Building Blockbuster Potential

New life for old molecules

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BY PATRICIA NICHOLSON

By tinkering with a familiar molecule, Isotechnika Inc. came up with a drug candidate with blockbuster potential: the immunosuppressant ISA247, a high-potency cyclosporine analogue. By tinkering with the familiar model of a Canadian biotech company, Isotechnika’s founder, chairman and CEO Robert Foster, PhD has built one of the industry’s leaders.

Robert Foster, PhD started Edmonton, Alta.-based Isotechnika in a spare bedroom of his home in 1993. Ten years later, the company boasts a spacious new lab facility, promising Phase II clinical trial results, and the biggest drug-development deal in Canadian biotech history. But it didn’t follow the classic path of a startup.

Rather than making a discovery in an academic lab and forming a company to commercialize it, Foster started Isotechnika long before it had a drug candidate.

“We didn’t have a technology to start with,” he says. In the beginning, Foster did contract analysis, drug analysis and consulting for the pharma industry, and then moved into developing drug molecules.

“I thought maybe the better thing to do was to use my background in pharmaceutics, because I did a PhD in pharmaceutics. Why not try to take some older drugs that have been on the market for a while and try to re-jig them so that you could change the activities of the drugs and maybe boost the potential of the drug or downplay some of the side-effects?” he says. “So that’s what we started doing.”

Foster describes Isotechnika’s focus as breathing new life into older molecules in a cost- and time-effective manner. This, he says, is more a rifle-shot approach than a shotgun approach to drug development: faster and more focused.

Focused Approach

Isotechnika quickly outgrew Foster’s home, and soon had drug candidates in four areas: anti-infective, immunosuppressant, anticancer and antihypertensive. Foster recalls that shortly after Randall Yatscoff, PhD — now company president, COO and director — joined the company in 1996, a lead drug had to be selected. Isotechnika had little expertise in oncology or infectious diseases, and there didn’t seem to be a pressing need to put another antihypertensive on the market. Where the company did have expertise was in immunology, immunosuppression and transplantation — areas for which there were substantial markets and few drugs.

In June 1996, while standing in a parking lot outside Health Canada’s offices in Ottawa, Ont., Foster and Yatscoff made the decision to focus Isotechnika’s resources on re-making cyclosporine, an immunosuppressant used to prevent organ rejection in transplant patients.

“We were walking on our way back to the rental car. We’d just had a really good meeting — sort of a pre-IND meeting — with people from Health Canada over in immunology,” Foster recalls.

“It was a fantastic meeting, so we said, ‘You know what? Let’s just focus on what we know and not try to be all things to all people,’” Foster says. “That’s where ISA247 came from, because we just dropped everything and we focused all our efforts on that one. And that was really the key. Once we started to focus, then things really started to happen for us. So it was a good turning point.”

Isotechnika is not the first company to try to rebuild cyclosporine. Foster says there have been thousands of attempts worldwide, but ISA247 was the first analogue for which positive results were shown.

“Cyclosporine is 11 amino acids,” Foster says. “We were trying to modify (it) on a couple of amino acids, and we were getting a lot of variability on whether or not the drug was showing increased potency on a milligram basis.” Then Yatscoff suggested a different approach.

“We showed him the chemistry of what we were doing. He said, ‘That’s interesting, but have you tried to do your modifications over in this part of the molecule?’ So we tried a few different structural analogues, changes on a different part of the molecule, and we started getting big, big changes in activity,” Foster says. “And that was exciting because of all the analogues that had been created up to that point anywhere in the world, none were shown to be more potent than the original cyclosporine.”

The big question was, did the increased potency come with increased side-effects?

“We just started trying it in various preclinical models, and it actually showed to be less toxic than the original cyclosporine. So not only did we enhance the potency, or the efficacy, but we also diminished or decreased the toxicity,” Foster says. “It just makes it that the drug is a lot safer to use.”

Major Markets

Cyclosporine inhibits calcineurin, an enzyme that plays a key role in immune response.

“If you decrease the activity of calcineurin, then you’ll suppress the immune system. But people have also known that if you decrease the activity of calcineurin you can also change things like blood flow to the kidneys. And then you can get kidney damage. That’s one of the biggest problems with cyclosporine — the nephrotoxicity,” Foster says. “And that has actually limited that drug entirely for the autoimmune market. You’d never give a drug like cyclosporine — or virtually never give it — for treatment of things like arthritis or psoriasis, because in that case the treatment is worse than the disease itself.”

ISA247’s profile has opened up those markets.

“We think you could really treat psoriasis and potentially other indications like arthritis, provided you dose it correctly. If you push it too high, you’ll probably get side-effects. But if you push water too high, you’re going to have side-effects,” Foster says.

“We’re just speculating, but our working theory is, we know that there are a number of different calcineurins in the body. What we think we’ve done is we’ve selectively inhibited the calcineurin that’s more associated with suppression of the immune system, and we’ve inhibited the calcineurin that’s responsible for blood flow to the kidneys to a lesser extent. So it’s more of a selective calcineurin inhibitor.”

Phase II clinical trial results have been promising in both psoriasis and kidney transplant indications.

“It really cleared up the psoriasis,” Foster says. “And it did it without changing renal function.”

The Phase IIa trial in kidney transplantation — on patients who had been taking cyclosporine for a minimum of six months — is complete. The results show that patients on cyclosporine can switch to ISA247 safely and effectively, giving ISA247 a broad market for transplant indications. Phase IIb will study ISA247 in new transplant recipients.

Foster estimates the cyclosporine market to be $2 billion a year in transplantation alone, the bulk of which is kidney transplants. He adds that the psoriasis market, and other autoimmune disease markets, are growing.

Pipeline Potential

Calcineurin inhibitors such as ISA247 are usually given to transplant patients as part of a cocktail of three drugs. Another vital ingredient in that cocktail is an mTOR inhibitor, but Foster says there aren’t many mTOR inhibitors on the market, and those that are available cause side-effects. “So we thought we’d build a new mTOR inhibitor to hopefully try to get around some of these abnormal effects that you see with some of the current ones, like you see abnormalities in lipids, lipid profile changes. So we built a new one, and we call it TAFA93,” Foster says. “We’re still in preclinical in that one so we hope to get that into an IND — investigational new drug — application sometime in 2004. That would be our second drug in the pipeline, and we’ll continue to build it from there.”

The company also has a diagnostics division, a wholly owned subsidiary called Isodiagnostika Inc. (Edmonton, AB), which is developing diagnostic assays to monitor the level of ISA247 and TAFA93 in the body.

“Eventually what we’d like to do is present a bundle where you say, in this bundle we’ll supply you with two or three drugs that are used in this cocktail, so you can buy everything from us — us meaning Roche and Isotechnika. And to help you use the drug more effectively, we’ve also got these diagnostic assays that will let you fine-tune your dosing so that you’re giving the drug at the optimal dose. So it’s a bit of a marketing tool as well.”

Big Deal

The vast market potential of ISA247 is one factor that Foster says helped Isotechnika close a landmark deal with F. Hoffman-La Roche Ltd. (Basel, Switzerland) in April 2002.

Valued at $215 million US, it holds the record for the largest deal ever struck between a Canadian biotech and a pharmaceutical company. The funding is to be paid upon reaching development milestones, and Isotechnika has thus far received $68.5 million Cdn.

“I think all the big drug companies scan the ledger all the time, and we had a number of proposals made to us early on. We sat down and worked through the various term sheets from the different drug companies, and in our minds Roche was the company to go with. It had probably the greatest need for a calcineurin inhibitor,” he says. “Plus Roche — in terms of just the human aspect — the people who were working at Roche who we met just seemed like a really good group to work with. We were really impressed with the way they structured their teams to work on these types of drugs, and from an FTC point of view — the Federal Trade Commission in the U.S. and antitrust issues — Roche also made the best sense.”

But Foster says Isotechnika wasn’t just seeking a good deal — the company also had its eye on making the biggest deal.

“We were looking for the best thing that made sense for the company, but we actually wanted to set a Canadian record. So we were pushing for that,” Foster says. Board members with strong legal and pharma experience, such as Isotechnika’s executive vice-president and director Joseph Koziak, whose background is both business and law, were instrumental in landing the deal. “We knew we had a great team going in there, and we just sort of left it up to them. They would come back to us from time to time and say, ‘Here’s where we’re at, what do you guys think?’ And we of course just said, ‘Keep going.’”

Despite the poor market for biotechs at that time, Isotechnika had other corporate suitors. But Foster says his company knew what it wanted.

“I think at the time we had four term sheets on the table, and they were really serious offers. And we had a number of other requests to do a licensing — all totalled I think it was close to 20 proposals,” Foster says. “But there were a lot of them that were just non-starters that we wouldn’t consider because, again, we wanted to have someone who was significant in transplantation and autoimmune, wanted it to be large pharma as opposed to maybe another biotech that wanted to do a deal with us. And they needed to have deep pockets and the right attitude, the right philosophy and the right market niche. Again, Roche just lined up perfectly.” Looking Abroad The big push now, Foster says, is to try to bring aboard American and European investors.

“We’ve told our story numerous times now in Canada. And I think by and large the Canadians that want to be in the stock are already in it,” he says. “So I think the focus over the next year at least has got to be getting the story down into the south to the U.S., as well as across to Europe. And then maybe if the market turns around and we start getting additional positive clinical trial results out and get the story pushed out further, then people will start really getting in behind the stock.”

Isotechnika completed a $15-million private placement in the U.S. in August, with the goal of bringing aboard qualified U.S. institutional investors. “We didn’t want to just get anybody into the stock, because then it’s likely that people will just flip the stock — they’ll buy it and sell it as soon as they can,” Foster says. “So what we wanted to do was to make sure that when people buy the stock that they hold it, and not only just hold it, but hopefully add to their position and bring their friends in as well . . . essentially looking for the opinion leaders in the U.S. to buy the stock so other people will start picking it up as well.”

Entrepreneurial Influence

Foster comes from an entrepreneurial family that owned sawmills in Alberta, and says he grew up in a business environment.

“My dad had quite a number of businesses when I was a kid growing up,” he says. “I was always surrounded by big machines and lots of logs. So as a kid I’d get sort of dragged around everywhere, sitting in the office while he was negotiating with somebody else, playing on an adding machine while he was in another smoke-filled office doing another deal.

“When I went to university and did sciences it was kind of weird because everybody else thought it should be business,” Foster says. “So I was the dark horse — I went into science. But then I came out and went into business — I redeemed myself,” he laughs.

Once he’d finished his PhD and joined the Pharmacology department at the University of Alberta (Edmonton, AB), Foster found academia didn’t really suit him.

“It was kind of like new shoes that didn’t quite fit right. It was a great place, there was a really good atmosphere in terms of my colleagues there, so generally it was really good. But I just couldn’t do science at the level I wanted to do science, and that was frustrating,” he says. While he enjoyed teaching, he says preparing for lectures, committee work and grant writing ate into research time. Also, academic life didn’t mesh with his entrepreneurial ambitions.

“Given the background that I had as a kid growing up, I didn’t just want to work for a paycheque. I wanted to work towards something where there was an ownership position. That’s the reason you basically have to leave the university at that point: because you’ll never own a chunk of the university.” Ownership and control of the company are issues that remain important to him. For Foster, the biggest challenge in building Isotechnika has been not only getting financing, but getting the right financing.

“Raising money, and raising it so that you’re not diluted right into oblivion. And avoiding some of the venture capital groups that are out there, because they’ll take their pound of flesh. So you have to step carefully so that you’re not completely taken over,” Foster says.

“I tried to do the financing in such a way that I would be diluted to a lesser extent. I think I’ve been able to do that,” he says. “At one point I owned 100 per cent of this company and now I own slightly less than 10 per cent. But still, I look at a lot of other companies where probably the entire management team owns significantly less than one per cent altogether.” Foster says the financial challenges of building a biotech company go hand in hand with the scientific hurdles. When cash is tight, it can limit the science, but the science also drives the financing.

“If you can show the financial community that you’re focused and you’ve got this approach that will ultimately lead to their investment value increasing, then they’re willing to put the cash in,” he says. “It’s kind of a vicious circle: ‘Show us your money,’ and they say, ‘We’ll show you the money if you show us the science.’”

Beyond the lab and the financing, Foster says there is also a human aspect that drives the work.

“To see a little box with the Roche and Isotechnika label on it, on one of these drugs that we developed using our own brain power, and knowing that a lot of people are benefiting from that — that will be just unbelievable.”