Merger Makes Curis a Contender in Regenerative Medicine
Q & A with Doros Platika
Boston, March 31, exclusive to BioSpace.com
In mid-February, three Cambridge, Massachusetts biotech companies merged and were reborn as Curis, Inc. Ontogeny, Reprogenesis and Creative Biomolecules threw their lot together to capitalize on each company's strengths and to form what they believe should be a powerhouse of "regenerative medicine"--- activating the body's own ability to repair and regenerate.
Curis represents a merger of strength that will create a company with near-term products, a broad pipeline and a toolbox of discovery technologies, said CEO Doros Platika in an interview with Biospace at BIO2000. To create a company with staying power, which Platika believes Curis will have, it should put 1-2 new drugs into clinical testing per year, have late-stage products, as well as mid-stage drugs in the pipeline.
Platika has been the CEO of Ontogeny, whose developmental biology thrust is powered by a genomics discovery engine; Reprogenesis brings to the table expertise in tissue engineering and two tissue products in the clinic, each with large markets; and Creative Biomolecules has OP-1 for bone fractures, a drug that's now under regulatory review in Europe and the US.
Platika acknowledged that the biotech community can be wary of mergers, often viewing them as a move of last resort, done out of weakness. Or, as Platika put it: "That two sick puppies can only produce one big sick dog." That was not the case here, with Ontogeny's coffers full and products coming down the pike swiftly for the other two companies. The bottom line, according to Platika, is that the merging of these three companies enables all "to extract the value in genomics and a way to convert three biotechs into one strong drug discovery and development company."
Biospace: How did the merger talks start?
Platika: Actually, we were just talking this morning about how there that's actually two questions, i.e. when did somebody start talking about "let's do the merger," which I would say probably was a couple of months ago, and the other is how long has the merger really been in gestation, i.e. courting, discussing and finding commonalties. I would say it's been almost two years since we've all been talking about our commonality and the potential for collaborations.
The main point here is that for the longest time I've thought that different biotechnology companies have different components of the puzzle. That is not to say that they're not successful, it's just that they're incomplete. And unfortunately, most people wait until they are in trouble to consider ways to make more complete companies. And that's why some people are reticent to do mergers. They have a connotation that you couldn't make it on your own.
I published a piece in Nature Biotech called "Checking Out at the Roach Motel and How Not to Check Into It," that argues the best reason to do a merger is for strategic reasons. That if you take two sick puppies, you now create a big sick dog that just needs to be fed more. That doesn't make any sense, and makes it very unlikely to be successful.
Biospace: Do you think most mergers are two sick puppies?
Platika: I would say in biotech there's been a real resistance to mergers. There have been different excuses given, from the egos involved to the fact that, unlike in other industries. so much of the real value in biotech are the people. Actually, it's intellectual property plus the people, it's not hardware like in some other businesses. But I think those are just excuses, to be honest.
Biospace: Why did a merger suit Ontogeny's needs?
Platika: Ontogeny was a company focused on functional genomics technologies in developmental biology. What are the molecules that are involved in making the body? That's what we were discovering, and there were two kinds of products that we believed were going to come out of that. One, those that activate growth in the body in order to restore function and repair following disease, trauma, or autoimmune disorders. Two, those that help out or inhibit drug processes, mainly in oncology.
And we, along with others, have started this idea of "regenerative medicine" and we felt that it was one answer to another issue in biotech, which is how do you extract value out of genomics?
People have found out that after you spend hundreds of millions of dollars on sequencing, what you end up is with is a lot of sequence.
Converting that sequence into drug discovery information is not going to be trivial. But regenerative medicine is one way to move quickly from genes to drugs. Other companies have also realized this Human Genome Sciences' CEO Bill Haseltine has started the Journal of Regenerative Medicine, of which he's editor-in-chief. And Eli Lilly has decided that this is going to be the way they're going to move into post-genomic drug discovery from genomics.
So there were two issues we faced at Ontogeny. A: We had to find a way to accelerate our development and B: We had a piece of the puzzle but we were not complete.
Ontogeny's pipeline had generated 6 to 8 product leads, we were going to have our first one entering the clinic in the next 12 months, and we were actively recruiting people in development.
So we said to create a sustainable company ideally what would you want? You want a company that has late-stage products with near-term product revenues, or active product revenues, and also you also wanted to add mid-stage products, so that way you had a full pipeline. You never know what products that are going to make it, therefore you want to diversify your risks across the pipeline, and pair that with a discovery engine that can generate one to two new INDs per year. Which is I realize very ambitious.
And we also wanted it to be all focused in the area of regenerative medicine. We felt that the pieces you needed for regenerative medicine were tissue engineering, inducing molecules, protein-inducing molecules, stem cells and also the ability to generate small molecule agonists and antagonists.
Biospace: So how did the three companies synergize?
Platika: Right. Creative BioMolecules had the late-stage product opportunities with OP-1 that will hopefully will be on the market within the next 12 months in one of the countries where it is now being reviewed -- Europe, the US and Australia.
Biospace: What is OP-1?
Platika: OP-1 is a bone morphogenic protein that stimulates the body's ability to re-grow bone. Its first indication is for non-union fractures, i.e. fractures that have not repaired. OP-1 is being co-developed with Stryker Corp., which will provide mid-teens royalties to Curis.
That serves at least two functions in the merger. One, they pioneered moving this forward, having completed two Phase III trials. And two, it provides us with possible near-term revenue opportunities.
Biospace: How else were there synergies?
Platika: The second issue was how to move regenerative medicine --- stimulating the body to repair and regenerate --- forward. Most people think about regenerative medicine like Star Trek, something that's not going to happen in their lifetime.
Well, this concept is producing its first product, one that will validate the concept of regenerative medicine, and that's going to happen in the next 12 months. It's not Star Trek.
Compare that with most people's concept of regenerative medicine. They usually think about using the genetic material, or 'blueprint,' that each and every one of us have in our cells to reconstruct the body. Or they talk about cloning, But I don't think that's a very useful way to think.
Essentially, each and every one of us has an almost a built-in 'fountain of youth,' if only you could reactivate part of the [genetic] program to replace cells that are damaged, such as bone. Now we're talking about something like OP-1 that is really useful. I think cloning is going to be useful in animal husbandry and so on, but not in humans.
Biospace: What about Reprogenesis?
What Reprogenesis offered was expertise in tissue engineering and a development organization that has taken their projects, in about two or three years, through Phase III clinical trials.
They have expertise with Bob Langer at MIT [a leading bioengineer], and collaborations for matrices and cells. Their most advanced product is in Phase III for regrowing functional tissue that would act as a valve to restore normal function in the bladder in children so urine doesn't back up into the kidneys.
Biospace: What is that condition called, and how common is it?
Platika: Vesicular urethral reflux, VUR for short. About one to two percent of children are born with this and right now it has to be treated with antibiotics and open surgery in about 20,000 cases each year.
Biospace: They're missing a valve that keeps urine moving in one direction?
Platika: Yes. Normally from each kidney you have a tube called a ureter that comes into the bladder. And the structure where they come in is such that it blocks urine from going back up when the bladder squeezes. It keeps the urine going out. What happens when you either don't have that structure or it's not functioning properly, urine backs into the kidneys and causes infection or damage to the kidneys. And you end up having major surgery, open abdominal surgery from which it takes weeks to recover.
So the tissue Reprogenesis has engineered, NeoBladder, turns the procedure into a 24-hour process that's done through a scope.
Let me back up a bit. In the US each year, there are 500,000 cases of adults with bladder cancer or children who, due to congenital diseases, have bladder damage. And to recreate a bladder, surgeons have to use the bowel, because you need something living, and bowel comes with its own blood supply. But bowel is designed to absorb. And so the people who get that kind of bladder built out of bowel run into electrolyte and fluid problems because the bowel's trying to absorb the urine that's supposed to be going out.
So what a Children's Hospital researcher and collaborators at Harvard and MIT have done is take a biopsy of the bladder, grow it in a matrix, and put the matrix back to the bladder site. When done in dogs, they demonstrated that you can regrow a bladder that has the layers of a bladder and the dynamics of a bladder.
Biospace: So this is an autologous product --- a new bladder valve grown from one's own bladder cells?
Platika: You got it. And we're in now in a pivotal Phase III trial, which has almost completed enrollment; Phase II results were successful and have already been published in 1999. The product has received orphan drug indication from the FDA, and additional funding from the government.
And it's something that Curis feels we're going to market ourselves. There is an initial market for NeoBladder of 100-200 million children, and in the US there's only 200 to 250 pediatric urologists treating them, so that allows Curis with a relatively modest sales force to approach everybody.
So, not only did Reprogenesis provide that product opportunity but it also provided a development infrastructure, and a manufacturing facility.
Biospace: Does Reprogenesis have other tissue-engineered products?
Platika: Yes, another products now entering the clinic is a matrix of specially-treated endothelial cells called VascuGel. It prevents restenosis and thrombosis. There's actually two products, one that's for use in coronary artery bypass graft [CABG] and open heart surgery, and the second one that's for delivery through a catheter during angioplasty.
When you do a CABG, or perform angioplasty, you damage the endothelium, which results in two things. One is re-endothelization. The lining of the blood vessels are called endothelial cells, which normally inhibit the smooth muscle layer of the blood vessel from proliferating. But once it's damaged by CABG or angioplasty, the muscle proliferates and can re-block the blood vessel. The second problem is that with these procedures is that blood clots can develop.
Biospace: So VascuGel would coat the surface where the angioplasty took place to prevent damage and restenosis?
Platika: Right.
But back to the strategic plan to merge; an additional advantage to bringing these three companies together was geography; all three companies are in the Boston area. So the scientists knew each other and respected each other, and it can bring everybody in. What we were focused on was identifying complementarity. There's not a lot of overlap between the companies, and therefore we're not after savings by cutting [personnel]. We did the deal done to get complementarity, so we can put the different pieces of the puzzle together to create a full picture.
So Reprogenesis brought development expertise, middle-stage product opportunities, and tissue engineering expertise. Ontogeny had brought discovery engine that was a functional genomics discovery engine for identifying biologicals, plus an effective program of identifying also cellular therapeutics and small molecule agonists and antagonists of the pathways.
From the financial standpoint, Ontogeny didn't do the deal out of weakness; we started the year with over $40 million in cash, and a net burn of around $10 million per year, so we certainly had more than three years' worth of cash. And multiple partners including Biogen, Becton Dickinson, Oxford Asymmetry, and more....
Biospace: And how were the other two companies faring?
Platika: Well, they're at different stages. ReproGenesis was private like Ontogeny. And Creative BioMolecules had over $20 million dollars in the bank, with product revenues expected in the next 12 to 18 months. They are public and trade on the NASDAQ under CPMI.
So in a way the creation of Curis provides three IPOs in one. It's the Curis IPO but it's also the Ontogeny and the Reprogenesis IPO.
Most people had asked us in the frothy market we were just in, why didn't Ontogeny do an IPO on its own. Everybody knew we were talking to a number of premium investment banks, and there was a lot of interest.
My answer to that is was what we were talking about earlier: if I were thinking short-term, and my exit strategy was the IPO, that would make sense. If on the other hand I'm thinking long term, about creating a sustainable company with sustainable value, with real liquidity that allows people to work in critical mass, then doing what we did made more sense. We did it from a position of strength, and from a strategic point of view to capture synergies.
The result is a company that has products under regulatory review in the US, Europe and Australia, diversification of risk across a pipeline, a lot more products at various stages; a discovery engine that would continue to spit out one to two new INDs per year.
Another good reason to merge was to help consolidate some of the intellectual property that is important in regenerative medicine. The company starts out with more than 150 issued patents and more than 225 pending patents. So it gives us an opportunity to be a real prominent company in our niche.
Biospace: How has the merger been received?
Platika: I think the initial response was gratifying; depending on when you looked. There was increase in the value especially with Creative as a tracking stock. Until Curis comes into being officially, the only way that people can own part of Curis is to buy Creative stock; for each 10 shares of Creative you're going to get three shares of Curis. [Curis will then be the publicly traded company when the deal closes.]
I think the valuation of the three companies when we first started talking about putting these together was running around 400 million or so. By the time the deal was announced February 15, and based on the closing price of Creative on February 14, the market cap of Curis would have been around 600 million. Right now it's around over a billion dollars.
Actually, for a while during the frothiness our valuation went over two billion, but it came back, especially after the recent forays by the President and Tony Blair in discussing intellectual property. Which by the way, would benefit Curis because we are a consumer of raw data. We translate it into medication.
Biospace: When will the deal close?
Platika: We filed the S-4 last week, so we anticipate that sometime in early June or late May. If the SEC approves that it has to go to the shareholders for a vote.
Biospace: How will you handle merging the three companies? Making good on the promises of a merger isn't always easy.
Platika: That's part of the reason why we've changed the name. I didn't want it to be Ontogeny or Creative or Reprogenesis. We wanted it to be a new company with a new culture to retain the excitement, retain the ownership of each three groups, rather than one group dominating the others.
The critical part here, as I said, is the complementarity and functionality which has enabled Curis suddenly to have a development group, to have a discovery group and to have a late-stage group.
Biospace: Who are your competitors, and at what stage of development are they?
Platika: They include companies that are primarily known in the genomic circles scub as Human Genome Sciences, the later-stage groups like Eli Lilly, groups like Genentech that haven't talked as much about it but are really a great group. For instance, one of the things that we do, like Genentech, is we use whole zebrafish embryos to screen for molecules. Other competitors include Regeneron and Organogenesis
Biospace: How many people did each company have and now what's the combined head count?
Platika: I think Creative had about 40 people as did Reprogenesis; Ontogeny had about 75 people. Probably the new company will be somewhere between 120 and 140. And that's because some people won't want to stay with Curis. Also in administration we've decided we're going to have only one CEO. For the most part the bulk of the people are staying.
Biospace: And are you going to have a new facility?
Platika: I would love to. Initially, we're going to consolidate four to five facilities into two facilities in Cambridge. But Cambridge [real estate] is really very expensive, very tight, and so the question would be how to best do this.
I don't know if you've ever been in a relationship with somebody who's lived with somebody else in that house or apartment, or you've lived with somebody else in your place. When you get together with someone new, it's probably best to make a fresh start to move to a place that's your new place together, and create your own memories. I think when you create a new company that's also ideal.
|
