ProdiGene Inc.

ProdiGene Inc. was the first company to commercialize recombinant proteins from transgenic plants. It has used its head start to assemble a strong IP portfolio and form a number of strategic partnerships to advance its programs in proteins for biopharmaceutical and industrial applications. Using corn as its production vehicle, ProdiGene is close to hitting the market with an industrial enzyme, and will embark soon on clinical trials for edible human vaccines for e.coli and hepatitis B.

Where the tall corn grows . . . proteins

• 101 Gateway Boulevard, Suite 100

• College Station, TX 77845

• Phone: [phone]

• Fax: [phone]

• Email/Web Site: [email protected]

• Contact:Anthony G. Laos, president and CEO

• Industry Segment:Biopharmaceuticals

• Business:Protein production in transgenic corn

• Founded:1996

• Founders:John A. Howard, PhD

• Employees:48

• Financing to Date:$20 million

Being first has its advantages, admits Tony Laos, the president and CEO of ProdiGene Inc. ProdiGene became the first company to commercialize recombinant proteins from transgenic plants, collaborating with Sigma Chemical Co. to produce avidin and b-glucuronidase for diagnostic and research uses just one year after its formation in 1996. This early start has enabled ProdiGene to build a strong intellectual property portfolio and form a number of strategic partnerships to advance its programs in proteins for biopharmaceutical and industrial applications.

Supply problems and safety concerns are driving interest in plant-derived proteins. The traditional method of therapeutic protein production—fermentation using bacterial or mammalian cell culture—is unable to meet the current demand, and manufacturing capacity is expected to be inadequate for the foreseeable future.

The use of animal tissue for protein production is coming under increasing scrutiny in the era of bovine spongiform encephalopathy and other animal plagues. "The pharmaceutical industry today is very dependent on bovine-derived intermediates," Laos says, "and there is always a potential for prions to make it into the end product used by consumers." Risk of contamination can be avoided by using plants as bioreactors to produce protein products, since plants are not infected by mammalian pathogens, and vice versa.

There are other incentives as well. Products of transgenic plants are easier to extract and require less purification than those from animal sources, making them faster and less costly to produce, and ultimately less expensive for buyers. Laos estimates that it costs ProdiGene 10 cents to $1.00 per gram of protein, compared to $10.00 per gram for cell culture, and $2.50 to $3.00 per gram for transgenic animal production. Scale-up to production is relatively quick—about three years. And increasing production can be easily accomplished by planting additional crops.

Proteins can be produced in any part of any plant. ProdiGene has chosen corn as its vehicle, chiefly because of the well-established infrastructure for growing, harvesting, processing and transporting it. Moreover, says Laos, "with grain you can produce, store and supply constantly, year-round."

To create its proteins, ProdiGene selects a gene from a natural source—plant, animal, viral, fungal, or bacterial—optimizes it, and inserts it into the DNA of a corn cell. The protein can be expressed in any portion of the plant, but is usually expressed in the corn seed. Expression can be throughout the whole seed or specifically in the endosperm, depending on the specific protein. The corn plants are harvested and stored until such time as proteins are extracted and purified for pharmaceutical or industrial applications. Extraction and purification requirements vary—for human or animal oral vaccines, the modified grain can be used directly. Laos says that ProdiGene is seeing protein expression levels as high as 40% of soluble protein, roughly equivalent to 20 kilograms of protein per acre of corn. He believes it to be the highest level among companies using corn to produce proteins.

Many of ProdiGene's competitors grow their plants in greenhouses, citing as an advantage their ability to control the production process. "Covered systems are fine for high value products where small amounts can meet demand," says Laos, but "we're looking at things like monoclonal antibodies where you need to produce in large quantities."

Moreover, it is impractical to cover a cornfield. ProdiGene contracts with farmers in the US and the Southern Hemisphere to ensure a year-round supply. It has established standard operating procedures (SOPs) that govern the entire growing cycle, from planting through harvest. The contractual agreement with the farmers provides them a premium for their growing services and very strict growing procedures to ensure containment of the crop. To ensure compliance with the SOPs and USDA and FDA containment regulations, field agronomists monitor each crop weekly. StaufferSeeds Inc., ProdiGene's partner for seed and grain production, supplies the agronomists and manages the surveillance duties.

ProdiGene founder John A. Howard, PhD developed the protein products division at Pioneer Hi-Bred International Inc.(an EI DuPont de Nemours & Co. Inc. division), but found that a large seed company was not the best environment for exploiting biotech applications not related to food. He licensed the technology from Pioneer, combined it with technology from Texas A&M University and Terramed Inc., and founded ProdiGene in 1996. Howard, now ProdiGene's CSO, served as president and CEO until November 2000, when fellow seed industry veteran Tony Laos, founder and former head of StaufferSeeds took the helm. Laos had served on ProdiGene's board since its inception. He remains the chairman of StaufferSeeds, which holds an undisclosed equity stake in ProdiGene.

Howard had established a diverse and ambitious agenda for the company. Less than a year on the job, Laos has applied the brakes, intent on focusing on those products and partnerships with the greatest chance of producing near-term revenue. "Like most start-ups, we're burning money," Laos says, "and we need to start bringing money in." ProdiGene already has small sales from avidin and b-glucuronidase. Laos aims to be self-sufficient in two years. To accomplish that, ProdiGene is focusing on a few key areas, and using strategic partners to supply it with manufacturing capabilities.

In the industrial arena, ProdiGene has been collaborating with Genencor International Inc. since 1997 to develop industrial enzymes. The lead product from this collaboration is laccase, which occurs naturally in fungi and is traditionally produced through fungal fermentation. It is an adhesive used in the textiles and pulp and paper industries. Laos hopes that laccase will hit the market within the next 18 months, and become a key product in the multi-billion dollar global market for industrial adhesives.

ProdiGene is also prepared to move quickly on multiple programs in edible vaccines for viral diseases, both for humans and animals. It has secured patents on individual vaccines as well as the technology for their production.

Edible vaccines are well suited for animal health. Corn serves as both a storage system for the protein and as a delivery system for the vaccine. Feed is less labor-intensive to administer than injections, and there is no risk of scarring the hide or meat. Animal vaccines will also be inexpensive to produce—no purification is necessary since the plant is used directly as feedstock. ProdiGene has completed clinical trials on its lead animal vaccine for transmissible gastroenteritis virus, which is fatal to young pigs. Tests proved that the vaccine could survive in the inhospitable environment of the gut, traditionally seen as a major stumbling block for oral vaccines.

Advantages of edible vaccines are perhaps more compelling for humans, particularly in third world countries where the lack of refrigeration and trained healthcare workers hamper efforts to immunize. Edible vaccines can be processed into cereal or other food items, obviating the need for health care professionals and specialized equipment. The vaccines can be stored at room temperature. Laos indicates that ProdiGene's proteins are stable after long-term storage. "We have proteins that have been stored at ambient room temperature for four or five years now, and there has been no significant deterioration."

Clinical trials are scheduled to begin later this year for the company's edible LtB vaccine for humans against E. coli. Trials for a Hepatitis B vaccine are next on the drawing board. The company has also received an NIH grant to develop an oral vaccine for AIDS, but that is still in a very early stage, Laos reports.

ProdiGene entered into a collaboration with Large Scale Biology Corp. in February 2001 [See Deal] to develop and commercialize therapeutic antibodies. This deal will allow it to begin large-scale manufacture of antibodies at LSBC's cGMP facility in Kentucky. An earlier antibody partnership with Epicyte Pharmaceutical Inc. [See Deal] has expired, although ProdiGene does retain rights to some of the licensed technology.

ProdiGene signed its first agreement with a pharmaceutical partner in April 2001. Laos is unwilling to provide details, but is very excited about its potential. "We've proven our concept in the industrial and animal health arenas," he says. "With this deal, we want to prove that we can actually do what we say we can do in the pharmaceutical arena."

ProdiGene's leadership position in transgenic plant technology is perhaps most evident in its IP portfolio, which includes over 100 issued patents. The company has a total of 9 US patents issued, and 13 pending. It also has licenses to 29 patent families, drawn from the likes of Aventis SA , DuPont, Dow Chemical Co. , and Monsanto Co. (a Pharmacia Corp. division).

In October 2000, ProdiGene received a landmark patent for its process of developing plant-based oral vaccines, which covers the development, extraction and consumption of any viral vaccine in any plants, not just corn. "The oral vaccine patent will give us a lot of freedom to operate," Laos says. He notes that ProdiGene is seeking opportunities to license its technology or to develop products for partners.

Laos welcomes competition since it lends credence to the viability of the industry. Not that he isn't keeping his eye out, especially for others using transgenic corn, such as Meristem Therapeutics, Epicyte, and Monsanto's Integrated Protein Technologies. "We are further along than most of these other companies, which is great," Laos says. But he admits that there's a downside to being first as well, especially when it comes to getting FDA approval for its human health products. "We're paving the way," he continues. "Even though we're going in with functional equivalency, the FDA will still require a lot of proof since the proteins are coming from plants."

In addition to proving the safety and efficacy of its own products, Laos hopes that the efforts of companies like ProdiGene can start to alleviate consumer antipathy to genetically modified plants. "The modifications that have caused an uproar are input traits designed to help farmers, and consumers see no value in that," he says. "Once they see that GM plants can help make drugs more readily available and at lower costs, they will start to realize the benefits of the technology."

ProdiGene received its first round of funding in 1997 from Javelin, AM Fund and IASD Health Service Corp. It raised $3 million in a second round in 1998. Genencor and returning investors Javelin Capital and AM Fund provided an additional $3.2 million in August 1999, and a private round in March 2001 netted $9 million. [See Deal]—NTD