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The mouse that's roaring
Biotech Medarex turns partnerships into a drug pipeline full of potential
Wednesday, February 15, 2006
BY JEFF MAY
Star-Ledger Staff

Big pharmaceutical companies call their lineup of promising new treatments a pipeline.
For smaller biotechnology firms, typically dependent on one or two novel drugs, a more apt term would be garden hose -- one that can slow to a trickle if there are regulatory kinks or scientific setbacks.

It is startling, then, to hear the kind of audacious projections coming from Donald Drakeman, chief executive of Medarex.

The Princeton-based biotech has yet to market any treatments developed from its human antibody technology, but Drakeman thinks the company can launch clinical trials for three to five new drugs each year and eventually average one approval a year.

That kind of achievement would be cause for celebration in a company much larger than Medarex, which employs 450 people in New Jersey and California and pulled in roughly $45 million in sales last year. The Food & Drug Administration, after all, approved just 36 drugs in 2004, and far less last year.

Medarex is a different kind of biotech, however.

Instead of focusing on a couple of medicines, it takes a more shotgun approach by forging partnerships with more than 50 pharmaceutical companies, most of whom license Medarex's genetically engineered mice to conduct research into monoclonal antibody therapies.

The biotech has combined those licensing fees and some timely financing a few years back to fund its own drug pipeline, while its partners pick up most of the development costs of joint projects.

With its partners, Medarex has 28 products in clinical development, a staggering number for its size. The company stands to collect royalties from any breakthroughs by its partners, but its real strategy is to come up with winning therapies developed strictly in-house, Drakeman said.
"The model is Genentech," he said, referring to the wildly successful California biotech that recorded $6.6 billion in sales last year. "They have been able to build a sustainable pipeline of new products over and over again."

Is Drakeman's optimism a pipeline dream? Most analysts who follow the company don't think so.

Medarex's approach "can be leveraged far more than chemical or small-compound products," said Matt Arens, senior research analyst for Kopp Investment Advisors, a Minneapolis firm that is one of the largest institutional holders of Medarex stock.

Monoclonal antibody therapies are essentially a way to harness the body's own immune system to counteract specific diseases, such as cancer or rheumatoid arthritis. The market for such therapies is expected to reach as much as $30 billion in 2010, or more than double what it is today.

Medarex owes its prominence in the field to its mice. Earlier research into antibodies ran into problems when treatments developed in mice were tested on humans. In some cases, test subjects developed a reaction to mice antibodies.

The company's chief scientist, Nils Lonberg, found a way to engineer completely human antibodies in mice, reducing the risk of an adverse immune response in people for any mouse-developed therapy.

Medarex's most promising drug is a treatment for metastatic melanoma, a deadly form of skin cancer, that is being developed by its partner Bristol-Myers Squibb. The drug, currently in Phase III clinical trials, could be ready for approval as early as next year.
Thomas Weisel Partners analyst Joe Slavinsky has said the drug, ipilimumab, is a "multibillion-dollar opportunity" for the two companies. But it also would represent a crucial validation of Medarex's technology.

"To actually have the FDA say, 'Yes, it's safe and effective,' there is no substitute for that," Arens said.

Not everyone is convinced the drug will be a blockbuster, however. And even late-stage drugs can encounter devastating setbacks.

"Metastatic melanoma is a notoriously difficult disease," said Kate Winkler, an analyst for Global Crown Capital.

Still, Medarex and its partners have four other products in Phase III trials. And the industry has shown an increasing faith in monoclonal antibodies: Amgen announced plans to purchase Medarex's main rival, Abgenix, for $2.2 billion in December.

The Abgenix deal helped drive up Medarex's stock, and Drakeman said the company was heavily courted at a recent investment forum held by JPMorgan. While Abgenix is expected to have its first product approved before Medarex, Drakeman noted the company has 11 products in late-stage development, compared with Medarex's 28.

"Over time, it'll become clear what the dominant technology has been in this area," he said.
Winkler said the proof is already in the partnerships Medarex has won. Abgenix has a smaller circle off alliances. "I'm still pretty convinced that Medarex had the superior technology," she said.

Of course, there is one area of biotech in which Medarex is hardly unique: It's losing money. The company reported a third-quarter loss of $23 million. It has yet to report fourth-quarter results. That hasn't mattered of late to investors. Medarex's shares, which rose 33 cents, to $13.31, yesterday, are twice what they were in April.

And while Drakeman -- who also teaches First Amendment law part-time at Princeton University -- said Medarex enjoys its independent status, many analysts expect the company will be bought out by a larger drugmaker.

"Medarex, on its own or as part of another organization, has put the tools in place to be a highly successful company for years to come," said Brian Rye, who follows the company for Janney Montgomery Scott.


Jeff May can be reached at jmay@starledger.com or (973) 392-4282.



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