned by outside investors who invested $25 million in it in October 2002.

Hecht is aware of Maxygen's strategy, but he says he likes the commercial validation, customer focus, and operating discipline that the Precision Engineering business brings to Microbia. "The balance of growth between different units can present a strategic challenge in any business," he says. "We're quite pleased with what we've done and how the two businesses are working together."

 
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