Issue Date: October 30, 2006
Losing Their Religion
Once devoted to worshipping at the altar of the protein, big biotechnology companies are starting to find faith in small molecules. Over the past few years, major biotech players have become converts to a "mode independent" philosophy; their focus has shifted from relying on therapeutic proteins to combating disease with every tool possible—be it an antibody, an antibody fragment, a peptide, a small molecule, or some combination thereof.
With the shift, biotech companies are building or expanding their chemistry research organizations in hopes of replicating within the small-molecule arena the level of expertise they have achieved in proteins. The firms are drawing on their biotech heritage for a different approach to designing drugs. By thoroughly integrating their biology and chemistry teams, they think they have a critical advantage when it comes to finding innovative small molecules.
This increasingly agnostic approach—to use industry's phrase—to drug discovery does not mean companies are forgoing their biological roots. Companies such as Genentech, which calls itself the founder of the biotech industry, and Amgen, today the largest biotechnology company, still devote most of their resources to protein-based drugs.
Moreover, recombinant proteins and monoclonal antibodies have clearly demonstrated therapeutic benefit. Drugs such as Genentech's Herceptin, Amgen's Enbrel, and Biogen Idec's Rituxan have brought new hope to patients suffering from a range of diseases. Biotech firms are realizing that antibodies are not magic bullets and recognizing that health care in the future will require treating disease with multiple types of drugs.
This embrace of small-molecule drug discovery is happening as biotech companies move away from a business model based on one or two core technologies, such as antibody design, according to G. Steven Burrill, chief executive officer of life sciences investors Burrill & Co. "Companies are much more focused on being the dominant player in a disease area, and they realize the answers are not always in a single drug," Burrill says.
Becoming a dominant player in a particular therapeutic area requires the flexibility to weigh both biologics and small molecules. A company focused on just one side of the cell—the outside with biologics or the inside with small molecules—is losing out, says Maxim Jacobs, analyst at the health care investment firm Mehta Partners. "You don't want to leave money on the table," he adds, noting that an antibody can pave the way for the development of a small-molecule drug, which later could cut into the sales of the antibody. Thanks to huge R&D budgets backed by sales of successful biologic drugs, biotech companies are starting to target everything they can, Jacobs says.
Biotech companies recognize the need to broaden their approach to truly address a disease. "Why would you try to build a house with just a hammer?" asks Paul J. Reider, vice president of chemistry research at Amgen and a member of C&EN's advisory board. "It may be the best hammer, but occasionally you want a saw, sometimes a drill." More important, he adds, becoming too reliant on a golden hammer can hinder a company. "If we're going to work on grievous illness, if we consider disease the enemy, why would you ever limit your options?"
And although some disease areas, such as endocrinology, lend themselves to protein-based drugs, the opportunity for small molecules to dominate in other areas is tremendous. "Given that 50% of the good targets in oncology are actually inside the cell, if you want to get at those targets, you have to be good in small molecules," adds Michael D. Varney, vice president of small-molecule drug discovery at Genentech.
Recognizing the need for technological breadth works both ways in the pharmaceutical industry. Big pharma, the longtime champion of small-molecule drug development, is starting to expand into biologics. In the past year, AstraZeneca paid $1.1 billion for the 80% of Cambridge Antibody Technology that it did not already own, while Merck laid out a combined $500 million to buy GlycoFi and Abmaxis. Most recently, Germany's Merck agreed to buy Serono, the Swiss biotechnology major, for $13.3 billion.
The biotech expansion into small molecules, of course, also has a financial rationale. As the leading biotechs mature into large multinational corporations, they are expected to maintain the rapid sales growth to which investors have grown accustomed. Revenues at Amgen and Genentech are starting to rival those of the major pharma firms, notes Mehta Partners' Jacobs, and they are under pressure to produce more blockbusters.
"Small molecules are really the way to go in that respect," he says, noting that patients are much more likely to accept, and buy, an orally available small-molecule treatment than the typical injectable protein-based drug.
Given these scientific and financial motivators, biotech companies are swiftly bulking up what just a few years ago were nascent small-molecule operations.
Among the big biotechs, Amgen arguably has the most advanced chemistry program, but the company admits to speed bumps along the road. Scott Foraker, vice president of licensing at Amgen, says the Thousand Oaks, Calif.-based firm first began to dabble in small molecules in 1994. The company waded further into the space the following year, hiring its first chemist and signing its first chemistry-related drug discovery alliance. The deal, with NPS Pharmaceuticals, tapped into a group of small molecules called calcimimetics.
But the program did not really get off the ground until 2000, Foraker says, when Amgen acquired Kinetix Pharmaceuticals, a company focused on making small-molecule protein kinase inhibitors. Amgen then brought on board several key executives with significant experience in small-molecule drug discovery, thereby laying the groundwork for the current chemistry research program.
"We had some false starts," Foraker acknowledges. "The first five years, between 1995 and 2000, were not great, but the past five years have been phenomenal."
Since 2002, Amgen's moves to build its small-molecule drug discovery and development capabilities have included the $1.3 billion acquisition of Tularik and the establishment of partnerships with Biovitrium, Infinity Pharmaceuticals, and Memory Pharmaceuticals.
Amgen's small-molecule program achieved a major milestone in 2004 when the company gained U.S. approval for Sensipar, a hyperparathyroidism treatment for kidney disease patients undergoing dialysis. The drug, which traces back to the NPS pact, brought $157 million in sales in 2005.
This year, the company licensed preclinical compounds for renal disease from Scottish specialty pharmaceuticals firm ProStrakan Group, and it signed a deal with Predix Pharmaceuticals, now known as Epix Pharmaceuticals, for access to Epix' preclinical S1P1 agonists for the treatment of autoimmune diseases.
Despite the recent deals aimed at pumping up its small-molecule drug pipeline, Amgen says it did not always receive a warm welcome when courting companies with chemistry expertise. For example, Amgen was swiftly rejected when it bid for access to a group of small molecules for metabolic diseases being offered by the Swedish biotech firm Biovitrum. "They didn't understand our capabilities, plus we didn't have any commercial products in the metabolic disease space," Foraker says.
Amgen, however, refused to take no for an answer. In 2003, the company emerged as the winning bidder and captured the exclusive rights to develop and commercialize Biovitrum's small-molecule inhibitors of the enzyme 11β-HSD1 for the treatment of type 2 diabetes and other metabolic diseases. The two companies are now wrapping up the research phase of their two-year collaboration.
"Now it is a nonissue," Foraker says of Amgen's chemistry know-how. "There's a pretty good knowledge base that we have a very robust small-molecule effort, and we have become the partner of choice."
Thanks to acquisitions, partnerships, and internal growth, Amgen's small-molecule drug discovery program has expanded from 167 people in 2002 to nearly 600 today. Yet even with the growing presence of chemists amid biologists, the company does not set specific goals for its small-molecule pipeline. Rather, Foraker says, Amgen has cumulative goals for the year that are independent of molecule type or origin. "Here we bring programs up in parallel and let the data decide," Reider adds.
Like Amgen, Genentech had a toe in the waters of small-molecule drug discovery for many years. But chemistry was long just a tiny portion of the overall research organization and was never funded in a way that would allow momentum to build, says Genentech's Varney.
Genentech's concerted push into chemistry coincided with the late-2004 launch of its first small-molecule drug, Tarceva, which came into the Genentech fold through a 2001 development and commercialization deal with OSI Pharmaceuticals. The drug, now approved to treat both lung and pancreatic cancers, inhibits the epidermal growth factor receptor, which is part of the HER family of receptors. Genentech is familiar with the HER pathway, as its antibody drug Herceptin blocks the HER2 receptor.
As a first foray into small molecules, Tarceva has been a major success. The drug brought $275 million in U.S. sales in 2005, and analysts expect revenues of around $425 million this year. The development of Tarceva "has shown the world that, big or small, we can develop drugs effectively," Varney says.
Since Tarceva's launch, and driven by a desire to become the leader in oncology, Genentech has been making a more substantial commitment to chemistry. The company's goal is to be able to attack a therapeutic target from all angles.
Varney says inhibitors of the vascular endothelial growth factor (VEGF) are a prime example of the benefits of targeting both inside and outside the cell. Genentech has a big molecule on the market with Avastin, "but large pharma companies are coming right behind with small molecules," he notes. "In the future, if there are opportunities like this that can be pursued with both big molecules and small molecules, I would like Genentech to be there with both."
The company plans to expand its small-molecule effort significantly in 2006 and 2007, Varney says. Chemists across a range of disciplines, from medicinal to computational to process chemistry, are being brought in to create the right balance of skills for a solid small-molecule drug discovery platform.
Genentech has set the ambitious goal of putting four small-molecule candidates into the clinic each year by the end of 2008. The current focus of the company's small-molecule effort is to "build a critical mass in oncology and get really good there," Varney says. Once that infrastructure is established, the idea is to expand into immunology, but Varney adds that "it's going to have to be under the right set of circumstances, because we don't want to dilute our effort in oncology."
To help set the four-candidates-per-year pace, Genentech is buttressing its internal efforts with external collaborations. The company has entered into a spate of alliances in the past year, primarily choosing partners with compounds in the lead-optimization stage up through the early stages of clinical development, Varney notes.
Genentech sealed two deals in July. One is with Inotek Pharmaceuticals, in the area of poly (ADP-ribose) polymerase inhibitors, for access to a compound in Phase Ib testing for treatment of melanoma. The other is with U.K.-based biotech firm PIramed to develop drugs targeting PI-3 kinase, an enzyme implicated in a number of cancers.
More recently, Genentech added another name to its roster of partners through an equity investment in CGI Pharmaceuticals, a Branford, Conn.-based firm with expertise in targeting protein kinases. The stake is part of a strategic alliance to discover and develop small molecules for a specific target implicated in oncology and autoimmune diseases.
Even though Genentech is actively pursuing acquisitions and partnerships, it is primarily interested in growing its small-molecule drug discovery program organically, Varney emphasizes. The strategy is to prioritize targets and build internally, while also keeping an eye out for partnering opportunities.
"We decided that if we're going to build a small-molecule effort, we want to customize it for an environment that for a long time was primarily big molecules," Varney adds.
However, Mehta Partners' Jacobs says other factors may be influencing Genentech's homegrown approach to small molecules. He notes that Roche's 60% ownership stake in Genentech is accompanied by agreements that could limit its ability to make a big acquisition.
Like Genentech, Serono's recent chemistry investments are tied to a desire to broaden its oncology portfolio. "It really dovetailed with a move into oncology," says Steve Arkinstall, vice president of research at Serono Research Institute in Boston. "We felt that if you're moving into targeted therapies in cancer, small molecules are a very important way to go."
Serono first pursued small molecules in 1997, when it began searching for mimics of Gonal F, the company's recombinant human follicle-stimulating hormone, which is used as a fertility treatment. A year later, that effort evolved into a major chemistry investment at Serono's Geneva research institute. The initial focus was to find small molecules to treat multiple sclerosis, for which Serono markets the biologic drug Rebif, and other inflammatory diseases.
After successfully building small-molecule operations in Geneva, Serono began to invest in chemistry at its Boston research site. The site began establishing small-molecule discovery and development capabilities about 18 months ago, when the chemistry labs were expanded and a number of chemists were hired. The focus at the U.S. research center is on oncology, and the firm's pipeline now includes a MEK (MAP-erk kinase) inhibitor in preclinical development that was discovered in-house.
The company is supplementing those efforts through in-licensing. Its oncology pipeline includes an aurora kinase inhibitor licensed last fall from Rigel Pharmaceuticals that is now in Phase I trials. Most recently, it added Newron Pharmaceuticals' Parkinson's disease drug, safinamide, to its roster. Serono agreed to pay up to $200 million for access to the α-aminoamide derivative, which is currently in Phase III trials.
Meanwhile, Biogen Idec has also been seeking opportunities to add small molecules to its pipeline. In the past year, it made two acquisitions for access to orally available drugs and it licensed a Phase II drug. As at other biotech companies, Biogen's small-molecule efforts add another dimension to its existing expertise in oncology and autoimmune diseases.
One of the acquired companies, Conforma Therapeutics, brings with it small-molecule inhibitors of heat-shock protein 90 molecules. The other, Fumapharm, develops drugs derived from fumaric acid esters. Its purchase builds on a drug development pact for BG-12, now in clinical trials to treat both multiple sclerosis and psoriasis.
Earlier this month, Biogen licensed UCB's α4-integrin inhibitor, which is slated to begin Phase II trials for treatment of multiple sclerosis in 2007. Like the compounds acquired from Fumapharm, the UCB molecule broadens Biogen Idec's multiple sclerosis franchise, which includes the antibodies Tysabri and Rituxan.
Despite substantial investments in small molecules over the past two years, the approach of big biotechs to chemistry has yet to be truly validated. The proof is in the pudding, as they say, and to date, the small-molecule drugs that have been commercialized by biotech companies were initially discovered by other firms.
Nevertheless, big biotechs believe they can bring a fresh perspective to small-molecule drug discovery as their chemistry programs mature, typically under the tutelage of experienced big-pharma scientists. Reider, for example, used to work at Merck & Co.; Varney was once at Pfizer, and Arkinstall came from GlaxoSmithKline.
"If you look at the traditional pharma world, when a problem is faced, the tools brought out are the ones of a chemist," Varney says. "One of the competitive positions we can create comes from being an expert in the big-molecule world."
For example, biotech companies have developed a keen insight into the underlying biology and pathways that lead to finding and validating targets. "The cell-based assays we develop are the most informative and the best in the field," claims Cristina Lewis, associate director for small-molecule drug discovery and head of biochemical pharmacology at Genentech. With this biology expertise, she says, the company can gather "a broader array of data that allow us to make better decisions and put better molecules into the clinic." Lewis' team acts as a bridge between Genentech's chemists and biologists, helping both make more informed decisions about drug candidates.
Biotech companies also highlight their skills in structure-based drug design, which involves visualizing how a molecule is interacting with its target. This area, they believe, is where the synergies between biology and chemistry can really hit a home run. For example, biotech firms' experience in protein expression provides ready access to proteins needed to support structure-based drug design, says Ben Askew, director of chemistry at Serono Research Institute. He notes that biotechs can also easily construct and screen multiple structures, which can provide important information for designing better molecules.
Ultimately, Amgen's Reider says, a company must have all the tools needed to answer any pharmacological question, whether that answer is a large molecule, a small one, or both. In the past, a disease that was first treated by biotech firms using antibodies might later have been tackled by big pharma with small molecules. As biotech companies build their chemistry skills, they want to pursue both avenues through simultaneous discovery programs that keep each other informed.
"I believe we have the opportunity to do something unique, and that's to change the odds," Reider says. "If you know a pathway works—that there's a drug at the end of the rainbow—then you throw everything you have at it."
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