Celera, partner to develop cancer drugs

Move is latest is effort to reshape Md. company

September 29, 2004|By William Patalon III | William Patalon III,SUN STAFF

Celera Genomics Group said yesterday that it is linking up with Genentech Inc. to develop cancer-killing drugs, the latest in a series of partnerships that Rockville-based Celera is using to reshape its business.

"We had to be very careful to .... develop a strategy that would allow us to deliver value to our shareholders and that would carry us as far forward as possible," said Kathy Ordonez, Celera Genomics' president. "We have to look at things very carefully and then make an assessment of what we [hope to achieve] based on the cash we have."

Celera acquired a reputation as a brash upstart under founder J. Craig Venter, whose high-profile race with the government-funded Human Genome Project to decode the human genome - the genetic marching orders for the human body - drew worldwide attention. The two ended up agreeing to jointly unveil the genome in 2000.

Celera's subsequent attempt to cash in on its technology by selling subscriptions to its database to the major pharmaceutical companies sputtered as the Human Genome Project posted some of the same information for free on the Internet. Celera then shifted gears, announcing that it would use its discoveries to help it develop drugs, and Venter was pushed out.

That wasn't the last change of plans. Company leaders realized that it would take years of development and millions of dollars to amass the resources and build the organization needed to start drug development. Celera dropped the go-it-alone strategy and is building a network of partners that have the resources it lacks.

Celera's current strategy has a good chance of working, said analyst Aaron Geist, who follows Celera for Robert W. Baird & Co. in Milwaukee. The company's storehouse of genetic know-how - to this point a product with no market - might now be viewed as raw material for a new generation of drugs, therapies and even diagnostic tools.

With its latest strategic shift, and partnerships it has formed, "Celera has already created a lot of value which isn't yet reflected in the share price," he said.

Celera shares, which at one time topped $20, closed yesterday at $11.46, up 52 cents.

The collaboration with Genentech calls for the two companies to discover and develop focused cancer therapies. Celera will identify "targets" - cell-surface proteins present in tumors that are absent in healthy tissue, for example -that Genentech can use in developing drugs, Celera said

Targeted drugs are biotechnology's version of a "smart bomb" that can zero in on its programmed target without damaging healthy cells. This makes it possible for doctors to administer higher doses of medication, increasing the treatments' effectiveness as side effects are diminished.

Although the financial terms of the Genentech agreement were not released, Celera's Ordonez said the partnership is structured largely as a conventional licensing agreement, with milestone payments and royalties. Some of Celera's other recent deals are more creatively structured, she said.

In a strategic collaboration with Seattle Genetics Inc. that was announced in July - another partnership focusing on cancer - Celera and its partner will co-finance preclinical and clinical product development, and share any profits that result. Either party can opt out of a particular product but still receive royalties on sales, Celera said.

Celera has tried to diversify its development efforts across several companies with differing technologies, with different approaches to financing, Ordonez said.

Flexibility built into such deals as the collaboration with Seattle Genetics, and another with Abbott Laboratories, allows Celera to choose whether to invest some of its cash - $746 million as of the company's last filing - in return for a shot at profitability, or to be more conservative and hold back in return for potential milestone payments or royalties, Ordonez said.

This flexibility is important because the company is working to develop some drugs on its own and is looking at related business opportunities, she said.

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