Biotech Values

[DewDiligence]

The Economist muses on the state of transgenic ‘pharming’:

[GTCB, my second largest holding after GENR, is the protagonist in this story, while Nexia is featured in a supporting role. Thanks to ‘dok_indo’ on the GTCB board for this find.]

http://www.economist.com/printedition/displayStory.cfm?Story_ID=3171546

>>
Down on the pharm

Sep 16th 2004
From The Economist print edition

Biotechnology: Will genetically engineered goats, rabbits and flies be the low-cost drug factories of the future?

EARLIER this year, the regulators at the European Medicines Agency (EMEA) agreed to consider an unusual new drug, called ATryn, for approval. It was developed to treat patients with hereditary antithrombin deficiency, a condition that leaves them vulnerable to deep-vein thrombosis. What makes ATryn so unusual is that it is a therapeutic protein derived from the milk of a transgenic goat: in other words, an animal that, genetically speaking, is not all goat.

The human gene for the protein in question is inserted into a goat's egg, and to ensure that it is activated only in udder cells, an extra piece of DNA, known as a beta-caseine promoter, is added alongside it. Since beta caseine is made only in udders, so is the protein. Once extracted from the goat's milk, the protein is indistinguishable from the antithrombin produced in healthy humans. The goats have been carefully bred to maximise milk production, so that they produce as much of the drug as possible. They are, in other words, living drug factories.

ATryn is merely the first of many potential animal-derived drugs being developed by GTC Biotherapeutics of Framingham, Massachusetts. The company's boss, Geoffrey Cox, says his firm has created 65 potentially therapeutic proteins in the milk of its transgenic goats and cows, 45 of which occurred in concentrations of one gram per litre or higher.

Female goats are ideal transgenic “biofactories”, GTC claims, because they are cheap, easy to look after and can produce as much as a kilogram of human protein per year. All told, Dr Cox reckons the barn, feed, milking station and other investments required to make proteins using transgenic goats cost less than $10m—around 5% of the cost of a conventional protein-making facility. GTC estimates that it may be able to produce drugs for as little as $1-2 per gram, compared with around $150 using conventional methods. Goats' short gestation period—roughly five months—and the fact that they reach maturity within a year means that a new production line can be developed within 18 months. And increasing production is as simple as breeding more animals. So if ATryn is granted approval, GTC should be able to undercut producers of a similar treatment, produced using conventional methods, sales of which amount to $250m a year.

GTC is not the only game in town, however. Nexia, based in Montreal, is breeding transgenic goats to produce proteins that protect against chemical weapons. TransOva, a biotech company based in Iowa, is experimenting with transgenic cows to produce proteins capable of neutralising anthrax, plague and smallpox. [TransOva is GTCB’s production partner for human serum albumin. (Fresenius of Germany is GTCB’s investment partner on the project.)] Pharming, based in the Netherlands, is using transgenic cows and rabbits to produce therapeutic proteins, as is Minos BioSystems, a Greek-Dutch start-up which is also exploring the drugmaking potential of fly larvae.

It all sounds promising, but the fact remains that medicines derived from transgenic animals are commercially untested, and could yet run into regulatory, safety or political problems. At the same time, with biotechnology firms becoming increasingly risk-averse in response to pressure from investors and threats of price controls from politicians, transgenic animal-derived medicines might be exactly what the pharmaceuticals industry is lacking: a scalable, cost-effective way to make drugs that can bring products to market within a decade or so, which is relatively quick by industry standards.

Just say no to Frankendrugs?

So a great deal depends on the EMEA's decision, particularly given previous European scepticism towards genetically modified crops. But as far as anyone can tell, the signs look promising. In a conference call in August, Dr Cox told analysts that the EMEA had so far raised no concerns about the transgenic nature of his firm's product. [See #msg-3737145 for more color on GTCB’s conference call.]

But as the fuss over genetically modified crops showed, public opinion is also important. While some people may regard the use of animals as drug factories as unethical, however, the use of genetic engineering to treat the sick might be regarded as more acceptable than its use to increase yields and profits in agriculture. Conversely, tinkering with animal genes may be deemed to be less acceptable than tinkering with plant genes. A poll conducted in America in 2003 by the Pew Initiative on Food and Biotechnology found that 81% of those interviewed supported the use of transgenic crops to manufacture affordable drugs, but only 49% supported the use of transgenic animals to make medicines.

Even some biotech industry executives are unconvinced that medicines made primarily from animal-derived proteins will ever be safe enough to trust. Donald Drakeman of Medarex, a firm based in Princeton, New Jersey, is among the skeptics. [This, of course, is one reason GTCB has such a low valuation. I’m betting that MEDX’s Drakeman is biased –and dead wrong.] His firm creates human antibodies in transgenic mice, clones the antibodies and then uses conventional processes to churn out copies of the antibodies by the thousand. “With goat and cow milk, especially, I worry about the risk of animal viruses and prions being transferred in some minute way,” he says. (Bovine spongiform encephalitis, or “mad cow disease”, is thought to be transmitted by a rogue form of protein called a prion.)

Another concern, raised by lobby groups such as Greenpeace and the Union of Concerned Scientists, is that transgenic animals might escape into the wild and contaminate the gene pool, triggering all kinds of unintended consequences. There is also concern that an animal from the wild could find its way into GTC's pens, make contact with one of the transgenic animals, and then escape to “expose” other animals in the wild. Or what if the transgenic animals somehow got into the human food chain?

Short of sabotage, none of these scenarios seems very likely, however. Since transgenic goats, for example, are living factories whose worth depends on their producing as much milk as possible, every measure is taken to keep them happy, healthy, well fed and sequestered from non-transgenic animals. As animals go, goats and cows are relatively unadventurous creatures of habit, are more easily hemmed in than horses, and are usually in no mood to run away when pregnant—which they are for much of the time at places like GTC and TransOva. [LOL]

The uncertainty over regulatory and public reactions is one of the reasons why, over the past four years, at least two dozen firms working to create drugs from transgenic animals have gone bust. Most were in Europe. GTC, which leads the field, has nothing to worry about, however, since it is sitting on around $34m in cash. Also sitting pretty is Nexia, particularly since it began to focus on the use of transgenic animals to make medicines that can protect against nerve agents.

Nexia became known as the spider-silk company, after it created transgenic goats capable of producing spider silk (which is, in fact, a form of protein) in their milk. It is now working to apply the material, which it calls BioSteel, in medical applications. Using the same approach, the company has now developed goats whose milk contains proteins called bioscavengers, which seek out and bind to nerve agents such as sarin and VX. Nexia has been contracted by the US Army Medical Research Institute of Chemical Defence and DRDC Suffield, a Canadian biodefence institute, to develop both prophylactic and therapeutic treatments. Nexia believes it can produce up to 5m doses within two years. [Nexia has about a dozen goats in its herd, while GTCB has 2,000!]

Today, the most common defence against nerve agents is a post-exposure “chem-pack” of atropine, which works if the subject has genuinely been exposed to a nerve agent, but produces side-effects if they have not. “You do not want to take this drug if you haven't been exposed,” says Nexia's chief executive, Jeff Turner. The problem is that it is not always possible to tell if someone has been exposed or not. But Nexia's treatment, says Dr Turner, “won't hurt you, no matter what.”

The buzz around flies

But perhaps the most curious approach to making transgenic-animal-derived medicines is that being taken by Minos BioSystems. It is the creation of Roger Craig, the former head of biotechnology at ICI, a British chemical firm, and his colleagues Frank Grosveld of Erasmus University in the Netherlands and Babis Savakis of the Institute of Molecular Biology and Biotechnology in Crete. While others concentrate on goats, Minos is using flies. “Mice won't hit scale, cows take too damn long to prepare for research, GM plants produce GM pollen that drifts in the wind, chickens have long-term stability of germ-line expression issues, and they carry viruses and new strains of 'flu—I quite like flies, myself,” says Dr Craig. [That’s a bit long for a soundbite ]

A small handful of common house flies, he says, can produce billions of offspring. A single fly can lay 500 eggs that hatch into larvae, a biomass factory capable of expressing growth hormone, say, or antibodies, which can then be extracted from the larval serum. The set-up cost of producing antibodies using flies would, Dr Craig estimates, be $20m-40m, compared with $200m to $1 billion using conventional methods. “In addition to getting some investors, the key here is gaining regulatory and pharma acceptance of the idea that flies have to be good for something,” he says. This will take time, he admits, and could be a hard sell. But if the idea of using transgenic goats to make drugs takes hold, flies might not be such a leap.

For the time being, then, everything hinges on GTC's goats. The EMEA's verdict is expected before the end of the year. Yet even if Dr Cox wins final approval to launch ATryn next year, he too faces a difficult task convincing the sceptics that transgenic animals are a safe, effective and economical way to make drugs. As Monsanto and other proponents of genetically modified crops have learned in recent years, it takes more than just scientific data to convince biotech's critics that their fear and loathing are misplaced.
<<