An unhatched DNA egg gleams gold Genes: Powerful drug companies have bet millions Human Genome Sciences' genetic database will pay off in the billions.

THE BALTIMORE SUN

It's been more than five years since Dr. Craig Venter rocked the science world by speeding up and streamlining the method for finding and decoding genes, the marvelous and mysterious globs of DNA that contain the blueprints for everything from eye color to telling cells how to fend off diseases.

Now, biotechnology and pharmaceutical industry experts believe that the company founded in 1993 on Venter's technological break-through, Rockville-based Human Genome Sciences, is poised to further stir up science and medicine.

The reason: Major pharmaceutical houses around the world are now working on a dazzling array of new products to diagnose and treat diseases based on Human Genome's ballooning storehouse of genetic information.

It will be at least several years before any of these products emerges from the laboratory, but the potential revenues to Human Genome, even from one or two blockbuster products, could be enormous, industry analysts believe.

"This technology has paid off in a time period and magnitude no one believed possible," said Dr. William A. Haseltine, Human Genome's Harvard Medical School-educated chairman and chief executive.

The company, launched by the late Wallace Steinberg and his New Jersey-based venture capital outfit HealthCare Investment Corp., could be a major success in less than a decade of being started -- an unusual achievement for any biotechnology venture.

Dr. Reijer Lenstra, a Smith Barney biotechnology analyst, said Human Genome "might become the next Amgen if it finds the right proteins," referring to the organic compounds contained in genes that regulate cell behavior.

For now, Human Genome is relying on licensing deals and the money it raised in two public offerings for its revenue.

Analysts project the company's net losses -- $31 million in 1995 -- will increase until at least late in this decade.

But big profits are forecast once the genetic storehouse results in products.

Among those in the pipeline: "smart" drugs that tell specific cells which functions to turn on or off and highly accurate ways to diagnose diseases, such as cancer, in their infancy.

Prospects like those, say experts, have a lot to do with the company's current market value, $596 million, despite its growing annual losses from its expensive research and development costs.

By comparison, that's $100 million more than highly profitable Life Technologies, a biotechnology industry supplier based in Rockville.

Also, Human Genome's shares have climbed, trading this year for as high as $49.75. Shares in Human Genome closed Friday at $33.25, or about $5 more than American depositary receipts in Glaxo-Wellcome, the world's third most profitable drug company.

The reason for the market's hubbub over Human Genome lies in the storehouse of new information the company is rapidly collecting about human and, to a lesser extent, microbial genetics.

The company says it has either fully or partially "sequenced" -- determined the protein codes -- for more than 80 percent of the 125,000 human genes, thanks to Venter's breakthrough.

His breakthrough involved creating a shortcut for gene discovery. Venter, a former National Institutes of Health scientist and Vietnam veteran, determined that while each cell contains up to 80,000 genes, only a small portion contains the protein coding to tell cells what to do.

Cells, however, make copies of the useful genes to send messages to other cells. Venter determined that by snaring the vital messenger units and copying them, one could decipher the protein codes quickly using high-tech machines.

When approached by HealthCare Investments, Venter, 49, didn't want to be fettered by corporate life.

So the venture capital firm established a nonprofit operation, the Institute for Genomic Research (TIGR), so the scientist could pursue his gene sequencing and basic science. Human Genome was then given the rights to its genetic discoveries in exchange for $85 million in financing over 10 years.

'Gene library'

The "gene library" this odd alliance has built is now thought by many experts to hold the clues for developing entirely new approaches to treating and detecting human diseases and chronic ailments as diverse as strep bacteria and inflammatory disorders.

Instead of relying on chemical compounds and dead or inactivated viruses for drug development, genes provide an entirely new pathway for pharmaceuticals.

"Genetics won't be the only way drug discovery is made in the future, but it will play a big role for some diseases," Lenstra said.

Meanwhile, Human Genome's genetic library -- stored and cross-referenced against other gene libraries by super computers housed in a cool, dim glass room at Human Genome's Rockville campus -- is considered to be so vast that no one team of scientists could ever hope to mine it all.

The company's database and its ability to find and sequence genes are generating keen interest from pharmaceutical industry executives and scientists hungry to get an edge on competitors in the race to develop and hit the market with new ways to diagnose and treat diseases.

That is not to say the company doesn't have competitors.

Incyte Pharmaceuticals, a California company that is sequencing genes, has landed some major drug industry clients, while Myriad Genetics and Sequana Therapeutics, are targeting specific disorders to find genes they hope are blockbusters.

many university and government researchers are sequencing and mapping human and microbial genes. And Merck & Co., among the most profitable pharmaceutical companies, is financing a genome sequencing and mapping project at Washington State University and making the information public.

While Merck touts the project as a public service, some analysts believe the strategy was undertaken to undercut the edge of Human Genome and its key research partner, SmithKline Beechum.

Human Genome's Haseltine said the Merck project isn't undermining the value of the Rockville company, contending none of the commercial competitors is on a par with his company.

"Our competition is all of the other pharmaceutical companies developing products," said Haseltine, 51.

That remark may seem arrogant to some critics. But biotechnology analysts widely agree that Human Genome is the leading player in the expanding gene research industry.

Since January, Human Genome and its leading research partner, SmithKline Beechum, have opened up their database through research collaboration arrangements with some of the world's top pharmaceutical companies, including U.S.-based Schering-Plough, Germany's big player, Merck KGaA, and the French firm Synthelabo.

The upfront payments alone on the pharmaceutical alliances are worth more than $200 million to Human Genome. Stay tuned, say Human Genome's executives, more deals are in the works.

Meanwhile, sales royalties from drugs and diagnostics developed by SKB and the other pharmaceutical houses already in on the collaboration could generate between $10 million and $120 million for Human Genome by 2005, projects Lenstra at Smith Barney.

"Those are crude estimates because no one really knows yet what the value of the database is. We won't really know until a product emerges that will tell us something about the value," Lenstra said.

Also, in structuring the research collaborations, Haseltine and SmithKline's CEO Jan Leschly, its pharmaceuticals division chief Jean-Pierre Garnier and its R&D; guru George Poste have radically altered the playing field of the pharmaceutical industry. Hard-nosed competitors traditionally don't share research data in the race to develop new products.

Under the agreements, the collaborating companies must share research information. Everything in Genome's database is up for grabs until one of the partners proves in animal testing that it has found a strong candidate for a product. Then it's their baby. But no matter which firm develops and gets clearance to market a product, SmithKline and Human Genome will receive royalties.

Despite the deals struck with the other drug houses this year, SmithKline remains Human Genome's most significant R&D; collaborator.

After all, the U.S. and British-based pharmaceutical and personal care products company was the first to agree to ante up millions on an unproven field at a time when others Human Genome and HealthCare Investments were courting wouldn't.

Today, more than 50 percent of SmithKline's entire R&D; effort is focused on developing new products from genetic information "starting points," said a spokesman.

Key drug development targets at SmithKline, Haseltine said, include treatments for osteoporosis, hypertension and heart plaque.

Others in the alliance are moving in different directions.

For example, Hoffman La-Roche, which agreed to pay HGS an undisclosed amount this year for genetic information about the streptococcus pneumonia bacteria, is attempting to develop a powerful new strep antibiotic.

Haseltine broadens strategy

Originally, the company had planned to make a living selling its genetic information, but Haseltine has significantly broadened that strategy.

And with good reason, said Lenstra the analyst. "You can't expect to map the genome forever."

Said Haseltine, whose mentors at Harvard include Nobel laureates James D. Watson, who discovered the molecular structure of DNA, and Walter Gilbert, who furthered DNA research and later founded Biogen, "What we are building is a true pharmaceutical company."

Haseltine said Human Genome has recently embarked on an effort to develop drugs and other products in house, mainly ones focused on developing a therapy from proteins. These include projects focused on anti-viral drugs and cancer therapies.

Analysts expect the first products based on Human Genome's gene research to emerge from the lab and into clinical trials within two years. Haseltine expects the first products resulting from Human Genome's gene library to be approved for marketing between 2000 and 2005.

From there the company expects as many as seven new targets annually should emerge from the alliance for clinical testing. "That is a very realistic outlook," said Haseltine.

Haseltine isn't modest when asked what lasting contributions to society he and the company hope to achieve.

"Our technology could change the face of current medicine. It could be rapidly broadened so that you could work on almost any disease you wanted to and make the process for developing a solution much faster. That seems irresistible to me," said Haseltine, who ditched his dream of practicing medicine when he was told by his Harvard mentors that biophysics and genetics offered more potential to have a lasting effect on society.

You won't find Haseltine, though, seeking inspiration for his company's legacy by popping in on gene researchers for a look at the latest discovery.

Instead, he said, he looks to art and literature.

An avid reader, he currently favors contemporary foreign writers and the classics. As for art, Haseltine has a deep and abiding appreciation for good works.

Works of art are everywhere at Human Genome's growing campus in one of Rockville's serene high-tech business parks. Halls and offices are lined with framed prints of the works of Picasso, Matisse and African tribes.

"Medicine," Haseltine said, "is not about biology. It's about knowing what human society wants and needs. The best places to find that are through art and literature, and so I look to them to guide us."

Pub Date: 8/11/96

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