France's Cytomics Goes Offshore—to U.S.—for Chemistry

CASE STUDY

Other, perhaps, than the fact that its based in France, Cytomics Systems is a typical small biopharmaceutical company.

The Paris-based firm was founded in 2000 by Dominique Thomas, director of research at the CNRS Center for Molecular Genetics. It raised 3 million euros ($3.6 million) in financing from Socit Gnrale Asset Management in 2003, and today it has 15 employees.

Cytomics is based on Thomas work in the field of the ubiquitin-proteasome pathway for protein degradation. In July, the company announced that it had discovered small molecules able to inhibit the in vitro proliferation of human cancer cells by acting on the activities of the proteasome.

The job of further developing these molecules falls to Sabine Barbey, the firms head of medicinal chemistry. And because she oversees a virtual chemistry department, Barbey needs help. We are a small biotech company, and we dont have any chemistry in-house, she says, so obviously we must find companies that can do chemistry for us.

Barbeys approach to outsourcing is telling of how the chemistry services market is developing: For her basic, no-nonsense synthesis needs, she hired Syngene, a big Indian contract research firm. But for her complex medicinal chemistry work, she is using Kalexsyn, a small Kalamazoo, Mich.-based company launched last year by former Pharmacia chemists.

Earlier this year, Barbey needed quantities of one of the anticancer compounds discovered through Cytomics UbiScreen platform. It is a hard-to-make molecule, however, and the European chemistry services company she was working with couldnt synthesize it. She decided to try Kalexsyn on the suggestion of a friend in the chemistry community.

Kalexsyn is the brainchild of Robert C. Gadwood and David C. Zimmermann, veterans of Pharmacias R&D operations in Kalamazoo. When Pfizer acquired Pharmacia in 2003 and announced the end of drug discovery research there, Gadwood and Zimmermann decided to stay in town rather than pull up roots for a Pfizer site on the East or West Coast.

They figured they could build a business doing chemistry for Pfizer and other major drug companies. But by the time Kalexsyn moved into new labs in March 2004, big pharmas embrace of offshore chemistry providers was in full swing. The timing could not have been worse, Gadwood says. We had a business plan predicated on chemistry outsourcing in the late 1990s. By 2003, the whole landscape had changed.

He and Zimmermann regrouped and started pitching their services to smaller companies in the U.S. and in Europe, where the exchange rate favored them. And they got creative on pricing. To Barbey, they offered to perform chemistry at a discounted rate for a month or so, followed, they hoped, by a longer contract at full price. She took them up on it and soon found they were able to make the molecule. Since then, Kalexsyn has been developing an optimized family of molecules around the first one.

Today, in addition to Gadwood and Zimmermann, Kalexsyn employs 11 full-time chemists—all but one of them former Pharmacia staffers. It also works with several former Pharmacia and Upjohn chemists on a consulting basis. The company is just starting to break even, Gadwood says, and plans to move out of the business incubator it occupies to its own, larger quarters late next year or early in 2007.

For its part, Cytomics expects to carry out in vivo experiments with some of the optimized compounds in early 2006. Assuming positive results, it will then move them into preclinical trials.

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