Cellzome and GlaxoSmithKline: Deal announced on 10th September 2008




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Video title: Cellzome and GlaxoSmithKline: Deal announced on 10th September 2008
Released on: September 10, 2008. © PharmaVentures Ltd
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In this programme Tim Edwards talks to Fintan Walton to discuss the recent news from Cellzome. The company announced today that it has signed a worldwide strategic alliance to discover, develop and market novel kinase-targeted therapeutics to treat inflammatory diseases with GlaxoSmithKline.
Cellzome's origins and proprietary technology.
Fintan Walton:
Hello and welcome to PharmaVentures Business Review here in London. On this show I have Tim Edwards, who is President the CEO of Cellzome Incorporated, welcome to the show.
Tim Edwards:
Thank you Fintan. Good morning.
Fintan Walton:
Good morning to you. Cellzome is a company that is incorporated in United States, it's a parent holding company is in the United States, but it's a company that's got activities here in the Europe both in the UK and in Germany in Heidelberg. Could you tell us Tima little bit about the origins of Cellzome and its specific history and also a little bit about its proprietary technology?
Tim Edwards:
Yes, certainly. So we were spun out of The European Molecular Biology Lab in the year 2000. And EMBL is based in Heidelberg in Germany and that was where the company first began to trade. And subsequently we built up a medicinal chemistry group in the UK and that's the origins of two of our two operating companies. And our proprietary technology, we originally licensed a patent from EMBL which was a patent called tab, sorry tagging technology. And we used that to immobilize proteins to resin metrics and that's the foundation stone of our proteomics approach.
Fintan Walton:
So that's the kind of this technology is it?
Tim Edwards:
Yes that the protein our original proteomics was developed into the Kinobeads approach. And the kind of itself has substantial patent filings around it in a substantial amount of knowhow which my colleagues have developed.
Fintan Walton:
Right. So it's important that obviously it is not original intellectual property but Cellzome has added to that technology and the proprietary technology?
Tim Edwards:
Absolutely, as you say in both formal patents and informal knowhow software routines and data analysis.
Fintan Walton:
Right, So in a sense Cellzome is a discovery company with a proprietary technology?
Tim Edwards:
Yes. We comprise 90 people, 10 nationalities, 60% women. I think we are very unusual business and it's great and there is a lot of creativity involved in all of that and that creativity went to develop the kind of its technology which is now the subject of the deal we've recently announced.
Recent collaborations with Novartis, Johnson & Johnson and GSK.
Fintan Walton:
Right. Now the other thing that you have, you've just recently announced a deal, before we come to that I mean one of the key things here is when we look back at 2000 when you were founded and we all know that discovery based companies had a tough times I find it fascinate that companies like Cellzome have actually bucked the market in the sense in saying that actually you know we can survive and not only do that but we can end up doing there some very good deals as well later down the stream, when you joined Cellzome it must have been tough time at that time?
Tim Edwards:
It was a very tough time actually I think the company hadn't quite figured out how to commercialize this really leading proteomics capability and haven't signed many collaborations, but as you know subsequently we went on to sign collaborations with Novartis [PharmaDeals ID = 19935], Johnson & Johnson [PharmaDeals ID = 19934] [PharmaDeals ID = 14358] and just recently GSK [PharmaDeals ID = 31189]. And that's brought significant cash in flow into the company in total over the four-years about $100 million and really that's part of our business model, we fund our proprietary programs in the development of our technology through collaborations with leading pharmaceutical companies.
Kinobeads technology and it's differences from other technologies.
Fintan Walton:
Okay. Coming back to the technology if we can the Kinobeads technology obviously you are focused on kinases and specifically as a group for drug discovery, what is it that makes your technology, your proprietary knowledge and so forth different from other discovery engines, discovery sources?
Tim Edwards:
So kind a way of you are right we are focusing on kinases which is a which comprise 518 proteins and we are concentrating on finding inhibitors of kinases directed at inflammatory diseases, so rheumatoid arthritis possibly multiple sclerosis, IBD, psoriasis and so on. What makes kinases distinct is they look very similar or on technical terms they have very similar structural homology and that means that finding inhibitor of one quite often means you find an inhibitor of a large collection of them. And to move from the oncology setting and many kinases are currently in late stage clinical studies and you can launch to move from oncology into inflammation it's argued that you need very selective inhibitors and our technology profiles potential inhibitors against a broad spectrum of kinases simultaneously and it does that in human cells and even human tissue. So we are very much operating in a physiological state and a very natural state in which kinases are assayed in there sort of physiological setting with their regulatory proteins and the chaperone proteins and adapter proteins and that makes a big difference.
Fintan Walton:
So you are moving the chemistry straight into the cell basically, effectively?
Tim Edwards:
Yes. And where and the whole environment is much more predictive of clinical outcome. So you know there has been a vast amount of investment in kinases in the first wave much of it hasn't worked there are no marketed drugs for inflammatory disease, so our distinction is applying our technology to try and find these new drugs for inflammatory diseases.
Moving from a discovery company into a clinical development company.
Fintan Walton:
Right. Now I mentioned earlier that the atmosphere or the environment for discovery based companies was tough just after the dotcom boom and crash and so forth. But you as you say you've managed to develop a business model, now that business model obviously feeds on the original proprietary technology, so it must be a challenge for a company like you, challenge for you to make executive decisions about whether to take certain groups of compounds all the way into clinic or whether you should partner them, that there must be some sort of very clear decision making made around those sort of issues, so how do you do that and you know are you moving from a discovery company now into a clinical development company?
Tim Edwards:
So our first stage was to walk before you run. So you know when I start this about four-years ago fundamentally we had a platform technology and we had a little bit of chemistry in the field of Alzheimer's disease. My own view was that Alzheimer's disease for young companies or nascent companies is a very difficult area to be in, because the animal models were unpredictive of disease and we in a sense decided to get some expertise and we collaborated and still do collaborate with Johnson & Johnson on a broad collaboration looking at a particular pathway gamma-Secretase and particular protein gamma-Secretase, so in that case we choose to seek a systems with the partner back to the kinase program really our walking step was to decide to significantly invest in chemistry to find selective inhibitors and simultaneously adapt the technology we had at that time to really focus on kinases to build the assay systems to build the industrial throughput we needed to use mass spec [ph] as an assaying system which itself is not trivial in order to profile our compounds and in order to guide the chemist in designing the molecule and so we found and we are still learning some very interesting things about this structure activity relationships and preserving or losing selectivity.
The last financing round in december 2002 and living off with collaborative income.
Fintan Walton:
Right. Because the other component to the Cellzome story as I understand it is that you haven't actually raised any money since 2002?
Tim Edwards:
Yes rather unusually but that's true so our last financing round with investors was December 2002.
Fintan Walton:
And how much can you tell us how much money you've actually raised by 2002?
Tim Edwards:
Yes about $74 million and it equated to Euros as well, we've raised it in Euros and dollars.
Fintan Walton:
Okay, right. And so you've basically living off the collaborative income that you've been able to generate from these collaborations with J&J and so forth?
Tim Edwards:
Yes we have and so not only have they provided us with cash, but they've also provided us with expertise, they've provided us with sort of imperative urgency and so on that having a customer is all about and so I agree with Dave Nod of the IP group who argues that you know biotech companies should concentrate more on customers, I completely agree with that. I think as a business sector we do that for too little in fact. So what we are doing at Cellzome we have this sort of mixed economy models that sometimes go ahead, what we are doing is seeking to go out collaborate with people all around the world including some industrial partners and that really helps us navigate our business, it helps us contextualize risk, it helps us coming back to that walking and then running, it helps us design in a competitive clinical programs and so on and so forth and that's been very, very helpful. And you know we are a great ideas house you know $100 million of collaboration income over four-years demonstrates that, so I've got great colleagues very creative, but even we all need some help and that's what we get through having customers and introduces great organization discipline.
Deal with GlaxoSmithKline in the area of inflammation and the challenges going forward.
Fintan Walton:
Okay, right. And of course you've just recently signed a deal with GlaxoSmithKline and just described as a significant strategic alliance looking at some of the just some of the date in the press release, it looks like it's very close to a billion dollar or plus potential deal?
Tim Edwards:
Yes. So we are excited about and you are absolutely right about the potential because things don't work in biotech and so this deal it's comprise of seven programs and not all of these programs are going to work, but there the key challenge for us and I think this is very important in Cellzome's development is that GSK want us to take those that don't fail, they want us to take them through to proof of concept clinical studies, so this is in Phase IIa and this is a big step forward, so I just to remind you earlier we were talking about Cellzome starting off, it's a platform company and now we can seriously concentrate getting a number of programs into Phase IIa proof of concept clinical development, so quite a big step in a five-year horizon not using investor capital, so I think that's a very important step for us.
Fintan Walton:
And then this collaboration is specifically in the area of inflammation is that correct inflammatory disease?
Tim Edwards:
It is exactly and we're and inflammatory disease and GSK are adopting a number of our existing programs we are not able to disclose those, but we are also going to be beginning some new programs, we were gonna be screening the kinome, we were gonna be looking some new inhibitors and bringing in some other programs through as well. And to your point about the money, so as you've read we get 14 million pounds just under $30 million of upfront and just over you know $230 million per program of milestones. So across seven programs we can do the masses [ph] quite a large preclinical deal.
Fintan Walton:
Right. Now it's important obviously when you get into these sorts of size deals that you have the infrastructure and the capabilities to support those particular program, so does that present you with new challenges going forward?
Tim Edwards:
It does actually, so right now we've got some plans on the table, we are discussing them on Monday to expand our laboratories in Cambridge. We are also looking across the company to take on nearly 25 to 30 new people's so mainly medicinal chemistry teams in fact, but you are right that has to be supported by some extra biology effort. And in due course we will be putting in a small preclinical teams, more clinical team. And right now I am looking for CML.
Fintan Walton:
Right. And well you get a lots of phone calls as a result of this interview...
Tim Edwards:
I hope so, I hope so Fintan.
How does Cellzome manage collaborations with major organizations?
Fintan Walton:
But I think one of the other things that we see here is that you know when you set up a new collaborations with major companies like GSK of this type of nature which becomes significant and you've already got existing relationships then collaborations become important, the management of those collaborations become important as you've already said you know customer care in a sense is component to that, so what's Cellzome's approach to that how do you manage your collaborations with major organizations?
Tim Edwards:
Well firstly we work at it very seriously, so this isn't after thought, this isn't having a collaboration because hey the investor say we have to as I said earlier this is part of our business is to work with other people and learn from them, so we are very active about that and we are very good at it. Michael is our excellent in running collaborations. And it really depends, so Novartis, Johnson & Johnson now GSK all have different ways, so I think the first point is regular communication against a back drop of a culture of complete transparency, it's a fact things don't work. And if you start within the company and then even with our collaborators if you start to sort of hide that or in someway you're embarrassed about things not working you just don't get the right result and then everybody gets into difficulties, so it's a you know it's a technical thing we have regular phone calls, we have regular meetings and they vary depending on the collaborations. And it's an attitudinal thing it really matters to be transparent it's one of our key cultural themes from the board right down to the staff.
Importance of government's contribution in biotech industry.
Fintan Walton:
Right. Now looking at the success of Cellzome's it's clearly you are on a nice shinning light at the moment, but you also sit on the board of the BIO Biotechnology Industry Association here in the UK, so you see a you see not only obviously you've got your own experiences but you're also got an eye into the in particularly the UK biotechnology industry activities, Tim, what's the mood amongst biotech entrepreneurism executives in the UK, is it a good one?
Tim Edwards:
I think it's, I think as Chris Evans summarized it not so long ago in an article, I think you know there is a fair amount of doom and gloom, I think there number of the companies on the public equity markets are having a little bit of difficulty we have seen Ardana and (indiscernable) calling administrators for example, we've seen Sareum sell their assets. So I think there is a certain amount of gloom and doom. And I think there is a fundamental challenge to some of the government authority is to whether they really want to help in some ways, so clearly that's one economic argument which is you have to let failing businesses fail. But equally if the government chooses through it's various funding agencies to invest in basic research what the biotech sector does is apply that research, we apply a few likes of commercial filters, organizational filters, collaborative filters and so for that basic research to get ultimately through to patients we need a vital biotech sector and right now vital is not really in that good state. And I think it's very important for government to contemplate the biotech sector alongside the strategic investment in basic research.
Fintan Walton:
Right. But I suppose that brings in you know questions around you know where, where can they help I mean can they help by encouraging more venture capital into the space or are we ever going to succeed in getting venture capital come back into their space in a amount of that it did in the past? Can governments intervene there in that way?
Tim Edwards:
I am not sure they can and actually I think you know the venture capital has been funding some fair few businesses over the last 12 months, you know number of companies have been started with quite large venture capital dollars, so I think I don't think the VC sector is under performing at all. I think where the government can help is in areas of influence, so for examples it runs the national health systems, so I think you know a change in attitude to risk to running clinical studies to making it easier to run clinical studies in the UK would be a great contribution and part of that is, is an attitudinal point and part of that is a financial point. So where they to for example underwrite the costs of proof of concept studies in the UK then that might well help a number of companies get through that critical stage.
Future plans of expanision and raising money.
Fintan Walton:
And been on the board of BIA you've obviously seen the greater world of biotechnology outside your own company, but equally when you look at your own company how you're going to plan to go forward with Cellzome, you've got some important decisions to make over the next few years, what are those likely where are you likely to go with a company like Cellzome. Are you likely to continue to stick to your Kinobead technologies, stick to your kinase story, do you like to expand on that, do you go horizontal or do you go vertical in terms of how you expand?
Tim Edwards:
Yes we will do we will have a bit of that everything, so right now we are focusing on a particular target class kinases in a particular disease area inflammation, so where a kinase in well known in oncology. And so we could, we could take our technology platform into oncology, which we have plans to do and we have partners talking to us about that, we can take our kinase, Kinobeads technology into neuroscience, in fact have a LRRK2 program which is a rather excited, people are getting excited about that is a neuroscience target and we are working on that and having discussions with companies about that. But equally we can apply our platform to different target classes and we are already investing in doing that where and then trying really to get a head of the next wave, so in kinases if you like we were slightly behind the curve, but I think with the next time and we have a couple of things in minds as we say investing right now, we want to about get ahead of the curve and take the technology into different place and take a little bit more risk there I think doing great science involves embracing great risks sometimes and great risk is commenced with our cost of capital, so you know we shouldn't be trying to do very basic things, in my opinion we shouldn't be doing me too therapies. I don't think the regulators are going to authorize those in the future, so we are out there doing some great science doing and we believe that excellence in science drives excellence in drug discovery and that involves taking some risks as we looking to do.
Fintan Walton:
You have your parent holding company is actually based in the United States...
Tim Edwards:
It is.
Fintan Walton:
As we said right at the very beginning, so if you did go to raise money will it be in the United States rather than here in the UK?
Tim Edwards:
I am not really sure and I didn't wish to say I am complacent at all but sort of right now you know we still have a runway as you pointed out earlier in this decision you know we haven't raised money for investors since December 2002 so we are really working hard at our capital efficiency and that's great discipline for us in fact particularly to set against my comments about risk, so that's a great discipline. I am not sure whether where we'd go we incorporated before my time that the company is incorporated in Delaware really to be able more easily to build assets in the US, it's still a biggest market that's very important and also to access the capital markets and we have competitive plans we've looked at businesses and so on in that way. But right now I think we've got a job to do with GSK and really to concentrate on our kinase inhibitors, inflammatory disease to the short-term, we got a very exciting PI3K-gamma program in preclinical development. We may be amongst the leaders in that the whole PI3K area is very exciting now it's gonna Piramed has we know now sold to Roche [PharmaDeals ID = 30142] and there are other sort of markers if you like commercial markers that suggest this a very interesting area and it lends itself to our technology.
Fintan Walton:
Tim Edwards, thank you very much indeed for coming on the show. Thank you.
Tim Edwards:
Thanks Fintan.
Tim Edwards
Chief Executive Officer
Tim Edwards was made President and CEO of Cellzome in September 2004, following seven months of acting as an advisor to the company. In 2005 he became the Chairman of ReOx Limited, a drug discovery company that researches the development of novel treatments for disease by controlling the activity of hypoxia inducible factor, a position he held until 2007. Since joining CellzomeTimhas overseen several successful collaborations with large pharmaceuticals such as Novartis and Ortho-McNeil Pharmaceutical. Timspent fourteen years as an entrepreneur, managing and developing three privately held businesses before becoming an Investment Banker in the healthcare sector. From investment banking he moved to British Biotech plc where he had several roles including Chief Operating Officer and Acting Chief Executive Officer. He is a board member of the BioIndustry Association, a Trustee and Director of The Mulberry Bush School and a Fellow of the Royal Society for Arts, Manufactures & Commerce.
Cellzome Ltd
Cellzome Ltd is a privately owned drug discovery company that was founded in 2000 as a spin out from the European Molecular Biology Laboratory in Heidelberg. Its aim is to identify a new generation of kinase-targeted drugs for the treatment of inflammatory diseasesuch as rheumatoid arthritis and multiple sclerosis, by using its proprietary technology, known as Kinobeads, in the screening and profiling of kinases in cells and tissues. Kinobeads act as a kinase-binding matrix that can be used to measure quantatively the binding interaction of a compound with more than 300 different kinases at the same time. The resulting information can indicate a specific compound's action and hence improve the predictability of a drug candidates' performance in clinical testing. Cellzome are applying Kinobeads to the discovery and development of novel, selective inflammatory kinase inhibitors, acting on distinct targets in particular conformations, which represent key mediators in immune receptor signaling and chemotaxis. Cellzome's business model is to generate shareholder value by developing a pipeline of small molecule pharmaceuticals and by collaborating with leading pharmaceuticals. To date this has been successful and has resulted in collaborations with several pharmaceutical companies including Novartis, Ortho-McNeil, Galapagos and Argenta. The company also has links with many academic institutions, such as the European Molecular Biology Laboratory, the MIT, the Universities of Birmingham, Cologne, Edinburgh, Munich, Torino, Imperial College, and the Center for Molecular Medicine in Vienna.