BioWorld Today Columnist

As the pharmaceutical industry continues its nosedive into the abyss of consumer distain, the April 5, 2005, issue of the Wall Street Journal brings me a front-page reminder that biotech is not immune to being cast as the bad guy.

The headline read "How Genentech, Novartis Stifled a Promising Drug."

It's the sorry tale of Tanox Inc.'s TNX-901, a monoclonal antibody treatment to block production of circulating IgE, aimed at the 1.5 million Americans with peanut allergy. About 15 percent of those folks have severe reactions, and 50 to 100 Americans die annually from accidental peanut exposure. (Those of you with allergic kids know just how tricky avoidance can be.)

The stifling came as Genentech and Novartis - corporate partners with Tanox in development of a different MAb aimed at the same target, but different disease - dumped the drug in spite of strong Phase II data generated in 2002. That left patients in the lurch and Tanox in a funk.

The antagonistic relationship between Tanox and Genentech was not new. The firms had been in official opposition since 1993, when Tanox filed a lawsuit accusing Genentech of "appropriating" the Tanox anti-IgE invention by launching its own anti-IgE program. Tanox's work, which aimed the therapeutic MAb at a novel site on the IgE molecule, had been revealed to Genentech in 1989 during discussions over a potential partnership.

Genentech promptly filed its own counter-suit, and definitely had its opponent outgunned. Tanox was, and still is, a small biotech firm, with a market capitalization of $431 million at the time of the WSJ article, vs. Genentech's $60 billion. It's based in Houston - far off the beaten track of the East Coast/West Coast biotech corridors. The company was founded in 1986 by married Taiwanese scientists from Baylor College of Medicine, who previously had served as director and vice president of Centocor Inc., now part of Johnson & Johnson.

Nancy Chang, CEO, managed the amazing feat of financing a Texas-based biotech company by using her network throughout Europe, Asia and the U.S. to raise $55 million. In mid-1990, after failing to reach an agreement with Genentech, she forged a partnership with Ciba (now part of Novartis) to co-develop the IgE-blocking TNX-901 for allergies and asthma. Tanox retained co-manufacturing, co-promotion rights in the U.S., and co-marketing rights in Asia. By late 1993, the partners had TNX-901 in Phase I testing for allergic problems and another MAb was in Phase I/II for HIV.

The appearance of the competing Genentech anti-IgE Xolair program was a major speed bump, mitigated somewhat by issuance of patents for the Tanox technology in 1995. Eventually, Tanox, Genentech and Novartis forged a three-way agreement that combined the two IgE programs and put the two larger companies in charge of developing, manufacturing and selling any resulting drugs. That resolution contributed to a $244 million initial public offering for Tanox in 2000.

But another argument arose, over which product and which clinical indication to pursue within the partnership. The big guys wanted to put all hands on Xolair for asthma, while Tanox was convinced that TNX-901 and food allergy patients deserved support.

Based on a clause in its original deal with Ciba, Tanox started clinical testing in peanut allergy patients, in spite of being sued by its partners in a federal district court. As patients began to develop significant tolerance to allergen loads that previously would have landed them in deep trouble, Tanox became more intent on continuing development.

According to the WSJ, the big boys became increasingly insistent that Tanox cease all development activity, primarily because of the potential threat to Xolair's revenues.

In October 2001, a U.S. district judge ruled that the three-way agreement allowed Tanox to pursue a candidate that had been dropped by the partners. However, she was persuaded to suspend the case and let Genentech and Novartis continue arbitration. One year later, just a few months after Phase II data showed TNX-901 worked in patients, the arbitration panel ruled that Tanox did not have the right to pursue its own molecule. At that point, CEO Chang estimated Tanox had spent about $75 million to fight the demise of TNX-901 - not quite how she wanted to spend her IPO dollars. A final settlement came in early 2004.

Xolair received FDA approval for asthma in 2003. Genentech and Novartis now are testing Xolair in its own Phase II study aimed at peanut allergy. Data are yet to come from that Xolair trail, but patients whose hopes were raised by TNX-901 are wondering why those large, profitable firms are blocking it.

So what do we make of this? Another story that casts industry leaders as a mean-spirited Snidely Whiplash, willing to let patients suffer to protect against competition? And why did the Wall Street Journal run old news on the front page?

The story exposes the scary side of partnering for the majority of biotech firms - those without the revenue-driven deep pockets to support long lawsuits. They must depend on the integrity of potential partners and hitch their wagon to someone else's star in hopes of surviving long enough to prosper.

This David vs. Goliath tale does not show the biotech industry at its best.

The next few years will be discombobulating for the big companies on many fronts, and it's unlikely that they will lose any of their current focus on maximizing profits. The little companies should not expect better treatment as they move forward.

If it's not safe to partner with the big boys, where can the rest of the industry (and its shareholders) find partners that might provide a better bottom line for them? Can companies better balance the ethical needs of patients with the profit needs of industry? (This isn't even an orphan indication! Those poor folks are really in a tough negotiating position.) Can biotech really wean itself off of big pharma partners and still survive?

I'll be exploring those questions over the next few months by talking with folks in and around the industry, and will report back. Send your comments to me at biogodess@earthlink.net.