Alder and New Partner, Bristol, to Give Amgen and Abbott a Run for Their Money

11/11/09Follow @xconomy

Alder Biopharmaceuticals keeps such a low profile that even after five years in business, few people in Seattle biotech know who they are. That changed yesterday as the private Bothell, WA-based company burst onto the local, and national, biotech scene by striking a deal with Bristol-Myers Squibb that could be worth more than $1 billion over time to create a new drug for rheumatoid arthritis.

Alder obviously was playing with a strong hand of cards in negotiations with multiple pharmaceutical companies, even though it hasn’t yet disclosed the results of a 120-patient clinical trial of its ALD518 drug candidate that ended this summer. But Alder has been working behind the scenes for months on this deal, and there were several serious bidders, says CEO Randy Schatzman.

Alder ultimately chose Bristol-Myers (NYSE: BMY) because it has experience in the rheumatoid arthritis field through its FDA-approved abatacept (Orencia) therapy, deep pockets, and a “very aggressive” plan to develop and market Alder’s drug not just for rheumatoid arthritis, but for a variety of disorders in which the immune system attacks healthy tissue, Schatzman says. This means that Alder’s drug, which is made to block an inflammatory protein known as IL-6, is thought to have the same kind of far-reaching potential that other biotech drugs that interfere with a different inflammatory protein called TNF. This approach could offer doctors an alternative to the $10 billion-a-year class of biotech drugs, like Amgen’s etanercept (Enbrel) and Abbott Laboratories’ adalimumab (Humira).

When asked directly whether Alder’s clinical trial shows it is competitive with the Amgen (NASDAQ: AMGN) and Abbott (NYSE: ABT) drugs, Schatzman said this:

“We think we’re going to give them a run for their money.”

Seattle Genetics co-founder and CEO Clay Siegall, an Alder board member, added, “This is a superb deal. It gets Alder on a trajectory for becoming one of the important biotech companies in Seattle. They are turning from a startup into a real emerging company.”

To really emerge, Alder sought a partner that had more than just money, but also a bold view of the opportunities with ALD518 and how to capitalize on them. “Their vision is for the same development plan we’d have if we had deep pockets,” Schatzman says. “This is not just for rheumatoid arthritis, but for other autoimmune diseases in which IL-6 is an important player. It’s a very aggressive approach.”

Everyone outside the company will have to wait to see just how good the Alder drug really is. That’s because the company applied for a late-breaking presentation slot at last month’s American College of Rheumatology meeting in Philadelphia, but it was essentially too late to be included among just a handful of such presentations, Schatzman says. The plan is to release this data through a peer-reviewed scientific publication, and probably to present the data at the other top rheumatology meeting, the European League Against Rheumatism (EULAR) being held in Rome in June.

Without giving away his scoop—which medical journals and meeting organizers frown upon—Schatzman said that the mid-stage rheumatoid arthritis data was “consistent” with some publicly released data on ALD518 as a treatment for extreme cancer-related fatigue and atrophy, known as cachexia. “It’s very effective in rheumatoid arthritis,” Schatzman says. “We did an outstanding job of suppressing inflammation, and the onset of activity was fast.”

Still, this doesn’t mean Alder and Bristol are ready to leap headlong into a pivotal clinical trial with several thousand patients and rush off to the FDA for approval to start selling the drug. If these companies are ever going to beat powerhouse treatments from Amgen and Abbott, it will have to be delivered like those drugs are, through a thin-needle injection patients can give themselves under the skin. Alder’s studies to date have been run in a one-hour long intravenous infusion, Schatzman says.

So Alder and Bristol’s next step will be to take an interim step in a mid-stage study that looks at a variety of doses, and that examines how often the injections must be given, with a self-injectable form of the drug. That trial will probably take six to nine months, and should set the stage for a pivotal trial that looks at both the IV and self-injectable forms of the therapy, Schatzman says.

Even before waiting for that data to roll in, Bristol has its eyes on using ALD518 against a variety of other autoimmune diseases, in which the immune system goes haywire and attacks healthy tissue. This ability to treat rheumatoid arthritis, psoriasis, psoriatic arthritis, and other related conditions is part of what has made Amgen and Pfizer’s etanercept (Enbrel) exceed more than $7 billion in annual worldwide sales. Schatzman didn’t say which diseases Alder and Bristol have on their list.

What’s important strategically for Alder is that it didn’t give away the entire store through this partnership. It retained the commercial rights to ALD518 as a treatment for cancer cachexia, the debilitating fatigue many cancer patients feel when they have excess inflammation, including elevated levels of IL-6 proteins, Schatzman says. Alder will use some of its new cash horde—the $85 million upfront payment from Bristol—to enhance its own development plan for that use.

Beyond that, Alder will have some money to do some hiring, and to build up a pipeline of drugs behind ALD518 that use the same yeast-based technology for manufacturing antibodies. Alder has about 45 employees now, and Schatzman wouldn’t say how many he plans to add. But he did say that Alder expects to advance a second drug candidate into clinical trials in 2010, and a third clinical pipeline candidate will emerge the following year.

For those new to the Alder story, the big idea is really in manufacturing antibody drugs in a new way. Alder does this through a technology that turns yeast cells into mini-factories for antibody drugs, instead of the standard Chinese hamster ovary cells. Since yeast is a cheap raw material, and the cells divide much faster than the hamster cells, drugs made this way could cut manufacturing costs to a fraction of what it takes to make big sellers like Enbrel or Genentech’s Avastin, Schatzman said in an Xconomy story in September 2008.

The yeast production techniques have a number of other advantages besides cost, as Schatzman went on to explain at the Invest Northwest conference last March. The Alder drug can last longer in the bloodstream than its competitors, so it can be injected less frequently, possibly just three or four times a year instead of once a month, he said. Alder can also give its treatment in one-tenth the dose because it’s more potent, which improves profit margins and could allow Alder to undercut competitors on price. Plus, since Alder’s drugs are made in those fast-dividing yeast cells, its production process is about four times faster, making much better use of all the expensive fermentation equipment that biotech companies already have invested millions of dollars to build, Schatzman has said.

If there’s ever going to be a moment when it’s favorable for biotech companies at this early of development to go public, Alder is going to keep its eyes open for that opportunity, Schatzman says. Alder hasn’t filed a prospectus with the Securities and Exchange Commission, and the Bristol deal means it doesn’t have an urgent need for cash. But Alder is going to monitor the markets for the right moment that might offer returns for the company’s venture investors, Schatzman says.

There is still a long road ahead in drug development before investors will likely be interested in something this speculative. Schatzman noted that the FDA standard for a new rheumatoid arthritis drug is about 2,500 patient-years on therapy—way beyond the scope of something a startup biotech could handle. In the original Xconomy profile of Alder, he noted that it would likely be 2013 before ALD518 could reach the marketplace.

Drug development is a long and risky journey, as Schatzman, a molecular pharmacologist, knows well from his past experience at Celltech R&D, Roche, and Mercator Genetics. That’s why getting a serious partner for the long haul is so crucial if Alder is ever going to realize its dreams of someday creating a drug that’s compelling enough for patients that it can really compete against the Amgens and Abbott Labs of the world.

“This is really a validation by a Big Pharma company that our technology is on the right track,” Schatzman says.

When asked if Alder has the potential to grow into the next dynamic biotech company in Seattle, he says, “We’d like it to be. We think the potential is there.”

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