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Gold at the End of the Rainbow
Prosperity remains in the future for area biotech companies
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Business New Haven
7/7/2003
By: Richard Rangoon
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The promise of biotechnology made manifest: All five of greater New Haven's publicly owned biotechnology companies are operating at a substantial loss.
So are the area's 22 privately owned biotechs.
However, recent advances - new cancer-fighting compounds in particular - have encouraged investors to pump in badly needed capital.
Below is a summary of what each company does and the financial framework within which each works:
Alexion Pharmaceuticals
(NASDAQ: ALXN)
Cheshire-based Alexion develops drugs that inhibit certain immune system functions that cause autoimmune, cardiovascular and other diseases.
The company has two compounds in advanced stages of development, according to David Keiser, Alexion's president and COO. One compound, for patients undergoing heart surgery, has successfully completed trials involving 3,000 patients.
Last year, Alexion finished tests with Proctor & Gamble in the compound's application to heart attacks. One study proved the compound successful in reducing fatalities, according to Keiser.
According to published reports, the cardiovascular diseases targeted by Alexion and Proctor & Gamble have enormous financial impact on the U.S. health-care system. Reports document that just three of these diseases amount to $46.8 billion in annual costs.
Alexion also is working with the federal Food & Drug Administration (FDA) to gain approval of late-stage trials for a second compound that works through unconventional means to address several chronic conditions.
The company is using its proprietary technology to analyze compounds owned by Canadian-based Pytobiotech - a partnership that promises potentially to boost Alexion's bottom line.
For the fiscal quarter ending April 30, Alexion generated a net loss of $19.78 million, or $1.09 per common share, compared to a net loss of $17.11 million (94 cents per share) for the equivalent three-month period in 2002. For the nine months ending April 30, Alexion reported revenues of $710,000, compared to $5.78 million for the same period last year.
As of March 30, Alexion's market capitalization was $249.3 million, with $60 million of that figure dedicated to research and development. On that date the company reported 167 employees, 58 of whom were researchers.
CuraGen Corp. (NASDAQ: CRGN)
CuraGen uses it knowledge of genetics to study the molecular bases of disease. It develops protein, antibody and small-molecule drugs in the areas of obesity and diabetes, oncology, inflammation and central nervous system disorders.
CuraGen's drug programs focus on discovering and developing targets suitable for protein drugs that the company is developing in-house, antibody drugs that are being developed with partner company Abgenix, and small-molecule therapeutics in partnership with other leading companies.
Company officials say CuraGen has taken a systematic approach to determine the most promising drug targets for drug development. The company's proprietary technologies have identified 8,000 novel, as well as known, targets for its drug compounds. Based on disease associations in cellular and animal models, the company has qualified 500 of these targets as playing a role in disease.
CuraGen's net loss for the quarter ended March 31 fell 18 percent to $16.1 million, or 33 cents per share, compared to $19.6 million (40 cents per share) for the equivalent period in 2002. During the first quarter of this year, the company's revenue decreased 60 percent to $1.9 million, compared to $4.8 million for the same period in 2002.
To stanch the bleeding, the company in June announced a corporate restructuring and laid off 80 people, or 20 percent of its staff. The company says that it intends to reduce service-based revenues while focusing on drug development.
Nevertheless, the company remains on solid financial footing: Also last month, CuraGen had available on-hand cash and investments of $395 million, as well as subordinated convertible debt of $150 million due in February 2007.
As of March 30, Curagen's market cap was $259.4 million, with $81.7 million of that figure devoted to research and development. The company has 350 employees, 300 of whom are researchers.
Genaissance (NASDAQ: GNSC)
In May, New Haven-based Genaissance Pharmaceuticals Inc. bought the bulk of Fremont, Calif.-based DNA Science's assets for $1.35 million in cash. The acquisition included the purchase of DNA Sciences' genotyping facility in Morrisville, N.C., and was approved in federal bankruptcy court.
Including the expansion of a license agreement with Promethus Laboratories Inc. related to the purchased assets, Genaissance expects the net cost of the deal to be $1 million. As part of the DNA Sciences' deal, Prometheus will license rights from Genaissance for expanded use of a test that diagnoses a patient's ability to metabolize a certain class of drugs.
Prometheus and Genaissance will collaborate on another project focusing on disorders of the gastrointestinal tract, as well as partnering on treatments for autoimmune and inflammatory diseases.
Genaissance reported a net loss of $4.7 million, or 21 cents per share, for the first quarter of this year, compared to a net loss of $9.1 million (40 cents per share) for the first quarter a year ago.
Also for the three months ended March 31, Genaissance's reported revenues grew 16 percent to $2.1 million, compared to $1.9 million for the first quarter of 2002.
Operating expenses for the quarter swelled by 37 percent, to $6.8 million, of which $4.7 million was attributable to research and development. These results compare favorably to operating expenses of $10.7 million, of which $8.3 million was attributable to R&D, for the first quarter of 2002.
The company said the decrease in overall operating expenses was attributable primarily to the 43-percent reduction in research and development expenses. As of March 31, the company had cash, cash equivalents and marketable securities totaling $30 million, consistent with Genaissance's previously announced cash projections.
As of March 30, Genaissance's market capitalization was $37.9 million, with $9.9 million going toward research and development. The company has 157 employees, 105 of which are researchers.
Neurogen (NASDAQ: NRGN)
Neurogen, based in Branford, develops compounds for depression, insomnia, anxiety, arthritis, urinary incontinence and other medical problems pertaining to nervous disorders, inflammation and metabolism.
The company is in Phase II clinical testing of a compound that fights inflammation caused by rheumatoid arthritis and asthma. Both conditions are caused by a person being attacked by their own immune system. Neurogen has labeled the compound NGD 2000-1.
The company is considering collaborations with large pharmaceutical and biotechnology companies chiefly with respect to its inflammation and pain programs. Neurogen has ongoing partnerships with Pfizer, for insomnia, and with Aventis, for depression/anxiety.
Neurogen's collaborative agreements usually involve an upfront payment with milestone payments due at predetermined events, and royalties on sales of marketed drugs.
Neurogen recorded a net loss for the first quarter of 2003 of $7.9 million, or $0.45 per share. This compares to a net loss of $8.5 million, or $0.49 per share, during the first quarter of 2002.
Operating revenue for the first quarter of 2003 decreased 47 percent to $1.4 million, from $2.6 million for the first quarter of 2002. The decrease is due to the completion of a technology transfer agreement between Neurogen and Pfizer and to research with Aventis Pharma (NYSE: AVE) to develop drugs to treat depression, anxiety and other stress related disorders.
For the first quarter of 2003, research and development expenses, excluding non-cash stock compensation charges, decreased 17 percent to $7.8 million from $9.5 million in the first quarter of 2002. The decrease for the first quarter of 2003 primarily was due to reductions in staff and related salaries, benefits and lab expenses, the company said.
As of March 30, Neurogen's market cap was $89.9 million, with $34.1 million devoted toward research and development. The company has 165 employees; 125 are engaged in research.
Vion (NASDAQ: VION)
On June 19, Vion announced that it had entered into agreements with several institutional investors relating to private placement of $5 million of securities. According to CEO Alan Kessman, the money will fund the company into the first quarter of 2004, based on current estimates.
Previously, on February 8, Vion announced it would license its technology for the potential treatment of HBV and HIV to Achillion Pharmaceuticals, a privately held biopharmaceutical company in New Haven.
The FDA is expected to shorten the drug-approval process, CFO Howard Johnson said, saving biotechs time and money and making drugs available to the public sooner.
Vion laid off a third of its workforce last year when it narrowed it focus to its two most promising anti-cancer treatments. The layoffs also enabled Vion to improve its cash position, Johnson said.
Vion reported a loss of $2.4 million, or eight cents per share, for the three-month period ended March 31, compared with a loss $4 million, or 14 cents per share, for the same period a year before. Total operating expenses were $4.3 million for the quarter ending March 31, 2003.
As of March 30, Vion's market value was $36.7 million, with $10.5 million going toward research and development. The company has 35 employees, 24 of whom are researchers.
Greater New Haven's biotechnology industry is one of the most promising biotechnology centers in the country and continues to expand - but its potential remains to be fulfilled. Despite the losses incurred by the region's biotechs, investors are drawn to promising drug candidates and remain willing to invest the capital needed to fuel the development of new drugs.
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