About 40 miles north of Seattle, on a rabbit farm, Johnny Stine thinks he has found a disruptive force for biotechnology. He’s building a startup, called North Coast Biologics, around the idea—without a penny from venture capitalists or more than a handful of employees.
Ridiculous, right? “I wouldn’t bet against him,” says Carl Weissman, the president of Accelerator, the Seattle biotech-startup incubator. Accelerator invested in Stine’s previous company, Spaltudaq, which has now raised $34 million in venture capital to develop antibody drugs.
To understand Stine’s new idea, a bit of background is necessary: Genetically engineered antibody drugs, which can zero in on diseased cells while sparing healthy ones, are the fastest-growing class of drugs in the pharmaceutical industry, expected to top $26 billion in global sales by 2010. South San Francisco-based Genentech (NYSE: DNA) has become the world’s most valuable biotech company on the strength of three such drugs for cancer: Avastin, Rituxan and Herceptin.
But those medicines all have origins in a technique discovered in 1975, using mouse cells. The immune system recognized them as foreign and rejected the drugs, so companies like Genentech used less mouse DNA, and incorporated more human DNA, into their antibodies.
There are problems, however, with using mice, Stine says. They don’t make antibodies against some proteins that humans consider foreign, while rabbits do, he says. Rabbit antibodies have 1,000 times higher “affinity” than mice (they bind with their target on cells much more tightly and for longer). For the biotech business, that means rabbit-generated antibodies can be given in fewer shots, and at much lower doses, saving a bundle on manufacturing costs.
And here’s the part that Stine says “blows people away.” With rabbits, he has developed a way to yield hundreds of antibody drug candidates in less than a month. By comparison, it can take several months for mouse methods to yield a single drug candidate, he says. He calls it BLAST (B-Lymphoblast Activation and Selection Technology).
Stine isn’t the only guy who thinks rabbits may be the antibody engine of the future. Burlingame, CA-based Epitomics, backed by Chiron co-founder William Rutter, has been pursuing the idea for years, and has attracted Genentech as a partner. So there’s some competition to find a better approach.
How does North Coast plan to make money? The business model is, in Stine’s own words, a bit “wacky.” He calls it a “contract discovery organization” — sort of like an outsourced firm for drug discovery. Such a thing doesn’t exist, as far as I know.
There’s a need for it, Stine says, because big pharmaceutical companies are hungry for drug candidates in late stages of development, partly because investors insist they spend less on discovery. Those economics have forced even innovative, venture-backed companies into a box: They focus on just two or three drug candidates, develop them to a point in clinical trials, and then sell out to a big drugmaker.
Scientists have validated more than 400 targets on cells for drug development, and most aren’t being pursued, Stine says. With its more efficient method, North Coast wants to test drugs against some of those 400 targets, prove it can make drugs against them, and then hand the candidates back to partners for further development.
The structure is like that of deals you see biotech companies sign with big drugmakers all the time, except with much smaller dollar amounts for North Coast. Stine gives his partner a license to the drug candidate. In return, he collects up-front fees and takes payments for delivering antibody candidates. If the drugmaker has success taking them through clinical trials, Stine gets a milestone payment, and if it goes all the way to become a marketed product, he collects a small percentage royalty on sales.
“Any CEO of a company that agreed to terms like this would be fired,” Stine says. “But in this case, I’m the board of directors.”
Stine says he’s close to signing four deals to perform this antibody drug discovery work, for companies in the Northwest. Another six deals are in the works along the West Coast. If it gets to be too much for him to handle by himself, he can outsource some of the work to scientists in Victoria, B.C., and Northern Ireland.
Stine, 44, personally has been using rabbits as a model for screening new antibody drug candidates since his days as a scientist at Bothell-based Icos from 1994 to 2001. He used it some more during a stint with a unit of Fremont, CA-based Abgenix.
Weissman does see a risk in Stine taking on too many deals at once, and possibly overpromising and underdelivering. But the opportunity, he says, is undeniable. “There’s a lot of companies that tell you they can make antibodies for you, and they charge a lot and what they deliver is garbage,” Weissman says. “There’s a great opportunity for somebody to deliver high-affinity antibodies at a reasonable price.”
Stine says he’s having a ball. He loves going to work at the RR Rabbitry farm, working in a lab by himself, without the glamorous fine art and expensive equipment that venture-backed biotech companies often seem to splurge on. “This is like Genentech in 1976, two guys in a warehouse with a leaky roof,” he says.
The biotech industry needs companies with unconventional models like this to thrive, he says. “We need a way for companies to sustain themselves to do sustainable discovery.”
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