Aug. 7, 2002 — Proteomics firms are searching for indicators that big drug companies will continue to buy their products, even if investors stopped buying the stories that made proteomics companies into stars a few years back.
Economic uncertainty, combined with uncertainty about when the new technology will hit paydirt by locating the protein key to the next blockbuster drug, has big drug makers reluctant to spend, some drug discovery toolmakers say.
Others, however, say they are too close to the cutting edge for price-chopping moves to eat into their revenues.
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“Everybody that we talk to in the industry says that they are observing a slowdown in spending,” said Michael Knapp, founder and chief executive of Caliper Technologies Inc., which makes chips for DNA, RNA and protein analysis. “Because we’re such an early technology it’s not obvious to us that we are as sensitive to those kinds of things.”
Whether customers will continue to buy proteomics tools and services remains unclear. What is clear is that shareholders are selling. Two years ago, the promise of proteomics had Caliper trading for around $60 per share. This week, it has been hovering around its all-time low of less than $5 per share, sharing the sad fate of other “omics” companies, firms that analyze genetic and cellular material in hopes of speeding drug development.
Caliper’s revenues were rising even as its stock slid. That’s another phenomenon shared by genomics and proteomics companies that have watched their market valuation collapse as they began commercial operations. Survivors are expected to be companies that impress investors with results — meaning revenues and a hand in putting out a blockbuster.
That there will be survivors is clear. Disillusioned as they are by the come-down in valuations for genomics and proteomics firms, venture capitalists continue to feed future hopes of development-stage operations.
Zyomyx Inc. of Hayward, Calif., reeled in $27 million recently for its microfluidics screening technology that is someday expected to uncover drug targets. The funding came just weeks after Picoliter Inc. of Mountain View, Calif., raised $22 million. The small tech firms pulled in the cash in spite of a tough funding climate and without being in full commercial operation.
“There’s been a sobering change,” admitted Henry Nowak, chief financial officer of Caprion Pharmaceuticals Inc. of Montreal, a proteomics pioneer that uses cell fractionation techniques. “Investors want to see breakthrough technology, they want to see an IP portfolio and a plan to protect it. They want to see products that exist or are imminent.”
By “products,” Nowak means technology that stands out from the crowd.
“Proteomics is like teenage sex. Everyone’s talking about it, but hardly anyone’s doing it and the ones that are doing it aren’t doing it very well,” Nowak said.
Knapp agrees. Lab-on-a-chip technology has yet to deliver what it promised in proteomics: high-speed, fine-tuned identification of the protein sequences that make a difference in specific diseases, Caliper’s CEO said.
“We have protein-analyzing devices and they are remarkably different from protein-analyzing devices in the past. More convenient, more rapid, more quantitative. Those have achieved tremendous acceptance and they are being rapidly adopted by customers,” Knapp said.
But nobody is yet zeroing in on disease-specific proteins with speed and efficiency. “What is going on right now in actuality is that people are using two-dimensional gels, cutting spots out, digesting them, putting them in spectrometers and getting protein sequencing information out of them,” Knapp said.
Companies that continue to improve their technology even in the capital crunch are not wasting their time, proteomics executives say. Like everyone else, venture capitalists have learned much from the past year.
He predicts the window of opportunity for proteomics survivors to distinguish themselves by identifying and validating drug targets will be in the next five to eight years. Staying funded for that period means impressing venture capitalists with technology that shows a clear advantage.
“You’re going to have to convince these people you have a technology that is not going to become obsolete,” Nowak said. “You have to produce a platform that says it is not a one-shot wonder. You have to be willing to show big pharma you have more than a one-dimensional application.”
But this is no time to be nailing down every technological tweak with an iron-clad patent, advised Boston patent lawyer Thomas Saunders of Brown Rudnick Berlack Israels. In an active, fast-moving field like proteomics, spending time and money chasing patents is a waste of time, he said.
“You want a patent, I’ll get you a patent,” Saunders said. “But is this just an intellectual exercise or are you interested in doing business? I hate to see new technology over-lawyered. Patent proliferative disease has killed many a company.”