Using Frugal Business Model, Orphagen Targets Orphan Receptors

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comparing them with each other,” Thacher says. “You can be more effective.”

Orphagen’s track record appears to back that up. From 2005, the initial team of three scientists began finding “hits”—molecules that bind and stimulate a specific receptor. One group of hits targeted ROR-γt, an orphan nuclear receptor shown to activate and sustain TH-17 immune cells, a specific type of T-cell suspected of driving a range of autoimmune diseases, including psoriasis and rheumatoid arthritis.

A drug that inhibits RORγt has the potential to suppress activation of the TH-17 cells, while leaving the remainder of the immune system intact. Based on such promise, Orphagen negotiated its first partnership in 2008, with Japan Tobacco. This was also the industry’s first collaboration to develop compounds targeting ROR-γt.

Orphagen’s deal capitalized on excitement surrounding the field—Orphagen didn’t have a definitive clinical candidate in 2008, but neither did four rival companies that struck similar deals in subsequent years. After surviving for five years on government grants and artful scrounging, the Japan Tobacco deal was a windfall for Orphagen.

Orphagen CEO Scott Thacher (left) and Paul Crowe, director of biology, last year in Japan

Thacher would not disclose specifics about Orphagen’s 2008 contract, but he says, “it’s a strategic deal, which means that we have a long-term interest in the partnership.”

Four ROR-γt partnerships followed Orphagen’s deal with Japan Tobacco, including Phenex Pharmaceutical’s deal with Janssen Biotech, which could eventually generate as much as $135 million (with the possibility of further international royalties), and Lycera’s deal with Merck that could total $300 million.

Thacher acknowledges those were bigger deals than Orphagen’s, but he doesn’t view deal size alone as a valid measure of value. He contends that the metrics used to measure big pharma don’t apply to a research engine like Orphagen, which operates on a smaller scale.

Instead, Thacher says Orphagen focuses on return on investment, rather than blockbuster licensing deals. With no VC investors, Orphagen’s returns are divided among a … Next Page »

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