Austrian Biotech Clippings

Each year the MIT Technology Review lists the 35 most innovative young scientists in the US. Among the eight top scientists in the area of biotechnology, Konrad Hochedlinger from Austria, who works as Assistant Professor of Medicine at Harvard Medical School, was named one of the top young innovators for his work on induced pluripotent stem cells which resemble embryonic stem cells but are derived from adult cells. This reprogramming technique not only makes it easier to get custom-tailored stem cells for patient-specific research but also resolves potential ethical issues when destroying embryos.

Konrad Hochedlinger studied Genetics at the University of Vienna and wrote his Master’s thesis at the Institute of Molecular Pathology in Vienna where he joined Erwin Wagner’s lab. Afterwards, Hochedlinger went to Rudolf Jaenisch’s lab at the MIT for his Ph.D. and his postdoc before he finally set up his own lab at Harvard. Hopefully, this recent award, along with the international attention drawn to Hochedlinger’s work in the past years, will not only act as a further incentive for young scientists in Austria but also as an argument for politicians and the general public to recognize the importance and prospects of stem cell research. In fact, it will be important for Austria as a biotechnology research location to change its attitude towards the work on (embryonic) stem cells and foster research in this area, especially in light of the recent departure of genetics pioneer Erwin Wagner from Vienna to Madrid and the general omnipresent brain drain of top scientists.

Kurt Hochedlinger’s award portrait by MIT Technology Review:

“In 2006, scientists demonstrated that inserting four embryonic genes into mouse skin cells induced a small fraction of them to look and behave like embryonic stem cells. The technique promised to eliminate the need to destroy embryos to generate stem cells. But the first cells made this way were not completely “reprogrammed.” Konrad Hochedlinger, an assistant professor of medicine, found a simple way to improve the technique. Working with mouse cells, he initiated the reprogramming process by means of the same four genes that previous scientists had used. But he used a different gene to identify the cells that had been successfully reprogrammed; cells in which that gene is active turn out to look and act more like embryonic stem cells than those made previously. The technique offers a way around the controversies that have slowed embryonic-stem-cell research, which has the potential to help scientists understand certain diseases and, eventually, replace diseased or damaged tissue.” (Emily Singer, MIT Technology Review)

Further information:

• MIT TR35 2008 Young Innovators Under 35
• MIT TR35 Konrad Hochedlinger
• Konrad Hochedlinger, Simple Stem Cells (MIT TR, Video)
• Konrad Hochedlinger, Division of Medical Sciences, Harvard University
• Konrad Hochedlinger, Center for Regenerative Medicine, Massachusetts General Hospital
• Konrad Hochedlinger: The new kid of nuclear reprogramming (The Journal of Cell Biology)
• “Diese Forschungs ist kein Teufelswerk” (DER STANDARD, in German, PDF)
• Der Exodus der klugen Köpfe (DIE ZEIT, in German)

Yesterday, Intercell AG announced its financial results for Q2 and H1 2008. In the first half of this year, the Austrian vaccine developer increased its revenue to EUR 17.6m (EUR 5.2m in H1 2007) and decreased its net loss to EUR 8.7m (EUR 15.6m in H1 2007). Cash and marketable securities amounted to EUR 258.3m on 30 June 2008. In spite of higher costs due to the acquisition of Iomai, Intercell expects full-year profitability for 2008.

Regarding its drug pipeline, Intercell expects market approval for its Japanese Encephalitis vaccine in USA, Europa and Australia within the next few months. Moreover, all development programs concerning hospital-acquired infections (S. aureus, Pseudomonas, Pneumococcus) as well as the partnering programs of Intercell’s IC31® adjuvant with Novartis (Influenza) and the Statens Serum Institute & Sanofi Pasteur (Tuberculosis) are on track. In addition, Intercell recently completed the acquisition of US vaccine company Iomai which was financed through approximately 1.4m newly issued Intercell shares and a cash component of EUR 75m that was comfortably financed from existing reserves. This acquisition adds two late-stage programs and Iomai’s needle-free vaccine patch technology to Intercell’s pipeline.

Further information:

• Intercell AG announces Q2/H1 2008 results and gives update on business (press release, PDF)
• Intercell AG Q2/H1 2008 Report (PDF)
• Intercell Q2 revenue rises, net loss halves (Reuters)
• Intercell bleibt Biotech-Musterschüler (ARD, in German)
• Intercell halbiert Verlust und rechnet mit baldiger Zulassung des ersten Impfstoffes (Wirtschaftsblatt, in German)
• Intercell erwartet 2008 positives Ergebnis (DER STANDARD, in German)

Yali Friedman, founder of thinkBiotech, author of the Biotech Blog and managing editor of the Journal of Commercial Biotechnology, released the third edition of his book “Building Biotechnology” which he calls the “definitive primer and leading textbook on the business of biotechnology”. The new edition is more than 100 pages longer than the second edition, includes new chapters, case studies and figures, and covers all important areas in biotech business development such as science, regulation/IP, financing, licensing, M&A or biotech career development. The two sample chapters on Molecular Biology (PDF) and Building Biotechnology (PDF) give an insight into the excellent coverage of scientific and management topics covered in the book.

“Building Biotechnology builds a robust foundation by providing a comprehensive fundamentals-based overview of the broad variety of elements influencing the commercialization of biotechnology. Expanding on this foundation to ensure a practical appreciation of operational issues in the biotechnology industry, Building Biotechnology adds real-world examples on topics such as the hidden pitfalls of common operational decisions, practical considerations in selecting business models and funding options, strategies to overcome developmental failures, and methods to leverage options to strengthen development plans.”

Further information:

• Building Biotechnology 3rd Edition now available (Biotech Blog)

Yali Friedman, founder of thinkBiotech, managing editor of the Journal of Commercial Biotechnology, and book author and lecturer in the area of biotech business development, is looking for writers for two biotech book projects on his Biotech Blog. If someone is interested in converting a biotech screenplay into a book or interviewing a biotech industry veteran or simply wants to help him write or edit a book on the business of biotechnology, this is definitely a unique chance to get an in-depth insight into the topic as well as a comprehensive understanding of the biotech industry.

Further information:

• Looking for writers for book projects (Biotech Blog)

Several reports and articles in July have again revealed the areas of financing and regulation as two of the major challenges the biotech industry is currently facing. One of the major consequences of the tight business environment is ongoing consolidation in the industry which further intensifies the ties between big pharma and biotech. This blog post should summarize some of last month’s interesting news in these areas.

Financing. According to the annual biotech report by Marks & Clerk which is based upon interviews with 500 biotech executives in the US, Europe and Asia, a vast majority of biotech executives recognizes that funding pressures pose a serious threat to the industry (82%) and that the climate for enabling biotechnology innovation has deteriorated within the last year (78%). In fact, the report expects that investors will focus on less risky, latter-stage drug development and that they will either take a greater equity stake or potentially look to secure their capital against the drug-makers’ intellectual property assets. Moreover, this development is affirmed by new data on US venture capital investments. As the Washington Post wrote, “the overall financial downturn is making it nearly impossible for venture-backed firms to go public”. As a result, venture capitalists have to put more money into their existing companies instead of investing into new start-ups. Moreover, according to another Washington Post article, biotech was still the second biggest sector attracting US venture capital funds but recorded a 14% decrease in Q2 2008 compared to the year before.

Regulation. Again, the annual biotech report by Marks & Clerk shows that a vast majority of biotech executives are concerned that future drug pipelines will become much harder to deliver unless the drug approval process is relaxed (72%) and that the time it now takes for drugs to get through the system is eating into patent protection (91%). In addition, the IN VIVO Blog recently noted that the number of new molecular entities (NMEs) approved by the FDA in the first half of 2008 was even lower than in the year before with only six NMEs approved in H1 2008 compared to seven NMEs approved in H1 2007. Although 2007 “ended up being quite possibly the worst year ever for innovative pharmaceutical launches” and history shows that the second half of the year usually looks like the first, Michael McCaughan expects the FDA to beat last year’s NME approvals due to the high number of pending NME applications and changes to the FDA’s review authorities. In light of the ongoing criticism about the long approval process, in a defense document submitted to the European competition authorities the European Federation of Pharmaceutical Industries and Associations (EFPIA) partly blames biotech complexity for the slowdown in new drug approvals as “the biotech revolution, while promising many new advances, has been a costly period of retooling for the industry, which has not yet translated into a mature pipeline of products”.

Consolidation. As a result of the aforementioned challenges and due to the drought in big pharma’s drug development pipelines, the M&A momentum in the industry is still high with Roche’s offer for acquiring all outstanding shares of Genentech and Sanofi-aventis planning to buy UK vaccine developer Acambis as well as several smaller deals/announcements such as Intercell’s acquisition of US vaccine biotech Iomai, Shire’s acquisition of German biotech Jerini or Roche’s acquisition of US RNAi biotech Mirus currently highlighting that consolidation does affect biotech companies of all sizes globally. As Fierce Biotech claims, Sanofi’s offer for Acambis “underscores just how attractive vaccine companies have become” whereas Roche’s offer for Genentech can be viewed as a “model marriage of a Big Pharma company focused on molecular diagnostics and a Big Biotech company designing new genetic therapies for an era of personalized medications”. Apart from mergers and acquisitions, partnership deals such as GSK’s recent EUR 2bn insomnia pact with Swiss biotech company Actelion or Eli Lilly, Merck and Pfizer together backing a new biopharmaceutical venture are a further possibility of biotech and pharma integration.

Further information:

• Funding woes threaten future drug development, finds new research (Marks & Clerk)
• Venture Capital Funding Slips, Slowing Business Development (Washington Post)
• Exits? We Don’t Need No Stinkin’ Exits? (Washington Post)
• New Drug Approvals at the Half: 2008 Looks A Lot Like 2007, And That Isn’t Good (IN VIVO)
• EU Drug Development Slowdown Due to Biotech Complexity? (Bioworld.com)
• Analysts expect more mergers in life sciences (The Boston Globe)
• Roche makes offer to acquire all outstanding shares of Genentech for US$89.00 per share in cash (press release)
• Recommended Offer by Sanofi Pasteur for Acambis plc (press release)
• Acambis shares soar on $548M buyout deal (Fierce Biotech)
• Shire to add new orphan drug to its HGT portfolio – EU launch imminent (press release)
• Will Roche/Genentech team create industry model? (Fierce Biotech)
• Roche-Genentech: A Drug Powerhouse (Business Week)
• GSK inks $3.25B insomnia pact with Actelion (Fierce Biotech)
• Pharma giants to collaborate on new discovery tech (Fierce Biotech)

BIOCRATES Life Sciences AG from Innsbruck announced that Elgar Schnegg, previously a managing director at Sandoz Austria, joined the company in June 2008 as CEO and speaker of the management board.

Schnegg: “I am pleased to be a part of the team at BIOCRATES. Our strong technology platform is well-suited for research markets, and will provide an established method for routine diagnostics in the coming years. We look forward to creating a bright future by providing our customers with the most reliable and robust data in the industry.”

BIOCRATES Life Sciences AG is a leading biotech company in the field of metabolomics. It was founded in 2002 and has established a proprietary technology platform for targeted metabolomics. The company is significantly financed by venture capital investment from MIG funds 1 and 3. According to Wirtschaftsblatt Venture Woche from 17 July 2008, BIOCRATES also announced to increase its share capital through the new capital by the company’s existing shareholders as well as GC Global Chance Funds which is already cooperating with MIG funds in several other life sciences projects.

Further information:

• Elgar Schnegg joins BIOCRATES Life Sciences AG as CEO (press release)

According to The Guardian, four NHS hospitals and the University College London set up a GBP 2bn research venture called UCL Partners which aims at establishing London as an “intellectual powerhouse for the invention of new drugs and treatments”. What is to become Europe’s largest biomedical research organisation, follows concerns that the UK might not be able to compete in the global research market without stronger R&D collaboration between academic institutions and healthcare providers.

Neil Goodwin (project director): “This is about London positioning itself internationally. Other research centres are emerging in Dubai, Singapore and Shanghai. They have superlative research facilities and large catchment areas of patients, which is attractive to pharmaceutical companies conducting clinical trials.”

The venture aims to “produce more world-class research in key areas, including cancer and heart disease” by initially focusing on 10 research areas where it can provide world-class expertise. These are the nervous system, children’s health, heart disease, transplantation, immunology, ophthalmology, deafness and hearing impairment, dental and oral disease, cancer and women’s health. It will be interesting to see whether other European countries will also consolidate their research experience in bigger institutions linking academia and healthcare providers.

Further information:

• NHS hospitals to forge £2bn research link-up with university (The Guardian)

In a report by the Washington Business Journal, Intercell announced to finish the integration of acquired US biotech Iomai within the next 100 days. While Intercell is still working out final details for combining their operations with those of Iomai, the local hiring has already started with 15 open positions in the Gaithersburg office. In fact, if clinical trials for the patch technology go well, Iomai’s 110-person headcount could be doubled in the next three years in Gathersburg where Intercell will focus the entire company’s vaccine patch development.

Moreover, Intercell CFO Werner Lanthaler told Reuters that the company is looking for further acquisitions but could also become a target in the sector consolidation itself. According to Lanthaler, “the industry is in a process of major consolidation and the M&A momentum is extremely high in vaccines because this area is strategically important. (…) We are always looking for acquisition candidates. Our focus is on (…) products which are close to the final stadium (of approval). In the current dynamics we don’t necessarily always have to be the buyer, but could be the one who’s bought up as well. We are not in takeover talks, however.”

Further information:

• Ioma, Intercell integrating operations (Washington Business Journal)
• Intercell sees further buys, could be target too (Hemscott, Reuters)

Following the positive Iomai shareholders vote on 1 August 2008 and the execution of all important remaining closing conditions, Austrian biotech Intercell announced the closing of the previously announced acquisition of US biotech Iomai. Iomai was renamed Intercell USA Inc. and became a subsidiary of Intercell AG upon closing. Intercell’s COO Thomas Lingelbach was elected to also act as CEO of Intercell USA. Iomai-founder Gregory Glenn was elected CSO of Intercell USA, and Roman Necina and Reinhard Kandera were elected as COO and CFO of Intercell USA, respectively. Stanley C. Erck and Russell P. Wilson, the former CEO and CFO of Iomai, left the company. Iomai will be delisted from NASDAQ.

“We are very happy that we could close the transaction in a very short period of time and that we now can put our full focus to aggressively progress and leverage the patch based products and technologies”, states Gerd Zettlmeissl, Chief Executive Officer of Intercell. “We would like to thank our new colleagues in the US and the management team from Iomai for their excellent and hard work over many years to develop the world leading vaccine patch franchise”.

Intercell issued 1,442,819 new shares from authorized capital (representing about 3 % of Intercell’s total outstanding shares) at EUR 31.11 per share as share consideration to former major Iomai shareholders. The cash component of the transaction, totaling EUR 75m for share-, warrant-, and option holders, was comfortably financed from existing cash reserves of Intercell. In addition, a part of the outstanding Iomai options will be replaced by Intercell stock options. Intercell expects to maintain profitability in 2008 despite the additional costs associated with this acquisition.

In order to realize the full value of the acquisition, Intercell aims at (1) industrialising/commercialising Iomai’s Travelers’ Diarrhea patch vaccine, which should enter a pivotal phase III clinical trial in H1 2009 and has an expected market potential of more than EUR 500m p.a., (2) developing Iomai’s HHS-funded immunostimulant vaccine enhancemant patch for Pandemic Influenza, and (3) leveraging the patch technology into other vaccine applications to develop novel vaccines that are more efficient and to reduce the number of injections (both internally as well as with outside partners).

Further information:

• Intercell AG closes Acquisition of Iomai Corporation (press release)
• IOMAI shareholders approve acquisition by Intercell (press release)
• Intercell buys Iomai for $189M (Washington Business Journal)

The following interesting anecdote from a recent article at TheScientist.com reminds biotech decision makers that it is important to regard past investments as sunk costs and stop unsuccessful projects instead of unavailingly prolonging clinical development in the face of disappointing clinical data.

“Early in his career in pharmaceutical drug development almost twenty years ago, Gyan (John) Prakash was in charge of overseeing the clinical development of an antimicrobial drug. Though the product had seemed promising, his review of the data showed that the trial had failed, and it was Prakash’s job to tell his superiors that the program must be killed. “At that time I was so naive,” he says, declining to name either the company or the product. Killing the program he was working on meant he’d be out of a job, he thought, so before meeting with his bosses, he packed up his office, preparing to clear out. To his surprise, however, the company saw it differently, and he wasn’t fired - aborting unsuccessful projects early meant money and resources saved. That philosophy - acknowledging your mistakes and stopping while you’re ahead - is crucial, but rare, he says.”

Further information:

• Success from Failure (The Scientist)