53.8 F
Laguna Hills
Tuesday, Mar 19, 2024
-Advertisement-

OC will get its first large biotech firm when ICN spins off its Ribapharm unit

Orange County isn’t known for its biotechnology companies like neighboring San Diego or even the Bay area. But with the spinoff of ICN Pharmaceuticals Inc.’s Ribapharm Inc. subsidiary in coming weeks, OC will have a sizable, publicly traded biotech company.

Ribapharm, which counts a library of 3,500 chemically modified DNA compounds, stands to easily become OC’s largest biotech company with annual sales of around $150 million. Ribapharm could command a market capitalization of between $2 billion and $4 billion, analysts say, potentially eclipsing ICN’s some $2 billion in market value. While ICN will hold an 80% stake in Ribapharm after the spinoff, controversial ICN Chairman and Chief Executive Milan Panic won’t have a management role in the new company.

The spinoff, which could come as early as month’s end, is part of ICN’s plan to split itself into three publicly traded companies. Ribapharm, pronounced ry-ba-pharm, is the crown jewel of ICN and licenses the antiviral drug Ribavirin to Schering-Plough Corp. for use as a treatment for hepatitis C therapy. Other products in development include Tiazole for leukemia treatment and Adenazole for colon cancer.

While Ribapharm isn’t talking in the run-up to its public debut, spokesman ICN Peter Murphy did say that the unit is in the process of a “multimillion-dollar” expansion of its research and development operation. The company, which counts 20 researchers today, expects to add 80 more scientists this year and next.

Ribapharm is set to continue operating from within ICN’s 178,000-square-foot building in Costa Mesa, where it conducts research. Last year, the company overhauled its biology, enzymology, and drug safety and metabolism laboratories. This year, Ribapharm expects to complete renovation of its biology and chemistry labs, as well as its chemical development and medical departments.

Along with its Schering-Plough alliance, Ribapharm is expected to count Roche Holding AG as a shareholder. The Swiss drug maker has agreed to exchange its ICN shares for 9% stake in Ribapharm.


The Landscape

Ribapharm is part of a small contingent of OC biotech companies developing technologies to treat diseases.

Nexell Therapeutics Inc., an Irvine company that focuses its research on stem cell selection and transplantation, is one of the few local biotechs to gain federal approval for its technologies.

The company’s Isolex Cell Selection systems can remove stem cells from cancer patients, then screen out the contaminated cells and transplant healthy ones back into a patient.

“Without a stem cell transplant, cancer patients are likely to die after high-dose chemotherapy,” said Tad Heitmann, a Nexell spokesman.

Nexell, which employs 80 people at its Irvine facility, recently received a patent for its process of removing contaminated stem cells and replacing screened cells. Nexell scientists are working on separation technology that targets genes that provide resistance to viruses such as HIV.

Nexell expects to report $15 million in revenue for 2000, Heitmann said. For the third quarter, the company counted $4.5 million in sales, more than double from the year-ago period. The company posted a gross profit of $1.8 million for the quarter with a net loss of $7 million. The company, like other biotechs, doesn’t see overall profitability for four or five years, Heitmann said.

Irvine-based NeoTherapeutics Inc., a company developing drugs to treat memory problems, has a biotech subsidiary, NeoGene Technologies Inc. The unit is researching the receptors in the brain that could control certain functions such as obesity and memory. NeoGene hopes to sell the information about the receptors to pharmaceutical companies looking to develop drugs to treat various diseases.

NeoGene has a joint venture agreement with the University of California, Irvine, and has scientists working with the university’s functional genomics team under Dr. Olivier Civelli, professor of pharmacology.

As a result of the collaboration, NeoGene and UCI have been able to identify so-called orphan receptors, or genes that control physiological functions.

NeoTherapeutics has 40 employees with 10 scientists who work under NeoGene. Last month, NeoGene raised $2 million in funding from France’s Societe Generale, which took a 4% stake in the unit.

NeoTherapeutics recently created a new subsidiary, NeoOnoco Rx, a company that plans to license novel anti-cancer compounds. The company hopes to license compounds for the treatment of colorectal, prostate and bladder cancers. Luigi (“Gino”) Lenaz, a former executive at Bristol-Myers Squibb Co. in the anti-cancer drug development area, is the subsidiary’s president.

Another OC biotech player is Irvine’s Cortex Pharmaceuticals Inc., a fledgling neuroscience drug company.

Cortex licenses compounds from UCI called Ampakines, which increase the signals in the brain between molecules called neurotransmitters and proteins called receptors. With age, these receptors lose potency, resulting in memory loss associated with Alzheimer’s. Cortex’s Ampakines have the potential to strengthen the signals and the receptors.

Cortex, with 23 employees, has alliances with NV Organon of the Netherlands, Britain’s Shire Pharmaceuticals Group PLC and France’s Les Laboratoires Servier. The company estimates its pact with Servier to bring in $11.1 million in three years, which will help the company continue researching a potential schizophrenia drug.


Biotech Bids

Irvine-based Allergan Inc., OC’s biggest drug maker, works with a number of biotechnology companies. Allergan has collaborations with Pharmacia Corp.’s Sugen Inc. unit, CeNeS Pharmaceuticals PLC’s Cambridge NeuroScience Inc. unit, Overland Park, Kan.-based CyDex Inc. and San Diego’s Acadia Pharmaceuticals Inc.

“Allergan is developing a medicine for a genetic target,” said Dr. Uli Hacksell, Acadia’s chief executive.

Acadia researches how genes work to better understand diseases and create drugs, according to Hacksell. Allergan is responsible for clinical development of Acadia drugs and has worldwide rights to commercialization of products resulting from the collaboration. Last month, Allergan filed an investigational new drug application with the Food and Drug Administration for a potential treatment for glaucoma created with Acadia. In December, Acadia filed for an initial public offering, though the company hasn’t said when an offering might take place.

Irvine-based drug maker Sicor Inc. is going after the biotech market in a different way: it’s gearing up for what’s expected to be a wave of biotechnology drugs coming off patent in the next five years.

The company is building a new plant in central Mexico where it plans to make generic versions of biotech drugs. The facility, in the state of Toluca, is set to be up and running by 2002, in time to sell generic biotech drugs to global markets that don’t have patent restrictions. The company plans to sell into the U.S. and Europe as more patents expire and regulatory issues become clear.

“We believe (biotech) is going to be the next marketplace to be genericized,” said Laurie Little, a Sicor spokeswoman. “As those (drugs) come off patent, they will (create) great opportunities for us, as well as for end users, because they’ll be able to get some of these products at a more inexpensive price.”


Growth Prospects

For now, though, OC still is known for medical devices more than biotech. Doug Obenshain, a health science partner for Ernst & Young, said he believes OC could see more biotech companies in the next few years.

“As UCI continues to build its biology research team, that will lead to discoveries at the university level that will turn into new companies,” he said.

Obenshain also said that venture capital firms are showing interest in Orange County biotechnology companies.

“Biotechnology is an industry that is almost always venture-capital backed,” he said. “These investors are looking for patentable technologies.”

Domain Associates LLC, a Princeton, N.J., venture capital firm with offices in Laguna Niguel, has invested in Laguna Niguel-based Chimeric Therapies Inc., which is working on cellular bone graft products.

Arthur Klausner, a general partner at Domain, said he believes OC has potential in biotech, but has serious catching up to do.

“The region has a ways to go to generate the critical mass for biotech in staffing, and in the knowledge and understanding of landlords for the special needs of biotechnology companies,” he said.

There are pluses as well as minuses to being behind, Klausner said, including the fact that the research labs at UCI are less trodden than those at other schools and more readily available.

Ventana Global, an Irvine venture capital firm, is looking to OC for investments, according to Dr. Elliot Parks, the firm’s life sciences executive director. Ventana has been searching up and down California looking for biotechnology companies that have multiple technologies, Parks said.

“There are a lot of interesting companies in Orange County,” he said.

Orange County has seen its share of biotech failures over the years. In 1999, CoCensys Inc., an Irvine drug maker, was bought out by Purdue Pharma LP after running out of cash. Ten-year-old CoCensys, which developed products for the treatment of brain and nervous system disorders, had spent more than $177 million developing drugs, but failed to put a product on the market.

While the fate for CoCensys was grim, Ernst & Young’s Obenshain believes Orange County has the opportunity to become a player in biotechnology.

“The combination of growth in research funding to UCI and the significant amount of venture capital interest will lead to significant growth of new companies over the next five years,” he said. n

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-