Plans for anemia drug run into roadblocks

A licensing deal between Beth Israel Deaconess Medical Center and a Florida biotechnology company to produce a "super" form of an anti anemia drug is in danger of foundering just two years after it was signed.

The experimental treatment had the potential to be among the biggest-selling drugs to emerge from an academic lab in Boston. It was aimed at capturing a share of the $12 billion worldwide market for anti anemia treatments and could have generated millions of dollars in royalties for Beth Israel Deaconess. But testing in humans is on hold as the drug faces financial and regulatory hurdles that illustrate how difficult it is for academic medical centers to turn their discoveries into products by partnering with drug companies.

DNAPrint Genomics Inc., of Sarasota, Fla., which trades for less than a penny a share and lost $12.3 million last year, has been told by its auditors that it is in danger of going out of business, according to its most recent filings with the Securities and Exchange Commission. The company disclosed that it has defaulted on debt payments and is seeking venture capital so it can continue testing. In the meantime, the first batches of a compound it calls "super epo" sit in cold storage.

The problems mark another frustrating chapter in the development of the drug, a form of erythropoietin invented in the mid- 1990s by Dr. Arthur J. Sytkowski of Beth Israel Deaconess, and known officially as PT-401. His work was financed through grants from the National Institutes of Health and the US Navy.

Erythropoietin products are used to boost red blood cell counts in patients with kidney failure or who are undergoing cancer chemotherapy.

The first drug in the class was Amgen Inc.'s Epogen, the biotechnology industry's first blockbuster product. The super epo invented by Sytkowski -- two erythropoietin proteins linked end-to-end -- has the potential to be more potent and longer-lasting than other versions.

Eli Lilly and Co. held the license to PT-401 for several years, but the drug giant gave it up in 2001 for "strategic reasons," around the same time Amgen introduced its own second-generation erythropoietin, Aranesp.

Beth Israel Deaconess signed its deal with DNAPrint in 2005. Researchers at the hospital, like those at other academic medical centers, routinely invent diagnostic tests, devices, and other products, but creating a pharmaceutical compound with such large market potential is rare.

"It's a long shot. That's the game we're in. They're all long shots," said Mark Chalek, chief of business ventures at Beth Israel Deaconess.

"We're not at the point where we're going to say let's pull the plug. We'll stay with it, not indefinitely, but we will stay with it for some time in hopes that [the company] can assemble the resources to move forward," he said.

Boston's teaching hospitals collectively receive about $1 billion a year in NIH research money and are under pressure to leverage laboratory inventions into drugs that benefit people. But typically, there are more inventions than investors.

Beth Israel Deaconess typically signs 20 to 30 license deals a year and currently has about 120 active licenses, Chalek said.

Harvard University's office of technology development lists 103 available licensing opportunities for biotech-related innovations discovered by its faculty. There were 144 "active licenses" from Harvard researchers in 2004, the last year for which data are available on its website. That's down from a high of 288 active licenses in 1994.

In 2004, Harvard's largest royalty payment was $12.9 million from Bristol-Myers Squibb's medical imaging division for Cardiolite, a heart stress test invented by researchers at Harvard Medical School and the Massachusetts Institute of Technology that uses a radioactive tracer to identify damaged tissue.

But some payoffs can be even higher. For instance, a 2006 settlement over disputed royalties between Amgen and Harvard-affiliated Massachusetts General Hospital resulted in a one-time $186 million payment to the hospital for inventions related to Enbrel, a popular rheumatoid arthritis drug.

Not long ago, it appeared that Beth Israel Deaconess's deal with DNAPrint Genomics could prove lucrative for the hospital. According to terms of the licensing deal signed in 2005 by Beth Israel Deaconess chief executive Paul Levy and DNAPrint Genomics chief executive Richard Gabriel, the hospital would receive more than $2 million in milestone payments during development of the drug and $100,000 a year plus 4 percent of gross sales if super epo reached market.

Before he went to DNAPrint Genomics in 2003, Gabriel said he worked as a consultant for Beth Israel Deaconess, charged with trying to find licensing partners for super epo after Eli Lilly abandoned it . Gabriel said he ultimately decided to join a company that could team up with the hospital, instead of working as a consultant.

In December 2006, the company said pre clinical studies in mice showed the experimental drug stimulated red blood cell production at triple the rate of conventional anti anemia drugs already on the market such as Epogen. DNAPrint Genomics showed signs of financial troubles for the past year, but last month's SEC filing made it clear the situation has become critical.

In addition to the company's poor performance, super epo faces another problem: uncertainty over the safety of erythropoietin. In March, the Food and Drug Administration added warnings on the labels of such drugs because of clinical trial evidence showing higher doses increase risks of fatal heart attack, stroke, and tumor growth.

As a result, companies that make anti anemia treatments have suffered and enthusiasm for new versions has been dampened. Amgen's stock has fallen 28 percent since mid-January.

Affymax Inc., a start-up company in Palo Alto, Calif., which is developing a product to stimulate red blood cell growth, has lost about one-quarter of its stock value in recent weeks.

Gabriel said he believes investors' concern about the safety of anti anemia drugs will be temporary.

"The reality of [erythropoietin] is it saves a lot of lives and improves the lives of a lot of people. Otherwise, it wouldn't be a $12 billion a year drug," Gabriel said.

Sytkowski, who holds eight patents on super epo, would be entitled to 30 percent of the royalty fees under Beth Israel Deaconess's distribution schedule.

Christopher Rowland can be reached at crowland@globe.com.