Biotech Values

[DewDiligence]

Does MNTA have any bona fide competitors?

A new FoB report from Decision Resources* lists three companies in addition to MNTA as FoB technology specialists:

• Aequus BioPharma
• Prolong Pharmaceuticals
• Phage Biotechnology

Let’s consider each of these three companies.

1. Aequus BioPharma (http://www.aequusbiopharma.com ). Aequus is a small private company that was spun off from CTIC in 2007, and CTIC still owns a majority stake. Following is an excerpt from CTIC’s DEF14A SEC filing on 5/23/08:

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In May 2007, we formed Aequus Biopharma, Inc., a majority owned subsidiary of which our ownership was approximately 69% as of December 31, 2007. We entered into a license agreement with Aequus whereby Aequus gained rights to our Genetic Polymer™ technology which Aequus will continue to develop. The Genetic Polymer technology may speed the manufacture, development, and commercialization of follow-on and novel protein-based therapeutics. In May 2007, we also entered into an agreement to fund Aequus up to $2.0 million in cash in exchange for a convertible promissory note… As of December 31, 2007, we have funded Aequus with an initial payment of $0.5 million. Additional payments of up to $1.5 million will be made upon the achievement of certain milestones. In addition, we have entered into a services agreement to provide certain administrative and research and development services to Aequus. Our President and Chief Executive Officer, James A. Bianco, M.D. and our Executive Vice President, Chief Medical Officer, Jack W. Singer, M.D. are both minority shareholders of Aequus, each owning approximately 4.9% of the equity in the company as of December 31, 2007. Additionally, both Dr. Bianco and Dr. Singer are members of Aequus’ board of directors and each have entered into a consulting agreement with Aequus.
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Enough said—clearly, Aequus is not a serious venture.


2. Prolong Pharmaceuticals (http://www.prolongpharmaceuticals.com ). Like Aequus, Prolong is a small private company whose claim to fame is PEGylation. The company was founded by Abraham Abuchowski, who also founded Enzon and likes to bill himself as the “Father of PEGylation technology.”

Prolong is positioning itself as a contract manufacturer for companies who desire to sell PEGylated versions of protein drugs in the Third World, where regulatory standards are far below those in the US and EU. This may be a promising business model; however, it has little to do with the characterization and reverse-engineering skills that will be needed to sell full-fledged biogeneric drugs in the major pharmaceutical markets.


3. Phage Biotechnology (http://www.phagebiotech.com ). Phage is a 55-person private company with a production facility in San Diego and a few programs in preclinical development. I have not evaluated the company’s proprietary pipeline, which may have some value; however, as a player in the FoB market, specifically, Phage has nothing special to offer as far as I can tell.

The company claims to be interested in producing FoB’s for interferon alpha and beta, hGH, PTH, and G-CSF. These proteins comprise the simplest biologic drugs on the market and the ones that almost any biotech company with a modicum of readily available know-how could produce. In contrast, the FoB’s that MNTA intends to commercialize with Sandoz or another partner are complex glycoproteins that require considerable know-how to characterize and manufacture to the specs of the corresponding branded drugs.

Phage Biotechnology hired a consultant in late 2007 to try to find a development partner, as described in this PR: http://www.brucknergroup.com/publications/28.pdf . When this approach didn’t work, Phage tried to IPO, but it withdrew its application in January 2008 when it became evident there was no interest in the offering.

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In summary, the three companies cited by Decision Resources (Aequus BioPharma, Prolong Pharmaceuticals, and Phage Biotechnology) as being in the same FoB technology bucket as MNTA are hardly bona fide competitors, IMO. At best, these companies would appear to have some potential to be marginal players in the market for biosimilar drugs. As far as I can tell, they possess no special know-how to fully characterize glycoproteins or reverse engineer the production processes of the makers of branded protein drugs, which are the skills that MNTA intends to leverage in bringing fully-substitutable biogeneric drugs to market.

*The table of contents of the Decision Resources report is available at: http://www.decisionresources.com/stellent/groups/public/documents/pdf/dr_050360.pdf .