As a rule, getting a drug on the market turns a biotech startup from a buck bonfire into a cash cow—or at least a cash calf. But rules tend to get broken. Just ask GTC Biotherapeutics. In mid-2006, European drug regulators approved the Framingham, MA-based company’s first medicine, ATryn, a protein for blocking risky blood clots. Trumpets blared: It was the first drug made in bioengineered animals—genetically altered goats on GTC’s famed “pharm” near Charlton, MA, produce the medicine, a human blood protein called antithrombin, in their milk. Pharming’s longstanding promise—the ability to churn out large quantities of protein drugs at relatively low cost—was finally a commercial reality.

But despite making history, GTC was soon pegged by investors as little more than a cash embryo. ATryn, which GTC had licensed to Denmark’s LEO Pharma, was approved to prevent blood clots in patients with a rare, inherited antithrombin deficiency who were undergoing surgery. Annual sales, perhaps only a few tens of millions of dollars, wouldn’t come close to making GTC profitable. Last year the company’s shares drifted under a dollar each, prompting the NASDAQ Stock Market to notify GTC in January that its stock was headed for delisting. Last Friday the company underscored its cash-strapped status by announcing that it had agreed to sell 6.9 million shares to institutional investors at a fire-sale price of 87 cents a piece. Following the announcement, its share price fell below 80 cents.

You’d think all this would get CEO Geoffrey F. Cox’s goat. But when I talked to him last week, he sounded upbeat, reeling off a number of reasons GTC’s stock price isn’t likely to linger in the sub-buck-a-share danger zone for delisting.

First, he noted, GTC is in talks with a “number of parties” interested in partnering with it to commercialize ATryn in the U.S. (GTC said earlier that it hoped to complete the deal by the end of this quarter). “It’s very tough to predict with certainty” that that timing goal will be met, Cox added. “Nothing’s gone wrong—the negotiations are going very well. But these things take time, and I’m anxious to do the right deal rather than do one just to meet a timeline.” GTC’s negotiating position just got a bit stronger—it recently racked up key clinical data for ATryn’s U.S. approval.

A partnership would add sorely needed funds to GTC’s coffers. As of September 30, the company had only about $21.8 million in cash, less than its net loss of $26.5 million for the first nine months of 2007. (The latest stock sale announced Friday brought in some $6 million.) It would also put ATryn on the road to correcting antithrombin deficiencies much more prevalent than the rare, inherited one it’s approved to treat.

One such deficiency sometimes occurs in patients undergoing coronary artery bypass surgeries—potentially a $150 million to $200 million-a-year market, according to Cox. Another is disseminated intravascular coagulation, or DIC, which can cause deadly blood clots in patients with severe infections, an indication GTC sees as potentially a multi-billion-dollar market. LEO Pharma, GTC’s European partner, is conducting a Phase 2 trial with ATryn for DIC patients. “Hopefully LEO will complete patient recruitment over the next year or so,” Cox said. The trial might be followed by a large, international Phase 3 study sponsored by LEO and GTC’s to-be-announced U.S. partner, speeding ATryn’s approval for DIC in both Europe and the U.S..

GTC also plans to produce a protein called factor VIIa, used to treat hemophilia. Currently extracted … Next Page »

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GTC Biotherapeutics (NASDAQ: GTCB), which bioengineers goats to secrete drugs in their milk, announced late yesterday that its groundbreaking medicine for a rare blood-clotting disorder cleared the main hurdle in a pivotal U.S. trial. The advance paves the way for the Framingham, MA-based company to seek FDA approval for the drug around mid-year, potentially making it the first medicine from “pharming”—manufacturing drugs in bioengineered animals and plants—to reach the U.S. market.

In 2006, the drug ATryn was approved in Europe to treat the same clotting disorder, making it the first pharmed medicine to garner regulatory endorsement. GTC’s European partner, France’s LEO Pharma A/S, launched ATryn last year in the U.K. to treat the rare condition, hereditary antithrombin deficiency, or HD, in patients undergoing high-risk surgical procedures.

GTC’s clinical-trial news was expected and had little impact on its stock price—GTC was trading at $1.06, up 4 cents a share, soon after the market opened this morning. The company’s shares have languished under a dollar in recent months, prompting the Nasdaq last month to notify GTC that its stock might be delisted. It hasn’t helped GTC’s stock price that the market for the rare clotting disorder is very small. In fact, the U.S. trial required only 31 patients.

But if GTC succeeds in getting FDA approval for ATryn, which may occur near the end of 2008, the regulatory path for pharmed drugs will have been blazed, potentially facilitating FDA approval of ATryn for more prevalent disorders and opening the door for other pharmed drugs. GTC and other pharming startups have long dreamed of revolutionizing biotech manufacturing by mass-producing protein drugs in goats and other animals whose DNA is implanted with human genes.

The clinical advance is also expected to clear the way for GTC to form a partnership to commercialize ATryn in the U.S. The company earlier said it plans to conclude a partnership agreement during this year’s first quarter—stay tuned.

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Call it the 27-year-old startup: ImmunoGen, one of biotech’s oldest companies, has yet to get a drug on the market more than a quarter century after its formation in 1981. This year may mark a long-awaited turning point for the Cambridge, MA-based company, though. If all goes well, compelling efficacy data will emerge from ongoing Phase 2 trials with ImmunoGen’s cancer drugs, paving the way for pivotal trials that could lead to the FDA-approved promised land. When I dropped by ImmunoGen (NASDAQ: IMGN) last week, CEO Mitch Sayare began by acknowledging that “I’m more optimistic than I’ve ever been” since taking the company’s helm in 1986. But he couldn’t resist adding a verbal version of knocking on wood: “My optimism is tempered by experience.”

He might have said bitter experience: Few cancer therapies have looked as good in theory—and have proved as frustrating in practice—as ImmunoGen’s. Spun out of Boston’s Dana-Farber Cancer Institute, the company has pioneered “immunoconjugates”—two-part medicines consisting of monoclonal antibodies, the guided missiles of biology, chemically attached to highly toxic molecules designed to amplify tumor-killing power. Such drugs can target cancer cells with poisons that are far more potent than traditional chemotherapeutics, in principle enabling tiny doses with relatively minor side effects to knock out tumors.

Unfortunately, for years the approach worked just well enough to lure ImmunoGen down a tortuous dead end. The company spent most of its early life trying to demonstrate efficacy with conjugates employing a form of ricin, a toxin derived from castor beans that’s said to be 12,000 times as deadly as rattlesnake venom. Monoclonals studded with ricin-derived molecules duly “killed targeted cells in patients,” says Sayare. “But what defeated us was ricin’s immunogenicity”—after one or two doses, patients developed immune responses to the ricin-ferrying drugs that cleared them from the blood before they could do any good. “You can’t treat cancer with an agent that you can use only once,” he adds, “because even if you can kill 99 percent-plus of cancer cells with the first dose, there will still be billions left.” ImmunoGen shelved its ricin conjugates in the mid-1990s after more than a decade of work on them.

Such key-project failures have been known to kill small biotechs. Indeed, “there were times in the late ’90s when we came very close to the big pit,” recalls Sayare. “We looked down and were able to walk away.” Pulling ImmunoGen back from the brink … Next Page »

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No doctors thwart the Reaper more often than cardiologists, who routinely pull heart-attack victims back from the brink with artery-opening procedures. But their god-like powers suddenly fade after coronary arteries are unblocked. In fact, much of the harm from heart attacks occurs at that point due to “reperfusion injury,” which occurs when blood flow is restored to oxygen-starved tissues—just when things are looking up, the phenomenon unleashes gusts of cell-trashing “oxygen free radicals” and induces deadly calcium overload within cells. The inexorable heart-muscle destruction that follows can give the Grim Guy the last laugh, leading to fatal second heart attacks within days or the prolonged agony of congestive heart failure. But now Maynard, MA-based Ischemix thinks it’s found a way to block much of the damage and prevent cardiac miracles from turning into Pyrrhic victories.

Ischemix says its experimental drug CMX-2043 has consistently reduced reperfusion injury by 30 to 40 percent in extensive, placebo-controlled rodent tests. You heard it here first: If the drug shows similar efficacy in people—a big if, given that dozens of promising drugs for reperfusion injury have failed—Ischemix will be transformed from one of the Boston area’s least-known biotechs into a Big Pharma mob scene as drug makers scramble to secure rights to the new medicine.

Heart researchers have struck out for over three decades trying to develop reperfusion-injury blockers. Indeed, all the flailing on the reperfusion front threatens to lead to “therapeutic nihilism” concerning the problem, according to a sweeping 2004 report on the problem by scientists at the National Institutes of Health. Arguably, reperfusion injury is already the dirty little secret in cardiology: Animal studies indicate that it causes up to 50 percent of the tissue damage after heart attacks. Further, the controlled blood-flow interruption during cardiac procedures, such as coronary artery bypass surgery, or CABG (pronounced “cabbage”), also can trigger reperfusion injury—that’s probably why some 13 percent of the 500,000 U.S. patients who undergo CABG each year suffer major complications within 30 days of their operations.

All this adds up to the kind of blockbuster potential that’s increasingly scarce in drug research. Ischemix’s first goal with CMX-2043 is to cut post-CABG complications, including potentially fatal heart-beat irregularities—that indication alone represents a $500 million “market opportunity,” says CEO Reinier Beeuwkes. Following a successful safety trial with CMX-2043 last year, the company plans to launch a “proof of principle” efficacy trial in CABG patients later this year. But the plan is contingent on whether the company can raise the $15 million it needs to fund the trial, he adds.

You’d think venture investors would already have perfused the startup’s coffers. But so far Ischemix has funded CMX-2043′s development with a mere $14 million supplied by Beeuwkes himself and Ischemix’s medical director, Geoffrey Clark. Before taking a flyer on Ischemix, the two co-founded Braintree Laboratories, a leading maker of “gastrointestinal lavage” products ingested before colonoscopies. A former heart researcher, Beeuwkes served on Harvard’s faculty in the 1970s, then went on to become director of renal and cardiovascular pharmacology at Smith Kline and French Laboratories, now part of GlaxoSmithKline, before founding Braintree.

Ischemix has purposely kept a low profile during CMX-2043′s initial development, compiling considerable data on the drug before trying to sell the story to outside investors, explains Beeuwkes. One reason is the long history of withered hopes in the effort to develop reperfusion-injury blockers—potential investors aren’t easily convinced that substantial progress is now finally in the offing. Ischemix also has had a special reason to keep quiet while building the case for its new drug: A few years ago, its predecessor company, CereMedix, made an ill-fated foray under previous management into the hype-ridden world of anti-aging dietary supplements, or “nutraceuticals,” whose snaky aura can be the kiss of death for an aspiring biotech trying to raise money from hard-headed VCs.

CereMedix sprang from research on antioxidants discovered by biologist Victor Shashoua, who co-founded the company in 1999 while associated with McLean Hospital in Belmont, MA. Shashoua had developed a suite of compounds with antioxidant properties that raised hopes of blocking the damage by free radicals that appears to be a central part of the aging process. CereMedix’s plan of developing an anti-aging nutraceutical proved untenable, however, and in late 2005 Beeuwkes, a long-time investor in the startup, stepped in as CEO to develop some of Shashoua’s compounds as reperfusion-injury blockers. Though retired, Shashoua still holds a stake in the company, and his son, a physician, serves on its board.

Renamed Ischemix, the company set about tinkering with the antioxidants to give them a second key property besides the power to mitigate the free-radical damage of reperfusion injury: the ability to block its cell-killing calcium overload. Veteran pharmaceutical chemist Steven Kates, Ischemix’s vice president of research, led the effort, which yielded a family of promising candidates, the best of which was CMX-2043. While details of the drug’s mechanism remain murky, says Beeuwkes, in rat studies it appears to exert, as hoped, a two-pronged defense against reperfusion injury—a novelty that might finally break the logjam in efforts to minimize the injury. In the Phase 1 safety trial in humans last year, says Beeuwkes, “even at the highest dose we used, we didn’t see adverse effects” that seemed related to the drug. Further, the doses ranged up to about five times “what we think we may need to work in CABG patients, based on our animal studies.”

With the promising data in hand, the company is now trying to get on venture capitalists’ and Big Pharma’s radars. It just launched a new website, and Beeuwkes recently began presenting at biotech meetings. “If you’d asked me for an interview a year ago, I’d have said ‘No, thank you,’” he says. “But now it’s time to put on the slippers and go to the ball.”

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If you haven’t considered eating more fish or taking fish-oil pills by now, you’re probably very young, just in from Mars, or both. The case for the health benefits of omega-3 fatty acids, the compounds of interest in fish oil, rests on thousands of studies over the past two decades, and the list of ills they may ward off or ameliorate includes heart attacks, stroke, diabetes, macular degeneration, rheumatoid arthritis, Alzheimer’s disease, various cancers, osteoporosis—basically every major disease of aging, as well as psoriasis, asthma and others. But there’s a deep mystery here: Why is omega-3 linked to so many different benefits? You could spend weeks immersed in the fish-oil literature trying to answer that. But it would be easier to ask the brain trust at Resolvyx Pharmaceuticals, a two-year-old startup in Bedford, MA. The company not only offers a compelling explanation but is also poised to capitalize on it to develop drugs as versatile as fish oil itself.

Here’s the big idea: One of the main things that goes wrong as we age is the fraying of our inner controls on inflammation, the heated immune reaction, accompanied by pain and swelling, that’s triggered by invading germs or other insults. That allows pockets of low-level inflammation to linger—picture smoldering coal-seam fires across your inner landscape. Just about every degenerative disease of aging, from atherosclerosis to Alzheimer’s, has been found to centrally involve insidious inflammation. Chronic inflammation also does much of the damage in autoimmune diseases, such as rheumatoid arthritis. Thus, if you wanted to come up with a do-all miracle drug, you probably couldn’t do better than to develop a potent anti-inflammatory that could be safely taken for long periods. And if you were smart, you’d probably start, like Resolvyx’s founding scientists, by investigating the safest anti-inflammatory around, fish oil.

Omega-3 fatty acids’ anti-inflammatory effect isn’t new. But the molecular details of the effect—and the ability to explain fish oil’s remarkable diversity of likely benefits—have only come into focus over the past few years. The progress stems largely from the work of Resolvyx cofounder Charles Serhan, an anesthesia professor at Harvard Medical School. Serhan is known for groundbreaking research on natural anti-inflammatory lipids. Since 2000 his group at Boston’s Brigham & Women’s Hospital has elucidated how omega-3 fatty acids are processed in the body to give rise to sets of potent lipids, dubbed resolvins and protectins, that affect the process of inflammation.

One of Serhan’s seminal ideas is that after inflammation has done its thing, it doesn’t just passively fade as its triggering molecules dissipate. Instead, it is actively curtailed during a “resolution phase” by chemical messengers that pacify angry immune cells and halt production of inflammatory signals. Serhan’s research suggests the resolvins are among the most important of these naturally-occurring resolvers of inflammation, hence the name—mere nanograms of them can quell inflammation. The protectins play similar roles, apparently springing forth to help to resolve inflammation in asthma and other diseases, as well as preventing death of stressed, potentially suicidal nerve cells during inflammatory flares caused by strokes and other brain hits.

With the discovery of key lipids that resolve inflammation, says Serhan, “we’ve figured out an old problem that first came up in the 1920s: Why are essential fatty acids essential?” (When discovered in 1923, omega-3 fatty acids were classed as essential because, like vitamins, they were found to be critical for normal growth, and the body can’t make them from scratch—they or their immediate precursors must come from food.) Indeed, adds Resolvyx executive vice president James Nichols, without the lipid peace-makers, “you’d accumulate inflammation over time” as one insult after another triggered unresolved flare-ups.

In 2002, Serhan joined forces with Per Gjorstrup, a native of Sweden who had long worked in the drug industry and was most recently at Biogen, to form Resolvyx. The startup’s goal seemed, literally, a natural: turn the body’s own inflammation regulators into drugs to halt run-amok inflammation. But it took three years to win over venture capitalists, … Next Page »

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The Great Bubble is dead and gone, but like Elvis it’s still occasionally sighted. Daytraders, for instance, could have sworn it was gyrating across their screens when WuXi PharmaTech recently went public. The Shanghai-based company leaped onto the Big Board on August 9 after pricing its shares at $14 each. The stock quickly rose by a third, then went on to roar past $30 in less than a month. Yesterday the provider of outsourced pharmaceutical research (NYSE: WX) closed at $37.35.

WuXi has more going for it than did the bubbly biotechs of yore. For years China’s biopharmaceutical sector has been a crouching tiger, full of potential but held back by a dearth of venture investing, lax patent enforcement, and a lack of internationally experienced managers. Now it’s in mid-leap—hindrances remain but significant progress has been made in dealing with them. WuXi’s startling jump onto the world stage shows what’s coming. It was formed in 2000 by Western-trained pharmaceutical veterans—CEO Ge Li earned a Ph.D. at Columbia University and then co-founded Princeton, NJ-based Pharmacopeia before returning to his native China. Drawing on China’s deep talent pool, WuXi quickly emerged as a world-class contract research organization, or CRO, specializing in preclinical services such as synthesizing novel drug candidates. With a staff of about 2,000, the company is profitable and boasts customers that include 9 of the world’s top 10 drug companies, as well as major biotechs such as Cambridge, MA’s Vertex Pharmaceuticals.

Daytraders may be wowed by WuXi’s stock, but the company’s closest watchers are people like Christopher Perkin, who oversees Charles River Laboratories’ growing presence in China. In June, the Wilmington, MA-based CRO forged into China’s drug-development market by forming a 75 percent-owned joint venture with Shanghai BioExplorer, another hot Chinese CRO. “All the major multinational drug companies are making sizable investments in China, mainly to set up R&D operations,” says Perkin. As a result, “30 or 40 years of Western pharmaceutical-industry development is being shrunk into a few years in China.” Underscoring that, a Chinese company this summer won FDA approval for its version of an AIDS drug now sold in the West, paving the way for China to rival India as a global supplier of generic medicines. Indeed, China already has more drug trials underway than India does, according to the Financial Times.

A key part of China’s jack-in-the-box pharma story is the emergence of CROs in Shanghai and other cities that can meet the West’s stringent regulatory and quality-control standards. WuXi was one of the first, and when Charles River’s joint venture opens its doors in Shanghai next year, it will offer a wide array of FDA-compliant preclinical services, including drug-testing with the Massachusetts company’s crown jewels: its unsurpassed collection of animal models of human diseases.

The pursuit of lower costs, of course, has been a major driver of Big Pharma’s push into China as well as the rise of major CROs there—bright young chemists and biologists in China can be hired for less than a third of their Western counterparts’ salaries. Importantly, China’s talent pool also includes a growing number of “sea turtles,” or returnees trained abroad, many of whom are coming back as veteran managers and entrepreneurs. The top sea turtle at Charles River’s joint venture is Shanghai BioExplorer’s co-founder and CEO, Kewen Jin, who got a doctorate in molecular biology at Rockefeller University, studied finance at Columbia, and worked for seven years at Wyeth before co-founding the Shanghai company.

But low labor costs, which first drew Western pharma companies to China a decade ago, are no longer their main pursuit there. “Our customers are telling us they want to develop drugs for China” at their new labs there, says Perkin. “China represents a developing market (for Western medicines) that’s equivalent to North America and Europe combined.”

In fact, the rise of middle-class consumers in China willing and able to buy Western medicines is swelling its pharmaceutical market by some 17 percent a year, three to four times the U.S. market’s growth rate, according to IMS Health. When announcing plans to set up a $100 million R&D center in Shanghai, Novartis last year spelled out a strategy that a number of multinational pharma players are pursuing in China: The Swiss concern said it will develop novel therapies for diseases particularly common in China, such as hepatitis B and C, in part by applying modern research methods to discoveries made over thousands of years in traditional Chinese medicine.

To date, the biopharma land rush unfolding in China has mainly centered on oral, “small-molecule” drugs synthesized by chemists—the drug industry’s mainstay medicines. But a second wave focused on “biologic” drugs, such as injected proteins churned out by bioengineered cells, is rapidly taking shape. … Next Page »

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“Like does not like like that is obnoxious.” Poet Marianne Moore wasn’t thinking of autoimmune diseases when she penned this line but it memorably captures the strife behind them—when our immune cells see their cellular kin as obnoxious, all hell breaks loose. Still, our immune systems are teachable. Early in life they learn to tolerate our own cells, forgoing attacks on genetically like tissues. Obviously, the lesson is sometimes forgotten. But if Cambridge, MA-based ToleRx is right, intolerant immune systems can be re-educated, revolutionizing the treatment of autoimmune diseases such as juvenile diabetes, rheumatoid arthritis, and psoriasis.

The idea isn’t new. For decades, drug developers have sought medicines to “tolerize” the immune system to selected antigens, molecules that trigger immune attacks. In principle, such drugs would have aspirin-like versatility and minor side effects, potentially quelling allergies, preventing rejection of transplanted organs, and dampening autoimmune diseases. But most attempts to intervene in our inner civil wars have gone poorly. In fact, two former Boston-area high flyers, ImmuLogic Pharmaceutical and BioTransplant, crashed and burned struggling to induce immune tolerance—ImmuLogic, known for seeking to curb cat allergies, was liquidated in 1999, and BioTransplant, focused on blocking organ-transplant rejection, went belly up in 2003.

So why have HealthCare Ventures, Skyline Ventures, Sprout Group, and other venture capitalists quietly bet $125 million on closely held ToleRx since it was founded in late 2000?

Its founders’ track record is clearly a factor. A decade ago, ToleRx CEO and cofounder Douglas Ringler helped guide development of a cancer drug named Campath at Leukosite, a Cambridge firm where he served as vice president of preclinical development. Campath, a monoclonal antibody drug now owned by Genzyme, was approved in 2001 to treat chronic lymphocytic leukemia, a blood-cell cancer. Its promise figured prominently in Millennium Pharmaceuticals’ 1999 acquisition of LeukoSite for over $600 million in stock.

LeukoSite’s success also bolstered the reputation of ToleRx cofounder Herman Waldmann, an Oxford University professor who chairs ToleRx’s scientific advisory board and is known for pioneering work in immunology: Campath originated in his lab in the 1980s. When Millennium acquired LeukoSite, Ringler and Waldmann moved on to form ToleRx. Sprung from research in Waldmann’s lab, the company’s main goal is to develop monoclonal antibodies and other drugs to suppress autoimmune attacks by revving up T regulatory cells, or T-regs—key mediators of immune tolerance. Secondarily, it’s developing drugs that do just the opposite: one is designed to break immune tolerance to cancer cells, inducing the immune system to wipe them out.

For years, T-regs—a subset of T cells, known mainly for fighting viruses and other invaders—were the dark matter of the immune system. Scientists knew they existed because of their effects. For instance, they continually check the activity of “autoreactive” T cells, which are primed to attack our own tissues and tend to become increasingly abundant as we age, raising the risk of autoimmune diseases. But their identifying traits and mode of action remained murky, only snapping into focus over the past decade. Now T-regs, and how to manipulate them to alleviate disease, are one of immunology’s hottest topics. Excitement about the immune peacemakers has stemmed partly from studies showing that pumping up their activity can actually cure autoimmune-induced diabetes in mice. The cells engender long-lasting tolerance for insulin-producing cells in the pancreas, which is lost in type 1, or juvenile, diabetes—the loss of tolerance leads to immune destruction of pancreatic cells that regulate blood sugar.

ToleRx’s flagship drug, dubbed TRX4, was developed in Waldmann’s lab to promote inner peace via T-regs. A monoclonal antibody, it works by glomming onto a molecule sticking out of T cells called CD3, triggering complex changes that culminate with increased numbers and activity of the tolerizing subset of the cells. That both suppresses ongoing autoimmune attacks and shifts the global immune response toward tolerance, says Ringler, yielding benefits that can last many months, and perhaps indefinitely, after a single course of therapy. The general tolerance induced by TRX4 means that it may alleviate many autoimmune diseases besides diabetes. ToleRx has already begun testing it in psoriasis patients and plans soon to begin another trial in rheumatoid arthritis patients.

But ToleRx’s main push with TRX4 has been against type 1 diabetes—the company is racing MacroGenics, a Rockville, MD, biotech, to develop the first CD3-targeted tolerizer for the disease. Both companies have reported promising preliminary clinical data. In a European trial, a six-day course of ToleRx’s drug in recently diagnosed diabetics significantly reduced the need for insulin shots over the following 18 months in many but not all of them: the ones who benefited were at an early stage of the disease, before nearly all their insulin-producing cells were destroyed. Last month, MacroGenics launched a “pivotal” trial in newly diagnosed diabetics with its drug, teplizumab. ToleRx plans to begin a pivotal trial with TRX4 within a few months.

If all goes well, TRX4 may reach the market in a few years to treat newly identified type 1 diabetics—those no more than 12 weeks from diagnosis. But the drug will probably also be used “off-label” for less recently diagnosed patients, says CFO Thomas Shea. Each year about 35,000 Americans, mostly youngsters, are diagnosed with the disease.

For all its promise, ToleRx has faced some harrowing moments. Just 48 hours before the planned launch of an initial public offering in 2003, an “abnormal event” in an animal study with TRX4 prompted it to cancel the stock sale, says Ringler. He declines to detail what went wrong but says “we now feel it was immaterial.” (Perhaps the main risk of tolerizing drugs is the chance that they will make T cells tolerant of pathogens—in ToleRx’s preliminary trial with TRX4, the drug was linked to transient symptoms of infection by the Epstein-Barr virus, which causes mononucleosis. At this point, though, the infection risk posed by drugs like TRX4 appears small.) ToleRx tried another IPO the following year, but investors soured on biotech before it could be completed, so the company canceled it. Still, in early 2003 ToleRx boosted its momentum by forming a collaboration with Genentech to develop its first tolerizing drug, dubbed TRX1, which has shown promise against several autoimmune diseases.

Another attempt by ToleRx to go public probably isn’t far off, says Ringler, as well as a major deal with a large drug company—the mounting reams of compelling data on T-regs and tolerance-inducing medicines have largely melted Big Pharma skepticism about their therapeutic promise. In theory, drugs like TRX4 “would be the closest thing to a cure” for autoimmune diseases that medicine has offered, says Ringler. Whether that’s borne out in practice remains to be seen. But clearly the odds are increasing that like can be made to like like.

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Nothing robs pharma officials of more sleep than unexpected toxicity linked to one of their companies’ medicines. Recently they’ve lost more shuteye than ever as reports on cardiac risks of widely-used diabetes drugs have fanned public anxiety about drug hazards. Now Congress is moving to intensify FDA surveillance of ill effects possibly caused by medicines. “We’re going to find adverse events associated with every drug,” says Keith Elliston, CEO of Genstruct, a Cambridge-based pharmaceutical consultant. That means the industry will urgently need better ways to tell whether such events really are caused by drugs, and, if so, to identify at-risk patients early. “To do that,” he adds, “we have to understand more about drugs’ mechanisms of action.”

As you’ve probably guessed, Genstruct’s specialty is figuring out how medicines do their things. The closely held company uses systems biology, an emerging discipline in which scientists try to capture enough of the complexity of living systems in computer models to predict what they will do when perturbed by drugs or illness. If Elliston is right, systems biology can prevent toxicity issues from erasing billions of dollars of pharmaceutical sales and turning patients away from needed therapies.

A Genstruct collaboration with Pfizer supports his thesis. Like many drug companies, Pfizer has been developing PDE4 inhibitors, anti-inflammatory compounds that may alleviate everything from asthma to rheumatoid arthritis. Unfortunately, one of its promising PDE4 inhibitors was found to cause severe blood-vessel damage in rats. That ordinarily would have killed the drug. But when Pfizer enlisted Genstruct to analyze the toxicity, says Elliston, systems biology revived the project.

Genstruct assembled all the available data on PDE4 inhibition in a computerized model comprising a network of interacting genes, proteins, and other molecules. The model highlighted key cause-and-effect relationships, revealing that the vascular injury was probably a rodent-specific effect—among other things, the model riveted attention on a central mediator of the damage that turned out to be an enzyme found at much higher levels in rats than in humans. The analysis also identified early-warning indicators of the toxic effect that might be used in human trials of PDE4 inhibitors to prevent drug-induced harm.

Genestruct is not the only biotech company betting on the market created by vanishing public tolerance for drug risks. In Mountain View, CA, Perlegen Sciences is focused on finding gene variants that make certain people react badly to specific drugs. One of its flagship projects seems prescient in the wake of reports that diabetes drugs made by GlaxoSmithKline (Avandia), and by Takeda Pharmaceuticals/Eli Lilly (Actos), elevate risk of heart attacks. Hoping to develop a competing drug in the same family as Avandia and Actos, Perlegen earlier collected 3,000 DNA samples from patients treated with the drugs in an effort to identify gene variants associated with the medicines’ tendency to cause fluid retention—a side effect that may aggravate heart failure. Perlegen hoped its competing drug could be offered with a proprietary genetic test that would enable the medicine to be targeted at patients unlikely to suffer harm from the side effect.

The privately held company’s first pass at the problem proved disappointing. “We’d hoped to find [gene variants] accounting for 50 percent” of fluid-retention cases on the drugs, says David R. Cox, Perlegen’s chief scientific officer. “But what we found accounted for only 16 percent.” Perlegen hasn’t given up—it’s now re-analyzing the patients’ DNA with “high-throughput” gene sequencers from 454 Life Sciences, recently acquired by Roche Group. The new technology “enables you to cost-effectively explore for rare gene variations,” says Cox, which often underlie the most troublesome adverse events—those afflicting a small fraction of patients, making them extremely difficult to detect before drugs reach the market and are prescribed to many thousands of people.

Cox says Perlegen doesn’t plan to try resurrecting canceled drugs. But it does hope to develop genetic tests for targeted prescribing of existing drugs that many people already depend on but that have come under a cloud due to unexpected adverse reactions. “In another setting,” he says, such reactions “are called icebergs. We now have the ability [to address their risks] in an expeditious way.”

Pharmaceutical executives no doubt hope he’s right—they can’t afford very many more Titanics.

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Oncology researchers are fond of saying that if you’re a mouse with cancer, they’ve found drugs that can cure you. Scientists at Cambridge-based Aveo Pharmaceuticals have even better news: They’ve developed mice with tumors that don’t always respond well to anticancer drugs. That heralds an important advance because it means that cancers in Aveo’s bioengineered rodents act much as they do in people. As more realistic models for testing new drugs, the mice promise to speed the quest for potent, precision-targeted weapons against specific kinds of tumors.

One of the biggest problems in cancer research is that standard “xenograft” models of the disease, in which human tumors are implanted in mice, usually lead drug developers astray. The cultured cells used for xenografts typically have evolved while in storage, losing their close likeness to real human cancers. What’s more, tumor cells normally draw strength from their surroundings, milking growth factors and nutrients from nearby cells to abet their runaway growth. Parted from these helpers and placed in such alien surroundings as skin-implanted xenografts, the cells develop traits that are radically different from those seen in human cancers. No wonder fewer than one in ten drugs that work wonders in mouse studies ultimately reach the market.

Closely-held Aveo has gathered some of the biggest names in cancer research to solve this problem: its scientific advisers include Ronald DePinho and Lynda Chin at Boston’s Dana-Farber Cancer Institute, Raju Kucherlapati at Harvard Medical School, Douglas Hanahan at the University of California at San Francisco, and Tyler Jacks, who directs MIT’s Center for Cancer Research. Under CEO Tuan Ha-Ngoc, an industry veteran who earned his biotech stripes as an executive vice president at Genetics Institute, it has raised over $100 million since its formation in 2002—a hefty sum for an early-stage biotech these days—and cut deals with the likes of Merck and Schering-Plough. Its Series D financing round last May, which raised $53 million, included a who’s who of backers.

To build its better mousetraps for cancer drugs, Aveo begins by planting tumor-initiating gene glitches in cells of embryonic mice—an example is a mutated form of a gene called EGFR that’s known to trigger various kinds of cancer. Further genetic trickery renders these genetic time bombs inactive during the rodents’ early development. To recapitulate what happens in human cancers, the deadly genes are switched on in later life in desired organs. When activated, they spawn human-like tumors that spontaneously evolve the same kinds of additional mutations human cancers do as they progress. Thus, Aveo’s models can mimic different subtypes of cancer emerging at different stages of the disease—an invaluable aid in developing drugs that work like precisely timed smart bombs instead of randomly fired nukes.

For its breast-cancer model, Aveo also employs a trick pioneered by Charlotte Kuperwasser at Tufts University School of Medicine in Boston: Implanting human “stromal” cells—which tumor cells normally harness to supply nutrients and other growth aids—along with tumor-generating cells. Under the microscope, says Kuperwasser, an Aveo adviser, the resulting rodent cancers “beautifully” mimic the appearance of breast tumors in human patients.

Ha-Ngoc cautions that proving the value of Aveo’s mouse models will require showing that they can lead to useful predictions about the way novel anticancer drugs will work in people. The proof may come soon: Aveo is pressing its models into use to guide in-house drug development. One of its new medicines blocks hepatocyte growth factor, a signaling molecule that helps drive the growth of various cancers. Aveo, co-developing the drug with Schering-Plough, plans to use its mouse models to pinpoint sets of cancer patients mostly likely to respond to the drug before testing it in people. If successful, that would represent a major first, potentially saving hundreds of millions of dollars that would otherwise be spent on clinical trials that go nowhere.

Aveo also hopes to accelerate the discovery of new drug combinations. A test case involves its development of a novel “anti-angiogenesis” drug, which blocks formation of new blood vessels that feed tumor growth. Aveo has licensed rights to the drug outside Asia from Japan’s Kirin Brewery, which despite its name has long been a major player in pharmaceuticals, agribusiness, and other sectors. The drug promises to work well when combined with existing chemotherapy drugs; Aveo’s models promise to show which combinations are likely to yield good results, as well as which tumor types to attack with them.

“Everyone in cancer research is going after smart bombs,” says Ha-Ngoc. “But you really need guidance systems to do that. That’s what we’re creating.”

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