All About Multiple Sclerosis

More MS news articles for June 2003

Startup advances on disease as it pursues elusive investors

Jun 5, 2003
Ted Katauskas

On the ground floor of a nondescript office tower off Southwest Hall Boulevard, down the hall from a title company and a real estate office, Virogenomics ("From Genes to Drugs") is in the business of genetically outwitting disease.

But so far, designing drugs to combat scourges such as multiple sclerosis and HIV has proved to be a far less lucrative endeavor than refinancing mortgages or selling starter homes. Since the six-person pharmaceutical company set up shop in May 2001, none of the executives, including CEO Adolph "Al" Ferro, has received a paycheck.

Ferro has raised a few million dollars of venture capital and pumped nearly all of it into basic research, which is conducted in laboratories at Oregon Health & Science University, a founding shareholder that holds the patents to the company's core technology.

How things have changed since 1998. That's when Ferro capitalized his first startup, Agritope, a Tualatin biotech company that genetically engineered shelf-stable fruits and vegetables, with more than $30 million in seed money. Agritope sold for $104 million a few months before Ferro launched Virogenomics.

"Raising money is a lot more difficult than it used to be," says Ferro, 61, a Tualatin resident who taught microbiology at Oregon State University for nine years before leaving in 1987 to oversee research at a Beaverton biotech firm that was developing an oral HIV test.

"Several years ago, if you had a good idea, you could leave on a trip with an empty suitcase and come home with it full of money. Those days are gone. The (venture capital) community has taken a big hit; they've had trouble raising their own funds because people just aren't investing like they used to. And the VCs are having to fund startups for a lot longer than they used to . . . which means less money is available for new companies like ours."

Last week, a few days before two established biotech companies made headlines with reports of successful clinical trials of genetically engineered cancer drugs, the National Institutes of Health's National Institute of Allergy and Infectious Diseases awarded Virogenomics a $100,000 grant to begin engineering a drug to fight HIV.

That milestone came two weeks after another, when the U.S. Food & Drug Administration granted Virogenomics an exclusive license to commercialize a genetically engineered multiple sclerosis drug under the FDA's "orphan drug" program. That program gives tax breaks and other economic incentives to pharmaceutical companies to develop treatments for diseases that affect relatively few people.

In the case of MS, that's 350,000 Americans. According to the Oregon Chapter of the National Multiple Sclerosis Society, it typically costs $12,000 a year to treat a single patient with any one of the five FDA-approved MS drugs, making treatment of the disease a $4 billion market.

"With MS, if you're successful, you can get 25 percent of the market," Ferro says. "You're talking a billion dollars. From that one drug. There's no way you're going to hit that in any other industry. In terms of market size, this is huge."

And so are Ferro's ambitions for VG1000, Virogenomics' genetically engineered MS drug.

"My dream is that it will cure MS, even reverse the damage that's already done," Ferro says. "At worst case, it will halt the disease in its tracks."

In MS, T-cells, the immune system' s cellular infantry, attack the protective sheath surrounding nerve cells in the spinal cord and brain, causing the central nervous system to short-circuit. Symptoms vary from person to person and can include abnormal fatigue, vision problems, a loss of balance and muscle coordination, and slurred speech, tremors and stiffness.

In animal models, VG1000, a protein engineered to reprogram the rogue T-cells, stopped the attacks and restored normal neurological function. After promising results with human cell cultures, the drug is ready for clinical trials -- as soon as Ferro can raise $3 million to start that process.

Ferro hopes VG1000 will prove to be the key in the genetic lock that turns off multiple sclerosis, much as Gleevec, a groundbreaking designer drug developed at OHSU, appears to be the key that turns off chronic myeloid leukemia, a disease that affects 15,000 Americans. In March, Gleevec, which is manufactured and marketed by Novartis, became the drug of choice for all new cases of chronic myeloid leukemia.

Bruce Bebo, an MS researcher at OHSU and a board member of the Oregon Chapter of the National Multiple Sclerosis Society, worked on VG1000 as a postdoctoral researcher at OHSU. He gives the drug a 50-50 chance of making it to market, noting that hundreds of drugs that look promising in animal trials fail to pan out when tested on humans.

Designer drugs are no exception. At best, Bebo says, a targeted drug such as VG1000 could offer an alternative to conventional MS medications such as beta interferon, which produce side effects so severe that many patients opt out of treatment. But an outright cure isn't likely, he says.

"MS is a complicated disease," says Bebo, who has no ties to Virogenomics and is no longer affiliated with the OHSU lab that's doing the VG1000 research. "Even if you manage to completely suppress the immune response, in order to get a cure you also have to repair the damage that's already been done. . . .

"Still, if there's any hint of efficacy in Phase 1 (of human drug trials), they'll have no problem convincing a major pharmaceutical company to buy them out. They'll sell and collect a percentage. That's what OHSU wants."

Given the challenges of raising a few million dollars in the current economy, much less the hundreds of millions that will be required to shepherd the drug through several phases of clinical trials, even Ferro acknowledges a buyout is Virogenomics' most likely scenario and VG1000's best shot at the market.

"Very few small biotech companies make it to become big pharmaceutical companies," he says. "Most are purchased. But you never plan on being purchased. You plan on developing your company into a major pharmaceutical company."

And every morning you go to work believing that, someday, you might even get paid. Ted Katauskas: 503-221-8440

Copyright © 2003,