Where Are They Now?

In a new occasional series, START-UP will select companies it profiled in the past to find out what went according to plan, and what didn't. This month, we revisit four anti-infectives discovery companies first profiled in 2000 and draw out some lessons, both from their successes and from their failures, for those starting out today.

Tracking the progress of a group of biotechs founded in the late ’90s yields some important lessons for today’s entrepreneurs.

Nancy Dvorin and Melanie Senior

Laying out a strategy is one thing; executing it is another. That’s why START-UP is revisiting companies it has profiled in the past to find out what went according to plan, and what didn’t. In a new occasional series called "Where Are They Now?" we’ll select previously profiled companies, founded at about the same time, and draw out some lessons, both from successes and from failures, for those starting out today.

We start with four anti-infectives discovery start-ups, founded in the late 1990s and profiled in 2000 (See "Novel Anti-Infectives," START-UP, December 2000. (Also see "Novel Anti-Infectives" - Scrip, 1 Dec, 2000.).) One of the companies has failed, but its technologies have been reincarnated (twice). The others have survived more or less intact, with the founding CEO still running the show in all but one of those three. They’re all still private. All of their stories demonstrate the need for scientific and therapeutic area focus, for tight financial discipline, and for partners.

These companies began life during the biotech boom de rigueur; both Paratek Pharmaceuticals Inc. and Arrow Therapeutics Ltd. were swept into the genomics frenzy, too. Funds were sloshing about freely, but there was, perhaps as a result, some naiveté, too. Arrow began with a broad, ambitious vision to tackle resistance issues across both bacterial and viral disease. It’s now firmly concentrated on antivirals, having sold off the genomics-based platform used in its earliest antibacterial efforts. Elusys Therapeutics Inc. , likewise excited by the wide potential of its antibody-based platform, began with a remit stretching well beyond anti-infectives. New management brought focus, and a strategy for leveraging Big Pharma’s ongoing love affair with antibodies, as well as seeking opportunities in the bioterrorism space.

The late-90s’ platform technology fashion lured what was then Elitra Pharmaceuticals Inc. into a false sense of security. Unable to transition sufficiently fast into a product-focused company, the firm’s assets split: some reverted to partner Merck & Co. Inc. ; others re-emerged within Rx3 Pharmaceuticals Inc., a new anti-infectives start-up run by one of Elitra’s managers.

Our class has arguably been through the most significant technological and financing shifts that the biotech industry has seen to date. Given that, their progress—indeed, survival—is not a mean feat. Arrow has close to two compounds in the clinic and has ticked the validating Big Pharma deal box, courtesy of Novartis AG . [See Deal] Elusys has a federal-grant-funded Phase I anthrax program on a fast track to approval. It also signed its first major partnership this year, with MedImmune Inc. [See Deal] Meanwhile, Paratek has most ostensibly benefited from another important shift since the late ’90s: Big Pharmas’ abandonment of, and then return to, the anti-infectives field.

Consolidation and strategic repositioning among larger drug firms meant Paratek’s lead asset kept landing back in its own lap, only to attract Merck in early 2006, for an undisclosed up-front payment and up to $127 million in milestones. [See Deal] Big Pharmas’ renewed interest in anti-infectives programs (albeit in development-stage assets, rather than in their own discovery operations) means more licensing, often with more licenser-friendly deal terms, and more M&A.

Both are good news for our candidates, especially because many Big Pharma see the need to spread their nets widely to secure a winner. Novartis Pharma AG , for instance, acquired a majority stake in antivirals group Idenix Pharmaceuticals Inc. in 2003, exercising its option to in-license valopicitabine for hepatitis C earlier this year. [See Deal],[See Deal] It also bought into the toll-like receptor 7 oral pro-drug approach to viral disease via its 2005 deal with Anadys Pharmaceuticals Inc. , and this year it licensed Human Genome Sciences Inc. ’s Phase II albumin-interferon alpha 2b (Albuferon) for hepatitis C. [See Deal], [See Deal] Outside of antivirals, Novartis acquired UK-listed biotech NeuTec Pharma PLC for just over £300 million ($568 million). [See Deal] NeuTec is developing two antibody fragments, one for administration with antifungals and the other with antibacterials for Staphylococcus infections. Meanwhile, Pfizer Inc. ’s biotech shopping has extended to anti-infectives, too, with its $1.9 billion acquisition of publicly listed Vicuron in 2005 [See Deal] This probably won’t be its last, given the giant’s recent announcement of a $17 billion M&A war chest.

Small wonder, then, that with a still-cool IPO market, M&A is a more attractive prospect for most biotech CEOs and investors. (See "The Price Is Wrong: Finding an Alternative to Traditional IPOs," START-UP, June 2006 (Also see "The Price is Wrong: Finding Alternatives to Traditional IPOs" - Scrip, 1 Jun, 2006.).) Most would prefer the Big Pharma variety, although biotech-biotech consolidation may also be in the cards—UK firm MicroScience, focused on vaccines and therapies for infectious diseases, last year became the European subsidiary of Emergent BioSolutions Inc. after a failed IPO a year earlier. [See Deal] Arrow and Elusys declare themselves ripe for M&A; Paratek, though, buoyed by funding from commercial partners and investors, as well as by nonprofit organization and government grants, is hiring commercial expertise to continue—and hopefully go public—on its own.

Meanwhile, Elitra’s successor Rx3 is running a tight ship, and it is waiting for validatory in vivo data on its key programs before handing too much equity and control to venture capitalists. Indeed, today our companies are better placed to hang on to far more control of their assets than would have been possible when they began. The industry-wide product shortage means those that discover them are able to retain territory rights, co-promotes and even negotiate profit-shares. Note, for instance, Johnson & Johnson ’s $165 million-up-front deal for Vertex Pharmaceutical Inc.’s hepatitis C protease inhibitor VX-950, which was for ex-North American rights only. [See Deal] (See "Vertex/J&J: Pushing Big Pharma's Deal Flexibility to the Limit," IN VIVO, July 2006 (Also see "Vertex/J&J: Pushing Big Pharma's Deal Flexibility to the Limit" - In Vivo, 1 Jul, 2006.); "The Rise of Regional Dealmaking," IN VIVO, September 2006 (Also see "The Rise of Regional Dealmaking" - In Vivo, 1 Sep, 2006.).)

Partners mattered to our group during their early years, for technologies, early programs, and funding. They’ll continue to matter as these companies enter the next stage of development.

Arrow Therapeutics: Tighter Belt, Narrower Target

When Ken Powell, PhD, founded Arrow Therapeutics Ltd. in 1998, the young biotech sector was booming. Funds flowed generously, particularly to those firms that, like Arrow, were following the fashionable genomics approach. (See "Arrow Therapeutics Ltd.," START-UP, December 2000 (Also see "Arrow Therapeutics" - Scrip, 1 Dec, 2000.).)

Times have changed. Powell had to rein in the team’s scientific ambition, sharpen its focus, and cope with Europe’s postgenomics funding drought. Eight years on, though, this former head of biology at Wellcome doesn’t regret leaving the cozy confines of Big Pharma (which admittedly faces its own challenges). Despite drug discovery and development taking longer, and proving tougher than most expected during the heyday, Arrow has stuck to its original goal to uncover novel anti-infectives. It resisted the urge, as Powell puts it, "to in-license the next cephalosporin from Japan," as many other anti-infectives groups did. Some of those, Powell acknowledges, did well; but "our thing, though, was to combine good science and making money for our shareholders."

He hasn’t achieved the second, yet, but has made good progress on the first. Having raised more than £40 million ($75 million) since its inception, Arrow now has one Phase II compound for respiratory syncytial virus (RSV), partnered with Novartis AG , and a hepatitis C compound about to enter the clinic. [See Deal] "Back in 2000, if you were a biotech with two clinical compounds, you’d have a $200 million valuation," Powell reflects. That seems ambitious today. But back then, "we were ambitious," he recalls. "Our problem was that we always knew more than we could afford to do."

Arrow began as an anti-infectives group, with programs in both antibacterials and antivirals. If anything, bacterials were the priority; Arrow’s lead program in 2000 was a novel broad-spectrum antibiotic. The team’s genomics skills were particularly suited to the area—they used a transposon-mediated differential hybridization (TMDH) technology to scan bacterial genomes and determine which genes are essential to growth.

Unfortunately, the lead compound proved insoluble. Arrow pursued antibacterial discovery for a while longer, seeking both new targets and new compounds. But today, "we’re officially focused on antivirals only," says Powell. The company’s breadth, at the time, was what saved it though. Leveraging a second core competence in virology and medicinal chemistry, the team discovered--using their own compound library--a new lead: this time, an orally available once-daily treatment for RSV, A60444. With hindsight, "I wish we’d stuck to antivirals" from day one, Powell concedes.

Indeed, it was the shift to antivirals and the focus on the RSV project, then preclinical, that helped pull in investors for a £21 million round in October 2003, one of the top UK private fundraisings at the time. [See Deal] RSV is thought to cause 20% of all lower respiratory tract infections, yet it remains poorly treated, with few alternatives to MedImmune Inc. ’s prophylactic antibody palivizumab (Synagis). Arrow’s next-in-line candidate is a small molecule aimed at the much larger hepatitis C market. The compound hits a unique target, the virus protein NS5a, which is involved with the DNA replicator function. The target is thought to counteract interferon, and to interfere with viruses’ signal to prevent host cells initiating apoptosis. "This is not a polymerase or a protease" inhibitor, Powell asserts (though Arrow does have polymerase inhibitors at lead optimization stage).

Antivirals is where Big Pharma’s return to anti-infectives—which most abandoned during the ’80s and ’90s—is most obvious. Novartis has been one of the most active dealmakers in the space; it was the Swiss group that provided Arrow with its first, validatory Big Pharma deal in June 2005, paying $10 million up front for development and marketing rights to A60444. [See Deal] Novartis has committed development and commercialization milestones of up to $217 million and double-digit royalties, but it will also receive rights to back-up compounds and a first look at future drug candidates that Arrow is developing using different chemistry.

Arrow had a choice of partners for the drug, and a range of deal terms, reflecting today’s rise in regional dealmaking, and junior partners’ success in retaining more commercialization rights. But "we needed to tick the Big Pharma licensing box," notes Powell. Investors needed to see a big name blessing the program, and because they own the company, they call the shots. "The up-front payments cover our R&D costs from the previous couple of years, and we got decent royalties," Powell says.

He hopes to hold on to the hepatitis C candidate for some time longer; ideally to proof-of-concept in humans, including in combination with interferon. That program will follow a simpler development path than that for the RSV program because there’s precedent; "we can follow the VX 950 trail," notes Powell. Yet the firm’s openness to collaborations has been critical in getting it to where it is today. Both antiviral programs emerged from early discovery partnerships. Screening work for A60444 was done in collaboration with Virogen Ltd. , a Medical Research Council spinout that has since wound up. The HCV program was born out of an R&D collaboration with Triangle Pharmaceuticals in 2000. When Triangle was acquired by Gilead Sciences Inc. , the program returned to Arrow. [See Deal]

In May 2006, Arrow took a £4 million loan from GE Healthcare Financial Services that, along with the cash from the Novartis deal and remaining funds, should take the company through to mid-2007. By that time, Powell hopes, Arrow should have a first proof-of-concept study in man for RSV and should be well into clinical trials with the hepatitis C compound. Beyond that, an IPO is a possibility, following another funding round, but Powell is as open as the next private biotech CEO to M&A, given how much more lucrative this form of exit is proving to be over a public listing.

Like many things, M&A has changed since Arrow started out. Back then, Big Pharma was mostly buying platform technologies; "biotech-Big Pharma M&A was rare," says Powell. Tying up with another biotech is also a possibility, although shareholders generally prefer the (more generous) Big Pharma M&A. They’ve had a bumpy ride, too. "The whole environment has changed, and we’ve had to learn to deal with that," sums up Powell. "We started out when everyone was a bit naïve, but we know more now."

Arrow has yet to see its strong science turned to commercial reality, but it has survived what may yet prove to be one of the biggest technology shifts, and the most extreme financing climate changes, in the biotech sector. Besides, notes Powell, "the biggest lesson for me has been how long it takes to get a drug to market."

Elitra Pharmaceuticals: Doomed by Failure to Produce Products

In many ways, Elitra Pharmaceuticals Inc. was a poster child of late-90’s biotech. It had a sexy technology platform, committed investors who pumped in a lot of money, and a seasoned management team, led by former Amgen Inc. president and COO Harry Hixson. Yet these promising ingredients were not enough for the antimicrobial drug discovery company. After raising close to $50 million and striking a number of deals, Elitra closed its doors in 2004, just eight years after its birth. Like many of that generation’s biotechs, it was unable to keep up with investors’ shift in appetite away from platforms and toward products.

Elitra itself may have failed, but its assets live on. Its core intellectual property has moved over to former partner Merck & Co. Inc. Other aspects of the company’s know-how now reside at Rx3 Pharmaceuticals Inc. , an anti-infectives discovery company formed by Elitra alum John Finn, PhD. Finn is applying the lessons learned at Elitra to avoid the same fate for his start-up.

Elitra launched in 1996 around a high-throughput antimicrobial genomics screening platform, originally developed at San Diego State University . Dubbed "ultra-rapid-gene-to-lead," Elitra used shotgun antisense technology to identify essential genes that enable pathogens to grow and survive, and to simultaneously develop drug-screening assays. The technology worked directly in pathogens, not surrogate models, which the company reasoned would enable it to validate its targets prior to initiating development.

The company established programs in both gram-positive and gram-negative bacteria. Starting in 2000, it formed a number of anti-infectives discovery and development deals. With its 2000 acquisition of Mycota Biosciences Inc., Elitra branched out into antifungals. [See Deal] But none of its programs moved beyond a very early stage. When START-UP spoke to Elitra in 2000 (See "Elitra Pharmaceuticals Inc.," START-UP, December 2000 (Also see "Elitra Pharmaceuticals Inc." - Scrip, 1 Dec, 2000.)), one of the company’s primary goals was to build in-house medicinal chemistry capabilities to start advancing beyond discovery. Despite various fits and starts, that never happened, according to John Finn, whom Elitra recruited in 2003 to become VP of drug discovery.

Nevertheless, Elitra kept adding staff, growing its headcount to 70 in the US and Canada. And money kept coming in, up to a point. Its last round of fundraising netted $22 million in August 2000. [See Deal] Earlier in 2000, Elitra had filed for an $86 million IPO, but it withdrew it that November. [See Deal] Although Elitra was able to attract more partners past this point, the handwriting was clearly on the wall for the company that was unable to make the transition into product development.

John Finn joined Elitra in 2003 from Cubist Pharmaceuticals Inc. where he had been senior director of lead discovery and optimization. His group worked on novel antibacterial agents including developing next-generation lipopeptides to Cubist’s first product daptomycin (Cubicin). A key piece of Finn’s work at Cubist was a structure-based anti-infectives discovery collaboration with Syrrx Inc., now owned by Takeda Pharmaceutical Co. Ltd. [See Deal], [See Deal]

But when Cubist in 2003 filed a NDA for Cubicin, it needed money to fuel its sales effort. Finn’s team paid the price with their jobs. The Cubist/Syrrx collaboration assets reverted to Syrrx, and Finn left Cubist in search of a new home for them. He first met with Elitra in the summer of 2003, at which point the burn rate had taken its toll. The company chose to reinvent itself by creating a new anti-infectives entity that combined Syrrx programs with Elitra technology. By November, Finn had joined Elitra, and the management team had formed Trilogy Pharmaceuticals Inc. The fledgling company had a term sheet in place for a $35 to $40 million round from a syndicate of VCs. But Trilogy never got off the ground: the lead investor walked away from the deal in early 2004, and the others followed.

Meanwhile, "debts from all the capital equipment Elitra had acquired over the years came back to haunt it," says Finn. The company needed a way out, and the exit came in the form of Merck, with which Elitra had forged an antibiotics discovery deal in October 2001. [See Deal] Merck put an offer on the table in May of 2004 and acquired the biotech’s screening technology. Elitra used the proceeds to wind the company down--all Elitra staff was laid off by the end of June 2004.

Hixson, at that point Elitra’s chairman, went on to serve on a number of boards. Paul Hamelin, Elitra’s CEO at the end, is now COO at New Jersey start-up AlgoRx Pharmaceuticals Inc. Elitra’s EVP of R&D J. Gordon Foulkes, PhD, is now a partner at RiverVest Venture Partners. Head of biology Philip Youngman, PhD, joined Merck’s anti-infectives group as VP of research. And Elitra’s former CFO, Greg Tibbitts, is now CFO and VP of finance at CryoCor Inc.

At Elitra’s demise, John Finn once again packed up the Syrrx technology and, joined by five former colleagues, opened the doors of his new antibacterial discovery start-up, Rx3 Pharmaceuticals Inc. in 2004. From the outset, Finn has been determined to follow a different path than Elitra, both from a technological and from a strategic standpoint.

While Elitra took a genomic-wide approach to discovery, Rx3 goes gene by gene, with antisense technology that provides not only target validation but target sensitivity, Finn explains. It then uses a structure-based design to produce novel antibacterial compounds that inhibit that target and in many cases a second target. The company currently has three programs and is advancing compounds in each: one is a gram-positive single-target program, the second is a dual-target program in both gram-positive pathogens plus important gram-negative pathogens that are involved in respiratory tract infections. The third is a dual-target program with broad spectrum activity. Rx3’s compounds should have increased spectrum activity, Finn reasons, and early indications are that they have the potential to be much more potent against resistant strains of bacteria than currently marketed drugs.

Money-wise, Rx3 is also taking an anti-Elitra approach. Although the company is not virtual, it is lean, with just 10 employees. It was launched with money from founders and an angel round, but it has largely financed its activities with three government grants currently adding up to $1.9 million per year, plus some income from fee-for-service work.

Finn intends to keep it this way. "We don’t want to burn a lot of equity dollars," he says. "We’ll keep valuations low to maximize the step up when we do bring in VCs." Rx3 won’t go looking for venture money until it has a compound that gets people excited, says Finn. That could come soon—he expects in vivo efficacy data on Rx3’s first compounds this year.

Two years since its inception, Finn is convinced that Rx3 is on the right track. "Out of the ashes of a failed financing, we were able to cherry pick the pieces we wanted and were able to focus on what we think are the highest value-added tasks: advancing compounds toward drugs of novel classes and novel mechanisms."

It’s too soon to predict success for Rx3, although it is certainly more product-focused, and more tightly managed, than its predecessor. Still, some of Elitra’s founders’ original vision may be turning into reality after all these years: Merck reported in Nature earlier this year about a new natural product, platensimycin, that has potent antibacterial activity against gram-positive pathogens, including the resistant strains, because of its novel mechanism. Merck discovered that compound with one of the assays that came from Elitra.

Elusys Therapeutics: Same Technology Core, Sharper Strategic Focus

The technological core of Elusys Therapeutics Inc. , profiled in START-UP in 2000, remains the same: a proprietary monoclonal antibody-based platform for clearing pathogens from the bloodstream. (See "Elusys Therapeutics Inc.," START-UP, December 2000 (Also see "Elusys Therapeutics" - Scrip, 1 Dec, 2000.).) But new management has recently sharpened the eight-year-old company’s focus.

Elusys’ Heteropolymer (HP) antibody technology chemically joins two antibodies together: one antibody targets a specific pathogen; the second binds to the CR-1 receptor on red blood cells, which carry the HP/pathogen complex to the liver. There, the pathogen is destroyed by macrophages and the red blood cells safely re-enter circulation, no harm done.

The broad applicability of the HP platform for clearing the body of multiple antigens—bacteria, viruses, toxins, and autoantibodies—was a key factor in attracting the company’s founders and first investors. Indeed, in its early years Elusys started down the road of developing HP-based antibody therapies for cancer and for autoimmune and vascular diseases.

The company’s focus has since narrowed, concurrent with a change in leadership. Former president and CEO Steven Sudovar left Elusys in 2005 and was replaced by Elizabeth Posillico, PhD, who had originally joined the company in 2002 as VP of business development. Whereas Sudovar came from Big Pharma, as the president of Roche Laboratories, Posillico has spent her career in biotech and thus is well acquainted with the need for flexibility and fast response to changing market conditions.

Posillico started her 20-plus year career at Damon Biotech Inc. as director of antibody production. She then moved to Genzyme Corp., where she was general manager and SVP in the diagnostics division. After a brief foray in VC-land at the Canadian Medical Discovery Fund, Posillico returned to biotech at Apoptogen Inc. and Physiome Sciences Inc.

Technology and timing lured her to Elusys in 2002. Just as Big Pharma’s interest in anti-infectives development had waxed in recent years, so too had antibodies come back in vogue. And for a small start-up, Posillico says, Elusys stood out because of its product-focus and commitment to building a pipeline. A very broad pipeline, at that.

In 2003, Elusys had many irons on the fire, chief among them, a federally funded program to develop an antibody for anthrax. It was also developing an HP therapy for lupus, which scientific founder Ronald Taylor, PhD, a University of Virginia biochemistry professor, had developed prior to the formation of the company. Elusys completed a Phase I trial on lupus in 2002. The plan when Posillico joined Elusys was to move that product forward. The company also had other nascent programs in Non-Hodgkin’s Lymphoma and thrombosis, both of which were one-offs. Added to that was what Posillico describes as a substantial body of research indicating that the HP technology had great potential for treating infectious disease.

Posillico's mission was to establish a clear direction for the company. That meant prioritizing certain programs, partnering others, and shelving the rest. The outcome of her strategic review was a renewed focus on anti-infectives. Nonrelated products were relegated to the back burner, where they will stay until partners emerge to take them forward.

Personnel changes reflect the company’s new mission. Gone are Elusys’ original VP of R&D and its VP of clinical and regulatory affairs. Posillico added two new scientific advisors with strong infectious disease backgrounds: David S. Perlin, PhD, the president of the Public Health Research Institute, and Stephen M. Smith, PhD, chief of infectious diseases at Saint Michael's Medical Center.

To facilitate its R&D efforts, Elusys developed a proprietary transgenic mouse that expresses CR-1, the complement vector for the HP system, on mouse red blood cells. That was critical to the company’s progress, Posillico says, because CR-1 is naturally present only on primate red blood cells.

Today, Elusys’ pipeline is much more cohesive. Its anthrax program, now the recipient of $20 million in federal grant funding, is through Phase I trials, and the FDA has granted it a fast track and orphan status. Its Anthim is unique, Posillico says, because it is an intramuscular formulation—not intraveonous like products developed by Human Genome Sciences Inc. and Apotex SA ’s, Cangene Corp. , with which the US government has contracted through Project Bioshield. Moreover, says Posillico, Anthim is a very high affinity antibody that requires just one-tenth the dose of those other compounds. Elusys is in discussions with the federal government now about an eventual contract to supply Anthim, which could represent $150 to $200 million in revenues for the company over the lifetime of the contract.

Elusys’ other lead program was not on the drawing board back in 2000. It is an anti-infective for a major unmet need, methicillin-resistant Staphylococcus aureus. MRSA is a primary culprit in hospital-based infections, and as recently discovered, is becoming a problem in the community as well. Elusys’ compound, ETI-211, combines HP with a commercial diagnostic antibody (from an undisclosed source) that targets Protein A on the surface of S. aureus. Preclinical studies demonstrated a dramatic increase in survival, Posillico reports. Elusys is in discussions with potential co-development partners, and she hopes to have a deal in place by end of this year.

The promising preclinical data on ETI-211 was one of the factors that attracted Elusys’ first major partnership, with MedImmune Inc. In a deal signed this April, MedImmune will use the HP antibody technology to develop drugs for selected infectious disease targets. [See Deal] Elusys is also working on two other early-stage candidates for HIV and for Candida. Next on the drawing board, but still in research, are CR-1 targeted vaccines to boost immune responses to certain gram-positive bacteria, viruses, and fungi.

Unlike many biotechs in the class of the late 1990s, Elusys has not had much trouble raising money. Its most recent round, a $23 million Series D that closed this July, will fuel the company for another 12 to 18 months, according to Posillico. [See Deal] That should be enough time to finalize some of the collaborations in the works now. Elusys may not need another venture round, Posillico says. If she does go out for more money, it will be a mezzanine round or simply to help position Elusys for a strategic merger. That is not an unlikely scenario, given the recent spate of M&A in anti-infectives, most recently Novartis AG 's $568 million June offer to buy NeuTec Pharma PLC . [See Deal]

Paratek Pharmaceuticals: Staying the Course in Shifting Times

Dealing with Big Pharma consolidation. Creative financing for VC-shunned niche products. Jumpstarting product development by building on known compounds. Outsourcing R&D to minimize burn. Many a start-up has floundered in trying to keep up with these industry shifts in recent years, but Paratek Pharmaceuticals Inc. , an anti-infectives discovery company formed in 1996, has not deviated from its original mission.

When START-UP profiled Paratek in 2000 (See "Paratek Pharmaceuticals Inc.," START-UP, December 2000 (Also see "Paratek Pharmaceuticals Inc." - Scrip, 1 Dec, 2000.)), the company had two technology platforms, both invented by co-founder and CSO Stuart B. Levy, MD, the director of the Center for Adaptation Genetics and Drug Resistance at Tufts University School of Medicine .

One, which reflected the genomics mania of the day, was based on Levy’s discovery of a master switch that controls gene expression in a number of drug-resistant bacteria. Paratek’s goal for its Multiple Adaptational Response (MAR) program was and is to develop prophylactic drugs that interfere with this gene switch and prevent bacteria from mounting an attack. The MAR program was a gleam in Paratek’s eye back in 2000, and it is still at an early stage.

The company has made much greater progress with its other core technology: the TET program’s focus is on creating tetracycline derivatives that are not susceptible to the resistance problems that have come to plague others in this family of broad-spectrum antibiotics. By using tetracyclines as its starting point, Paratek hopes to piggyback on the class’s efficacy, as well as to reduce the risks and timelines involved in working with uncharacterized compounds. The TET platform had yet to produce any products when we spoke to Paratek in 2000, but the company felt it had early validation of its potential from a 1999 antibiotic discovery deal with Glaxo Wellcome PLC. [See Deal]

Since then, Paratek’s medicinal chemists have built a pipeline of more than 2,000 novel TET compounds, leading with Phase I drug PTK 0796/MK-2764, a broad-spectrum tetracycline derivative from a novel class of antibiotics, aminomethylcyclines, identified during the company’s collaboration with Glaxo. PTK 0796 targets both gram-positive and gram-negative bacteria and is unique, says Thomas J. Bigger, Paratek’s president and CEO, who has run the biotech since its inception. That’s because the dual formulations in development will enable it to compete in markets for both hospital-acquired and community infections. An intravenous form of the drug could combat nosocomial infections in the hospital. Following their discharge, patients could continue treatment with the oral formulation, which could also be used against community-based infections.

The story of PTK 0796’s journey to this point illustrates the impact that Big Pharma consolidation has had on the biotechs that are now fueling its pipelines. When SmithKline Beecham and Glaxo Wellcome merged in 2000 to become GlaxoSmithKline PLC , "they decided to cut back in preclinical-stage antibiotic research and thus didn’t see a future with us," Bigger says. [See Deal] Paratek took the TET program back, focusing on what had become its lead candidate, PTK 0796.

In September 2003, Paratek signed up Bayer Pharmaceuticals Corp. to help take the compound beyond the preclinical stage. [See Deal] Within a year, its parent Bayer AG decided to out-license its anti-infectives business to Schering-Plough Corp. and to downsize its internal anti-infectives research and early-stage development. [See Deal] PTK 0796 once again returned to Paratek, which in July 2005 took it into Phase I itself.

It was not alone for long. "Within six months of getting the rights back, we had five Big Pharmas competing for it," Bigger says. Merck & Co. Inc. was the eventual winner. [See Deal] Paratek’s March 2006 deal with Merck could top $140 million, Bigger reports, and includes significant up-front payments and royalties. Paratek will work with Merck on developing the intravenous and oral formulations of the candidate worldwide, and it has the opportunity to co-promote the resulting IV product in the US.

In addition to Big Pharma’s renewed interest in anti-infectives, PTK 0796’s saga also illustrates Big Pharma’s new willingness to let partners retain some say in product development. Four of the five companies interested in PTK 0796 were prepared to give Paratek significant input, Bigger says. In the past, biotechs would simply hand over the compound and walk away. But its hunger for pipeline products is forcing Big Pharma to bend over to accommodate its smaller partners’ needs.

Phase II trials of PTK 0796 are due to begin early in 2007. All data up to this point are very promising, Bigger reports, but Paratek is hedging its bets with a number of follow-up candidates in the TET program. In anti-infectives, the company is developing narrow-spectrum candidates for C. difficile and acne, both of which demonstrated high potency with excellent activity in animal studies, according to Bigger. In the very near-term, Paratek will seek a partner for the acne candidate, but it may take more niche hospital-focused candidates to market it on its own.

Given the emerging evidence of tetracyclines’ versatility, Paratek has started partnering to develop derivatives for non-antibacterial indications. It started a program in malaria in 2001, and quickly garnered research support from the nonprofit Medicines for Malaria Venture (MMV) and the National Institutes of Health . The malaria effort led to a discovery program for anti-inflammatory and neuroprotective derivatives.

In October 2004, Paratek signed a deal with Serono SA to develop an oral tetracycline for multiple sclerosis. [See Deal] It is collaborating with the Families of Spinal Muscular Atrophy (FSMA) on a drug for spinal muscle atrophy, a frequently fatal genetic disorder. It also has ongoing research in stroke, arthritis, and adult respiratory distress syndrome.

On the back burner for much of Paratek’s life, the MAR platform is now poised to move forward. The company has developed five families of compounds, has proof-of-concept in animal models on a number of them, and is now doing lead optimization. The MAR program’s goal, drugs that prevent bacteria from infecting the host, represents a "new paradigm for treating infectious disease," Bigger states. As such, the company would prefer regulatory expertise and deep pockets to take the compounds forward. It will start to look for partners as the lead candidates emerge from optimization over the next year.

Not that Paratek’s own pockets are even close to empty. The start-up has raised $94 million to date, and all of its investors have stayed with the company, Bigger notes. Paratek has nevertheless cast its financing net wider. Besides accessing nonprofit money, it has also received $10 million in government grants, and Bigger hopes for more—he is involved in the current effort to overturn rules that restrict SBIR grants to start-ups with minority VC ownership.

Much of the money that Paratek has raised has gone toward hiring new expertise. On the business side, Paratek recently hired Wall Street veteran John Dunphy as CFO. Former CFO Beverly Armstrong, now Paratek’s general counsel and chief compliance officer, has been tasked with preparing the company for an IPO in 2007—if the market’s ripe. If not, the company has enough cash available to carry it further.

Paratek has also invested in its scientists, who form the majority of the company’s 67 FTEs. Medicinal chemistry has been a core competency from the company’s inception, and Paratek has hired ex-Bristol Myers Squibb and Genaera process manager Sean Johnston, PhD, to head up process development and manufacturing operations. It is also building a small GMP suite for future Phase I trials.

Beefing up in-house expertise bucks the current trend toward outsourcing, Bigger admits, but he’s tried CROs, and he is not convinced that they have the requisite knowledge to do basic development—even those formed by ex-Big Pharma R&Ders displaced during consolidation. "The expertise to build pharmaceutical development labs never left Big Pharma," Bigger opines. "One of the biggest lessons I’ve learned is the amount of expertise you need to bring into your own company. Outsourcing just doesn’t work."