Biotech Values

[DewDiligence]

GTCB write-up in Boston Globe:

[Same story from a hometown angle.]

http://www.boston.com/business/
healthcare/articles/2006/02/24/
rejection_of_drug_shows
_risks_of_biotech_business/

>>
Rejection of drug shows risks of biotech business

Makers of medicine from goats press on

By Stephen Heuser
February 24, 2006

After years of breeding goats with human DNA on a 19th-century farm, a Framingham company was rejected by European regulators yesterday in its attempt to introduce the first-ever drug milked from a bioengineered animal.

Scientists from Europe's top drug-regulation committee told GTC Biotherapeutics Inc. that its anticlotting drug had been tested in too few people to determine if it is safe and effective.

The news quashed what would have been a rare groundbreaking moment in the pharmaceutical business. Generated in the udders of 60 goats in rural Charlton, the drug, called Atryn, was seen as a high-water point in the lengthy effort to produce human medicines inside genetically modified farm animals. The company's goat-altering technology has been carefully watched as a promising way to make large amounts of valuable human proteins.

As Massachusetts grows increasingly dependent on the life-science industry for its economic future, the rejection of GTC's pioneering application also highlights a fundamental risk of the business: A company's future can hinge on one drug and a single government decision.

''It's not for the faint of heart," said Thomas Newberry, a spokesman for GTC Biotherapeutics.

The market value of GTC, about $116 million at the end of the day Wednesday, was cut in half yesterday after the news broke. A small team of executives hastily gathered around a speakerphone in a London hotel near the offices of the European Medicines Agency to reassure investors.

The company said it would appeal the decision, and plans to apply to the Food and Drug Administration next year to sell Atryn in the United States. But an analyst yesterday called the rejection a ''major setback" for a small firm whose success depends on the acceptance of a new way of making drugs.

With 135 employees -- about 70 of them on the Charlton farm -- GTC is a minor player in the local economy, far smaller than billion-dollar powerhouses such as Genzyme Corp. and Biogen Idec Inc. Unlike most biotech companies, which try to create one disease-fighting molecule and ride it to profitability, GTC is trying to use a known but obscure protein as proof of a new idea: that an animal, not a steel tank, is the most efficient drug factory.

The animal-milk protein idea was hatched more than 20 years ago by researchers at Biogen in Cambridge. The udder of a farm animal, scientist Harry Meade said, could be programmed to produce useful molecules too complicated and delicate to be manufactured in the large fermenting tanks used in most biotech plants. And it could generate the valuable substances in far larger quantities.

Since then the idea and Meade, its scientific champion, have traveled a tortuous route through the fringes of Boston biotechnology. With little interest from his Biogen bosses, Meade eventually took his idea to a start-up company subsequently bought by Genzyme, which spun the goat business into its own company, Genzyme Transgenics Corp. Eventually, Genzyme sold off most of its interest and the name was shortened to GTC.

With production facilities that eat several pounds of grain a day and head-butt each other for entertainment, GTC deals with issues that never arise for most biotech companies. Potential investors drive up a dirt road and are asked to dunk their feet in an antibiotic bath before walking on farm property. Veterinarians work in shifts to provide the goats with 24-hour care, and executives joke that GTC runs the only drug factory regularly inspected by the Department of Agriculture.

But GTC's main challenges -- boosting investor interest while trying to placate skeptical regulators -- are standard in an industry where most companies struggle and often fail to stay afloat for the years it takes to introduce a product.

''We're drilling oil wells," said Alison Taunton-Rigby, a long-time biotech executive who worked at Genzyme when it spun off GTC, and now runs another local start-up. ''If it's a gusher, it's great, and if it's not, tough."

If it can win approval for Atryn, GTC hopes to cut deals with larger biotech firms and pharmaceutical companies, using its herd of 1,400 goats as a manufacturing plant.

Yesterday's decision marked the disappointing conclusion to a two-year campaign by GTC to convince Europe's drug authorities that a protein from goat milk would work just as well as the human protein it replicates. The company applied in Europe rather than in the United States because regulators there have set clearer rules for getting anticlotting proteins approved.

Despite the rejection, GTC's executives said they are encouraged that European regulators did not seem fazed that the drug was produced in a genetically altered animal. The gene-splicing used to produce a bioengineered goat is the same procedure used to pump out synthetic proteins in a bioreactor, a drug-making technique nearly three decades old.

''They identified concerns, and not one of them relates to a goat," said GTC spokesman Newberry.

The regulators were pointed, however, on one issue: The company hadn't tested the drug in enough patients. GTC looked at 14 patients with antithrombin deficiency, a hereditary lack of anticlotting protein in their blood. Because of mid-study changes in how the drug was administered to nine of the patients, the European authorities considered only the remaining five -- too few, they said, to determine whether the drug worked safely.

Newberry said the drug appeared to prevent clots in the patients that took it, without side effects. And the small number of patients studied, he said, was because the drug treats a very rare disease -- a typical concern for biotechnology businesses, which often specialize in selling high-priced drugs that treat very few patients. For Atryn, regulators had asked for a minimum study size of 12 people.

The company is testing the drug on an additional 17 people for its US application, and hopes the new data will satisfy the FDA.

Regulators asked the company to add an extra round of ''ultrafiltration" to their process, to ensure that fragments of viruses don't show up in the drug. They also said GTC did not show enough data to prove that patients would not have an immune reaction to foreign proteins.

Newberry said the company was surprised at the rejection, but characterized the complaints as standard questions about biotechnology drugs.

''All these concerns are things that could occur in anybody's recombinant protein filing," he said.

If it is eventually approved, Atryn is unlikely to have the billion-dollar market potential of top biotech drugs made by Biogen Idec, Amgen Inc., and others. Analyst Navdeep Jaikaria estimates the potential market is only $50 million. But a quick check of the numbers shows why GTC's goats are among the best-protected and most carefully monitored farm animals in the world.

Antithrombin is currently produced by purifying it from human blood, and costs $1.72 per international unit -- that translates to more than $100,000 a pound. Each goat can produce more than a pound and a half of protein per year, more than $150,000 worth.

''Any given animal on the farm could be potentially an incredibly valuable animal," said Michael Schofield, the head veterinarian at GTC's farm.
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