To keep its focus in oncology and take advantage of the evolving political climate, Cell Therapeutics Inc. is spinning out a new company, Aequus BioPharma Inc., to create follow-on biologics using Genetic Polymer technology.

Aequus initially will function as a wholly owned subsidiary of Seattle-based CTI, following what CTI President and CEO James Bianco termed an "Abgenix/Cell Genesys model." Abgenix Inc. was created as a wholly owned subsidiary of Cell Genesys Inc. in 1996 and later went on to raise its own funding and eventually was acquired by Amgen Inc. (See BioWorld Today, July 1, 1996, and Dec. 15, 2005.)

CTI will provide the start-up capital for Aequus, and Bianco estimated that $1.5 million to $2 million would be sufficient to carry the company through preclinical proof of concept. CTI will receive royalties on any products developed by Aequus and has the right to license the Genetic Polymer technology as needed, potentially to create novel biologics or improve delivery of siRNA.

Management contracts for the new company should be in place "within the next 30 days," Bianco said. Several members of the Aequus management team hail from Immunex Corp., which was based in Seattle prior to its 2002 acquisition by Amgen.

Aequus, based on the Latin word meaning even or equal, will attempt to address a key issue for recombinant protein therapeutics: a relatively short half-life that often results in frequent injections and high costs. The biotech industry already has developed several mechanisms for dealing with that hurdle, including chemical conjugation with monomethoxypolyethylene glycol (PEG).

One example is Amgen's Neulasta (pegfilgrastim), a longer-acting form of Neupogen (filgrastim) requiring only one injection per chemotherapy cycle as opposed to daily injections for 14 days. Neulasta and Neupogen pulled in a combined $3.9 billion in worldwide sales in 2006.

CTI's Genetic Polymer technology uses a recombinant DNA process to achieve a similar goal. By ligating a secretion sequence with a biologically active protein sequence and a proprietary poly-amino acid sequence, the company creates a gene that can be used to produce a protein with a prolonged plasma half-life. Yet the approach "should be easier to manufacture than PEG," Bianco said, resulting in faster manufacturing and decreased costs. It also can be used with multiple molecules, and Bianco expects Aequus to advance follow-on versions of EPO and G-CSF into the clinic in about 24 months.

CTI says that its technology produces unique, patentable genes' and that the resulting protein biologics would not infringe on the patents held by competitors. Kelley Davenport, a spokesperson for Amgen, of Thousand Oaks, Calif., which holds those patents, declined to comment specifically on CTI's technology but said "even small differences between a follow-on biologic and the original biologic product can cause differences in effectiveness and unexpected side effects."

That, of course, has been the crux of the follow-on biologic debate. As of now, follow-on biologic products must complete Phase I, II and III clinical testing just like any other new drug. Last fall, Rep. Henry Waxman (D-Calif.) and Sens. Charles Schumer (D-N.Y.) and Hillary Rodham Clinton (D-N.Y.) introduced a biogeneric bill in their respective chambers seeking an abbreviated pathway for approval of generic biopharmaceuticals. The issue likely will be re-introduced in the current congressional session. (See BioWorld Today, Oct. 3, 2006, and Dec. 26, 2006.)

Biologics generate an estimated $51 billion worldwide each year and may hit $87 billion by 2010. Interest in follow-on biologics spurred some investment activity last summer, with Momenta Pharmaceuticals Inc. signing a $260 million biogeneric deal with Sandoz GmbH and Viropro Inc. teaming up with BioChallenge. Those deals came on the heels of Sandoz gaining a landmark FDA approval of Omnitrope (somatropin [rDNA origin]), a follow-on version of a growth hormone drug, after filing for a truncated approval based on Section 505(b)(2) of the Food, Drug, and Cosmetic Act. However, the FDA emphasized that Omnitrope is not therapeutically equivalent to or substitutable for any of the other approved human growth hormone products, and is thus not a generic biologic. (See BioWorld Today, June 1, 2006, June 16, 2006, and July 26, 2006.)

Bianco said CTI is hoping an abbreviated pathway for approval of follow-on biologics will exist by the time Aequus' products reach the clinic.

In the meantime, CTI has its own portfolio of cancer products to focus on. The company plans to initiate a Phase III gender-specific lung cancer trial with Xyotax in March and anticipates an interim analysis from its Phase III trials with pixantrone in non-Hodgkin's lymphoma this summer. Bianco said CTI is also "ready, willing and able" to begin potential buy-out discussions with DOR BioPharma Inc. on March 1, when DOR's nonbinding letter of intent with Sigma-Tau Pharmaceuticals Inc. regarding certain products expires. (See BioWorld Today, Jan. 22, 2007.)

Shares of CTI (NASDAQ:CTIC) closed up 2 cents at $1.60 on Monday.