San Diego’s CovX and Pfizer’s New Strategy For Innovation

Xconomy San Diego — 

It has been a year since the largest pharmaceutical company in the world acquired San Diego’s CovX, a venture-backed life sciences company developing new treatments for cancer and diabetes.

At the time, Pfizer already had invested more than $522 million to develop a San Diego campus, which has more than 1,000 employees and operates as a major hub for Pfizer Global Research and Development, or PGRD. So it would have been logical for Pfizer to consolidate CovX within its global R&D operations. But it didn’t.

Pfizer instead made CovX part of a new R&D division that includes other biotech units in Boston and the United Kingdom. Pfizer created the division just 14 months ago as an alternative approach to drug discovery, and calls it the Biotherapeutics and Bioinnovation Center, or BBC. I sat down recently with Rodney Lappe, the chief scientific officer at CovX, to discuss how Pfizer’s new model for innovation has been working.

“We remain more or less the way we were when Pfizer bought us,” Lappe says. “The goal is to retain that fast-paced entrepreneurial culture, with the resources of a big pharma company.”

In fact, he says, CovX has grown from 65 employees to 85 since joining the Pfizer fold, with R&D expanding from CovX’s original focus on developing new compounds for cancer and diabetes to new candidates for treating pain and inflammation. Yet Lappe says, “Most of the people here really can’t tell the difference between working for a small biotech and working for Pfizer.”

CovX was founded in 2002 around breakthrough technology developed at San Diego’s Scripps Research Institute, where researchers found a way to permanently bond small molecule drugs and peptides onto catalytic antibodies, which are large, soluble molecules that remain in the body for long periods of time. The technique creates a covalent bond between the small molecule and an antibody “scaffold” that Lappe describes as “chemical fusion,” creating a type of catalytic antibody the company calls “CovX bodies.”

Lappe says another biotech Pfizer acquired for the BBC, as well as two independent units created from Pfizer’s own operations, also have focused their research and development on large molecules. That is fundamentally different than the research focus on developing small molecules that pervades most large pharmas, including the work at PGRD, he says.

But the success of large-molecule cancer drugs such as Avastin and Herceptin has shown how valuable an alternative R&D focus can be, Lappe says.

Pfizer set up the BBC as a federation of small biotechs, each with specialized expertise. Each of these units is headed by a chief scientific officer and operates independently, using in-house technologies to develop new drug compounds. Yet each also gets the benefit of collaborating with other BBC units and occasionally drawing on the deeper resources of PGRD.

“We’ve always said that our competitive advantage has been the way we work together,” says Lappe. “We collaborate with PGRD on projects where we link both small molecules peptides and small proteins to our scaffold antibody.” The other units in the BBC are:

—The Research and Technology Center in Cambridge, MA. The internally grown research unit serves as the East Coast hub of Pfizer’s BBC and has specialized in RNA interference, or RNAi technologies.

—Pfizer Regenerative Medicine, which has operations in Cambridge, MA, and Cambridge, England. It was established by Pfizer from its own operations earlier this year to develop stem cell treatments for degenerative diseases and to repair damaged organs.

—Rinat, based in South San Francisco, which has special expertise in using protein engineering to create and optimize monoclonal antibodies in drug development.

Corey Goodman, who heads Pfizer’s BBC, “has a super vision for keeping that (entrepreneurial) excitement and in driving the activity,” Lappe says. “The BBC is fundamentally not interested in the number of shots on goal. We’re interested in scoring goals, in developing drugs with the highest probability of success.”