Pfizer Inc., a pharmaceutical major based in New York, agreed to acquire Excaliard Pharmaceuticals Inc., a spin off from Isis Pharmaceuticals. This is a good example of the virtual biotech model in action.
As large pharma downsizes their R&D groups, they are becoming more reliant on virtual biotech companies to fill their pipelines. I think that creativity and entrepreneurship is much more predominant in small companies and successful exits like this one demonstrates that there can be very good returns for investors in the virtual model. An examination of Excaliard's history may provide useful lessons for other biotech entrepreneurs.
Excaliard, co-founded in 2006 by J. Gordon Foulkes, chief executive officer of Excaliard, and managing director of RiverVest Venture Partners, acquired a license from Isis to develop antisense drugs by making an upfront payment of $1 million along with equity in their company. In less than 4 years, Excaliard started three proof-of-concept Phase 2 trials of its lead product EXC 001, an antisense medicine to reduce fibrosis. The virtual biotech announced positive results from its clinical trial of EXC 001 for amelioration of skin scarring and other fibrotic disorders in August 2010. Results of the Phase 2 trial indicated that treatment with the product significantly reduced scar severity in patients undergoing an elective abdominoplasty, compared to those who were treated with placebo.
In October the same year, Excaliard appointed Thomas G. Wiggans as chairman of its board of directors. Wiggans has more than 30 years of experience in successful development and commercialization of drugs in the field of dermatology. Generally, such appointments give an indication to the market that the company is preparing to commercialize its own products. This may have been a signal that the company has been unsuccessful in attracting a large pharmaceutical company to partner with or acquire it, and it was preparing to become a vertical pharmaceutical company if necessary.
On November 22nd this year, Excaliard and Pfizer announced a definitive agreement under which Pfizer would acquire Excaliard, confirming its efforts in commercializing the developmental drug EXC 001 and disproving market speculation that the company is not able to get a large pharmaceutical company to acquire it. The acquisition is expected to close by the end of the year.
The product EXC 001, an antisense oligonucleotide in Phase 2, is designed to interrupt the process of fibrosis by inhibiting expression of connective tissue growth factor (CTGF). Overexpression of this factor in damaged skin or tissue following a surgery or a traumatic injury causes skin scarring. As the Phase 2 trials of the product has revealed positive results in reducing scar severity, Pfizer plans to continue the development of EXC 001 to address unmet medical needs in patient groups that suffer from excessive skin scarring.
The interest being shown by Pfizer in acquiring virtual biotech companies as a means to fulfilling their new product pipelines may be due to the following reasons:
- Dermatological treatments are more popular because of the lower costs involved in trials compared to that for oral or parenteral drugs.
- Lower turnaround time for development and faster return on investment can be achieved at virtual biotech companies.
Mikael Dolsten, president of Pfizer’s Worldwide R & D, said that the acquisition is part of the company’s strategy to implement strong internal project pipeline involving innovative and differentiated drugs from biotech partners.
Senior vice president of Biotherapeutics, Worldwide R& D, Pfizer, Jose-Carlos Gutierrez-Ramos, said that the science behind Excaliard's lead compound aligned well with the company’s focus on new treatments for fibrosis and tissue remodeling. He added that EXC 001 has the potential to become a novel therapy in an area where there are only limited options as of now.
It only took five years from the inception of the company with the closing of Series A financing to lead generation to the completion of three Phase 2 trials to being acquired for late stage development by a pharmaceutical company that can now bring the product through Phase 3 and eventually to market. This is a testament to the value of a virtual organization that stays small, achieves their objectives through outsourcing, develops an important to new therapy and provides a good return to their investors.
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