More MS news articles for February 2001

Human Drugs from Goat's Milk?

http://biz.yahoo.com/bizwk/010222/sch28mdw2wad2yclekpceq.html

Thursday February 22, 4:13 pm Eastern Time
THE BIOTECH BEAT
By David Shook in New York

On a dairy farm in rural Framingham, Mass., a few miles west of Boston, Genzyme Transgenics (NasdaqNM:GZTC) has a different kind of workforce putting in overtime: Hundreds of genetically altered goats are producing biological drugs in their milk.

Sound strange -- even a little frightening? It's actually not much different than standard biotech-drug manufacturing, where medicinal proteins are derived from the cells of hamster ovaries. The big difference is that these cells are cultured in towering stainless-steel vats housed in sterile manufacturing plants. This is a common method for manufacturing biological drugs such as Avonex, a multiple-sclerosis treatment made by Biogen (NasdaqNM:BGEN), and Enbrel, an arthritis-fighting agent made by Immunex (NasdaqNM:IMNX).

But making batches of these proteins often takes months and millions of dollars. Enbrel, for instance, has been in short supply for a year because manufacturing capacity is so limited and complex.

BIG-NAME NODS. Genzyme Transgenics aims to change all of that. The tiny biotech company is betting the farm that transgenic goats can do it better. Forget the stainless steel bioreactors. This company thinks goat farming is a more efficient way to manufacture protein-based drugs. Through genetic engineering, these special goats have been bred to produce medicinal proteins in their mammary glands. The company's Framingham farms hold 1,900 of the mammals. Many are now producing proteins in their milk that may become human drugs.

Is this the future of biological drug production? Some pharmaceutical giants believe it is. Still, Genzyme Transgenics' stock has taken a beating over the last several months. It trades at $10 a share after slowly declining from a high of $50 a year ago. But Johnson & Johnson (NYSE:JNJ - news) and Bristol-Myers Squibb (NYSE:BMY - news) recently upped their investment in the tiny company, giving their apparent nod of approval that transgenics could possess real value in drug production. Given those big-name partners, Genzyme Transgenics could have new appeal to investors.

"Right now in biotechnology, there really isn't enough manufacturing capacity to handle all of these drugs in development," says Thomas Newberry, Genzyme Transgenics' investor relations chief. "Our concept here, our value proposition, is to use molecular biology to simply encourage a mammary gland to make specific proteins of therapeutic demand. We're providing a set of instructions so that these goats, when milked, will produce proteins which we can purify out as a medicinal product."

HARD LOOK. Actually, this isn't a new concept. Genzyme Transgenics was born in a spin-off from Genzyme Corp., of Cambridge, Mass., in 1993, when the parent company decided that the technology could be the foundation for a viable, stand-alone business. But not much excitement emerged in this field until Immunex ran up against massive, unexpected supply problems for its hugely successful drug Enbrel. Suddenly, transgenic goats are receiving a burst of attention from the scientific community. Even Immunex, which is building a new Enbrel production plant in Rhode Island this year, says it's taking a hard look at transgenics. "It does look like that's feasible, and we are in discussions with a couple of different companies," says Immunex spokeswoman Robin Shapiro.

Because some companies are scrambling to find enough manufacturing capacity to make the proteins cultured in those steel bioreactors, Genzyme Transgenics could be signing more partnerships soon. Johnson & Johnson biotech subsidiary Centocor, for instance, wants to know if goats are a viable alternative in producing the monoclonal antibody drug Remicade, for rheumatoid arthritis. Right now, it's made in an expensive production plant in the Netherlands. The Genzyme Transgenics' partnership represents Centocor's need to explore other production options, a spokesman says.

Hurdles still must be overcome before products derived from goat's milk ever reach the pharmaceutical market. None of these compounds have been tested in human clinical trials yet. And the risks became clear on Feb. 6 when Genzyme Transgenics killed a research project that sought to turn a transgenically produced molecule, rhATIII, into a drug for patients about to undergo cardiopulmonary bypass surgery. The Food & Drug Administration had asked for more comprehensive clinical data on the molecule. But the company decided it wasn't worth the heavy additional investment. "The level of expense and time involved in developing the additional data required by the FDA is not justified by the [drug's] potential market size," the company told investors. After the press release, Genzyme Transgenics' stock fell from $15 a share to $9.

UNKNOWNS. "Is transgenics feasible? Yes. Is it more economical? Yes. What is the timing and applicability to varying agents? Not sure," says Merrill Lynch analyst Eric Hecht. Sounds like Genzyme Transgenics has many of the same all-important unknowns that beset most biotech startups: The technology sounds cool and may work nicely in the lab, but can it actually create safe human drugs?

While it's hard to say yet, Wall Street is suddenly paying more attention to this little company. "I am in the process of analyzing Genzyme Transgenics right now," says Mehta Partners analyst Navdeep Jaikaria. "Clinical proof of principle does exist," he says. But right now, Jaikaria is neither recommending nor discouraging investment in the stock.

Prudential Securities' Rob Toth puts the picture into perspective this way: "If a herd of transgenic goats can ultimately replace a $500 million facility, that would cut down on manufacturing costs and relieve capacity constraints on the industry." It may seem like a far-fetched idea right now, but given the recent attention Genzyme Transgenics is attracting, this company likely won't become a goat on Wall Street anytime soon.