GTC Biotherapeutics, Racing Against Time to Prove the Worth of “Pharming”

As a rule, getting a drug on the market turns a biotech startup from a buck bonfire into a cash cow—or at least a cash calf. But rules tend to get broken. Just ask GTC Biotherapeutics. In mid-2006, European drug regulators approved the Framingham, MA-based company’s first medicine, ATryn, a protein for blocking risky blood clots. Trumpets blared: It was the first drug made in bioengineered animals—genetically altered goats on GTC’s famed “pharm” near Charlton, MA, produce the medicine, a human blood protein called antithrombin, in their milk. Pharming’s longstanding promise—the ability to churn out large quantities of protein drugs at relatively low cost—was finally a commercial reality.

But despite making history, GTC was soon pegged by investors as little more than a cash embryo. ATryn, which GTC had licensed to Denmark’s LEO Pharma, was approved to prevent blood clots in patients with a rare, inherited antithrombin deficiency who were undergoing surgery. Annual sales, perhaps only a few tens of millions of dollars, wouldn’t come close to making GTC profitable. Last year the company’s shares drifted under a dollar each, prompting the NASDAQ Stock Market to notify GTC in January that its stock was headed for delisting. Last Friday the company underscored its cash-strapped status by announcing that it had agreed to sell 6.9 million shares to institutional investors at a fire-sale price of 87 cents a piece. Following the announcement, its share price fell below 80 cents.

You’d think all this would get CEO Geoffrey F. Cox’s goat. But when I talked to him last week, he sounded upbeat, reeling off a number of reasons GTC’s stock price isn’t likely to linger in the sub-buck-a-share danger zone for delisting.

First, he noted, GTC is in talks with a “number of parties” interested in partnering with it to commercialize ATryn in the U.S. (GTC said earlier that it hoped to complete the deal by the end of this quarter). “It’s very tough to predict with certainty” that that timing goal will be met, Cox added. “Nothing’s gone wrong—the negotiations are going very well. But these things take time, and I’m anxious to do the right deal rather than do one just to meet a timeline.” GTC’s negotiating position just got a bit stronger—it recently racked up key clinical data for ATryn’s U.S. approval.

A partnership would add sorely needed funds to GTC’s coffers. As of September 30, the company had only about $21.8 million in cash, less than its net loss of $26.5 million for the first nine months of 2007. (The latest stock sale announced Friday brought in some $6 million.) It would also put ATryn on the road to correcting antithrombin deficiencies much more prevalent than the rare, inherited one it’s approved to treat.

One such deficiency sometimes occurs in patients undergoing coronary artery bypass surgeries—potentially a $150 million to $200 million-a-year market, according to Cox. Another is disseminated intravascular coagulation, or DIC, which can cause deadly blood clots in patients with severe infections, an indication GTC sees as potentially a multi-billion-dollar market. LEO Pharma, GTC’s European partner, is conducting a Phase 2 trial with ATryn for DIC patients. “Hopefully LEO will complete patient recruitment over the next year or so,” Cox said. The trial might be followed by a large, international Phase 3 study sponsored by LEO and GTC’s to-be-announced U.S. partner, speeding ATryn’s approval for DIC in both Europe and the U.S..

GTC also plans to produce a protein called factor VIIa, used to treat hemophilia. Currently extracted from human blood, factor VIIa is one of the most precious products on the planet—the kilogram or so produced each year by Denmark’s Novo Nordisk brings in roughly a billion dollars, Cox said. That makes the protein worth roughly 30,000 times its weight in gold. In 2006, GTC joined forces with France’s LFB Biotechnologies to produce factor VIIa in the milk of transgenic rabbits. If all goes well, said Cox, the companies’ version of the precious protein should enter the clinic “in the latter part of 2009.” Several other blood proteins are prime candidates for pharming, such as coagulation factors IX and VIII, needed to treat hemophilia and other bleeding disorders.

GTC’s most tantalizing prospect, however, is its potential for making relatively low-cost, generic versions of various protein drugs now on the market, particularly monoclonal antibodies, immune molecules used to treat cancer and other diseases. Monoclonals that are good candidates for pharm production currently garner total annual sales of $23 billion, Cox said. Last year GTC raised its profile as a “biogenerics” wannabe by announcing that it and LFB Biotechnologies were working to produce a substitute for Rituxan, a blockbuster for treating blood-cell cancers and rheumatoid arthritis that’s marketed by Genentech and Biogen Idec.

Two things must happen before biogenerics can take off. First, the original medicines’ patents must expire. That’s already starting to happen, but the most important expirations won’t occur until after 2012. In fact, said Cox, “the products we’re particularly focused on are a whole series of monoclonals that will be coming off patent in about five to six years.”

Second, Congress must give the FDA authority to define rules for approving biogeneric drugs. That will entail resolving heated issues, such as proving that generic versions of complicated protein molecules are equivalent to the originals. Last year, the Senate approved language on the biogenerics issue as part of broader FDA legislation, but it was dropped in a later version of the bill. But Cox is optimistic that the regulatory path for biogenerics will soon be defined. It appears, he said, that “the pharmaceutical and biotech industry is actually quite anxious to see the issue settled while President Bush is still in the White House. They feel they can get a deal closer to where they would like it to be” that way. And they may get their wish: along with its recently announced 2009 budget request, the Bush administration said it would push for FDA authority to approve biogenerics, boosting the chance that Congress will soon act on the issue.

Still, the irony of GTC’s position seems more glaring than ever: its future potential is demonstrably growing as its market value is shrinking. That’s often the case for early-stage biotechs, and Cox argued that the “ATryn news flow” in coming months and other signs of progress should pull GTC’s stock out of its current malaise. Stock sales “are really only dilutive if a company isn’t creating value with the cash it raises,” he added. “And we feel that we’re creating tremendous value.” Further, getting ATryn approved “was an exhausting and challenging process that developed great backbone in the company. That’s going to stand us in very good stead going forward. We just have to stick with it.”

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