The frosted sheet cake was for consolation more than celebration the sad Monday in June 2005 that Dr. Michael Bristow and J. William Freytag told employees at Westminster biotech company Myogen that things hadn’t worked out.
Five years of painstaking work costing about $100 million hadn’t mustered the results needed to launch a new drug for serious heart and lung ailments to market. The project was terminated, effective immediately, the men said. The scientists working on it would be assigned the next day to new groups focused on the development of two other drugs.
The company’s bad news drove down its stock to an all-time low of $5.21 a share. Glum employees snacked on cake and soda, provided, they were told, in recognition of work well done – and work left to do. Had they been sitting at another biotech company of a similar size, the sweets might have been all they received before being handed a pink slip and shown the door.
But this was Myogen, which would rally back from that depressing day to announce last week a cash buyout offer of $2.5 billion from Gilead Sciences Inc. of Foster City, Calif., which makes the world’s best-selling AIDS medicine.
The future of fledgling biotech companies typically amounts to a crapshoot. However, Myogen – carefully shepherded since its creation in 1996 by a relatively homespun team of scientists, business executives, investors and University of Colorado officials – has always been different.
“The people behind Myogen might be from a lot of other places, but they’re not going anyplace else,” said Derek Cole, Myogen’s director of investor relations. “Myogen is proof that Colorado is more than capable of building successful biotech companies.”
Analysts say Gilead stands to get a darned good deal.
Why? Only one in 1,000 drugs actually makes it to market. But Myogen has two drugs that together are expected to rake in more than $1 billion in annual sales. Ambrisentan and darusentan treat continuous high blood pressure in the pulmonary artery, a potentially deadly lung disease that affects an estimated 200,000 people worldwide.
Ambrisentan could win federal approval and go to market early next year, while darusentan would follow around 2009.
Myogen also has built a sales force and diversified its work through research partnerships and licenses for the development of more drugs and clinical treatments.
“Unlike a lot of biotech start ups, Myogen is not a one-trick pony,” said Michael McCully, director of Recombinant Capital, a biotech consultancy in Walnut Creek, Calif.
Bristow and Freytag are largely to thank for that.
Bristow, 60, a renowned expert in cardiovascular failure, spun Myogen a decade ago out of his laboratory at CU. Freytag, 54, holds a doctorate in biochemistry and has worked on the business side of various firms, including DuPont Medical Products. The two got together when Sequel Venture Partners in Boulder asked Freytag to assess the financial potential of Bristow’s work. The two men hit it off, and Sequel, which rarely invests in companies outside Colorado, became Myogen’s first major investor.
“Management is critical,” said Dan Mitchell, a partner in Sequel and member of Myogen’s board of directors. “We have to see smart and flexible people who know how to take risks and steer a company through failure. A lot of very smart people understand technology, but they can’t necessarily envision how a product can be marketable.”
Bristow and Freytag eschew the corporate culture and bureaucracy they say has stymied drug development at many giant pharmaceutical companies. “Big pharma,” as Bristow calls it, knows how to make drugs but has a hard time identifying the best patients for those drugs. As a result, more pharmaceutical companies cede drug development to small firms run by experienced clinicians such as Bristow and pony up big bucks to acquire the companies or the rights to their products.
Take GlaxoSmithKline, for example. The pharmaceutical behemoth and small-but-scrappy Myogen earlier this year struck a deal that landed Myogen as much as $100 million. Myogen agreed to promote a Glaxo- owned drug, and Glaxo gained rights to market one of Myogen’s drugs outside the U.S.
Myogen’s fortune hinges on two drugs derived from compounds essentially pooh-poohed by Abbott Laboratories in Chicago. Bristow won the rights to use the compounds from a German drugmaker that was acquired by Abbott.
When he shared his research on the German compounds with Abbott executives about five years ago, Bristow said they told him Abbott preferred to use its own compounds to develop similar drugs. Abbott licensed the compounds to Bristow without insisting on standard financial agreements that would have guaranteed the company the lion’s share of sales stemming from successful drug development, he said.
“They basically said they had their own things and didn’t need anyone else’s,” Bristow said. “Big pharma makes decisions for very political and peculiar reasons, which is another reason why people like me find it preferable to work in smaller biotech environments.”
Said Abbott spokeswoman Catherine Bryan: “These two compounds don’t fit Abbott’s business strategy.”
Bristow, Freytag and Myogen investors struck a big payday with the Gilead deal. Some of those spoils probably will be plowed back into Colorado’s biotech industry.
Bristow already has founded a new company here, Arca Discovery, which has developed the drug bucindolol to treat advanced heart failure. The drug is in late-stage trials, and Bristow expects it to win federal approval by early 2008. He spent much of last week consulting with officials at the U.S. Food and Drug Administration.
Is “big pharma” aware of what he is up to?
“Definitely,” he said with a laugh. “We already have them circling around again.”
Staff writer Christine Tatum can be reached at 303-954-1503 or ctatum@denverpost.com.
