From biocentury: www.biocentury.com
Evolution of a deal
By Susan Schaeffer
Staff Writer
The relationship between Applied Molecular Evolution Inc.
and Eli Lilly and Co. started out like most between technology companies and big pharma: with selected deals to optimize LLY compounds. But while most technology collaborations go no further, in this case LLY believes the technology is sufficiently useful to apply much more broadly. Last week, the pharma company announced that it would buy AMEV for a net $400 million in cash and stock.
Lilly’s move would be the second time the pharma company has folded a technology partner into its value chain a move that happens less frequently than might be imagined.
LLY acquired Sphinx Pharmaceuticals Corp. in 1994. In both
cases, the relationships began as collaborations on selected targets, and were expanded over a couple of years. Also in both cases, LLY ultimately saw an opportunity to apply a technology already proven to work to a broad range of therapeutic candidates.
The relationship between LLY (Indianapolis, Ind.) and Sphinx (Research Triangle Park, N.C.) began in 1991 as a collaboration on small molecule kinase inhibitors, one of which is still in development. LLY then bought the high throughput screening and combinatorial chemistry company for $76 million in cash. Sphinx, now know as Research Triangle Park Laboratories, has become LLY’s central facility for high throughput screening. The unit, which also focuses on lead generation, lead optimization and related technologies, provides the model for the future of AMEV, according to Tom Bumol, LLY’s vice president of biotechnology discovery research.
AMEV uses directed molecular evolution to develop improved versions of both marketed and novel biotherapeutics. According to Charles Schalliol, executive director of corporate finance and investment banking at LLY, the AMEV merger made sense for two reasons. “First, the strategic alignment of Lilly with Applied Molecular Evolution is right on the money, and joining together allows a free scientific interface that is not possible under just a license. Second, Lilly has enough molecules in development to be able to use the entire capacity of Applied Molecular.”
Bumol said AMEV’s technology is applicable to any protein and has benefits over other evolution technologies."AMEV’s technology, in contrast to that of other evolution companies, can achieve mutagenesis in any part of the protein at the nucleic acid level,” he said. “This results in many variants to choose from. And Applied Molecular’s high throughput ability translates into a higher success rate in identifying changes that meet pharmaceutical goals. The result is a broad application to all the biotech platforms we’re interested in.”
LLY and AMEV (San Diego, Calif.) began collaborating in 2001 when the companies signed a deal to use the AMEsystem directed molecular evolution technology to optimize one antibody and one protein therapeutic for LLY. A 2002 deal added a second therapeutic antibody and, this June, the partners added a growth factor and another antibody to the list of LLY molecules being optimized by AMEV. While LLY would not discuss the progress of the five molecules, AMEV previously has announced improvements on two of LLY’s antibodies. In October 2002, AMEV said it had demonstrated a 10-fold increase in the potency and target affinity of a LLY antibody in vitro, as well as improved stability. Last March, AMEV said that it had increased by more than 250 fold the affinity of another LLY antibody for its target, and engineered a greater than five-fold increase in the molecule’s association rate or the speed with which it binds its target.
LLY’s biotechnology group is focused on building a pipeline of protein-based therapeutics, including peptides, cytokines, hormones enzymes and antibodies. Though the company is known primarily for therapeutics for endocrine diseases, particularly in the area of diabetes, Bumol said,“the strategy today is to bring biotech products across all our therapeutic areas including cancer, inflammatory disease, cardiovascular and neuroscience.”
AMEV has been pursuing a strategy to generate a portfolio of second-generation biotherapeutics, because there is less risk, less cost and a higher likelihood of success when working with compounds that have a well known development path.
According to William Huse, chairman, president and CEO of AMEV, the potential applications for the technology were
much broader. Thus, in addition to seven of its own molecules in early research and preclinical development AMEV signed deals with eight partners, including LLY covering sixteen molecules. Typically AMEV optimizes a compound and then returns it to its partner for preclinical development. The company also grants its partners exclusive worldwide licenses to IP generated through collaborations.
AMEV spokesperson Chris Erdman said that LLY will receive milestones and royalties due to AMEV as a result of these
collaborations, but that the partnerships otherwise will be unaffected.
According to Huse, the size of LLY’s pipeline makes the deal make sense where others wouldn’t. In considering other mergers, he said, it would be hard to imagine a good fit because few companies could use all of AMEV’s capacity. LLY was the exception.“Lilly has enough candidates in its pipeline to keep our technology group well occupied for years to come,” he said. In fact, Bumol said that as AMEV’s external obligations come to an end, LLY plans to use all AMEV’s capacity for internal programs and partnerships. |
