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A Biotech Firm's New Formula

September 22, 2006
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(Newsbytes Via Thomson Dialog NewsEdge) Craig A. Rosen gets bored easily. During his last few years at Human Genome Sciences Inc., he oversaw the development of a $230 million manufacturing plant. Boring. He was promoted to chief operating officer. Boring. And president. Boring. The board of directors even talked to him about becoming chief executive. Boring.



What doesn't bore Rosen is molecular biology. Back when he co-founded HGS, when it was doing a lot of molecular biology, Rosen wasn't bored at all. He was sequencing genes. He was discovering new drugs. But that was 14 years ago. Now the Rockville company is pushing some of those drugs toward the final stage of development, which requires negotiating with federal regulators and forming partnerships with big drug companies such as Novartis AG. Demanding. Important. But boring.

Rosen's predicament is illustrative of the graying of the biotech industry, which as it matures gradually loses its grip on the scientific entrepreneurs whose creative spirit and microscopic digging got things started. Here was a company where Rosen once helped hang bookshelves, but as it finishes developing drugs that he helped discover, his prized skills are needed less and less. He knew it. His boredom was a symptom.

"I would argue for the last three or four years that I was bored," he said. "I didn't feel like I was contributing. I felt like I was a bystander in the process."

Then Rosen, 48, discovered something right in front of him: lab space no longer being used. Equipment no longer being used. Researchers no longer being used to their potential. And with the company's chief financial officer, Rosen eventually decided that if HGS could no longer fully focus on the early-stage side of the business, they would just buy a sizable chunk of the research-and-development capabilities from the company and do it themselves.

Only Rosen and his partner, Steven C. Mayer, would do it differently. That is, flip the biotech world on its head by starting a company that has no interest in selling drugs to patients. Instead, they want to test new products just long enough to persuade big drug firms to buy them. The drug companies will finish the most expensive testing, then eventually sell the products. Rosen and Mayer will walk away and start the process over. The idea is for the new company, CoGenesys Inc., to become a drug development engine for big pharmaceutical firms desperate for new products.

"After 10 years or so, the business is no longer in the start-up phase," said William A. Haseltine, a renowned scientist and founder and former chief executive of HGS who stepped aside two years ago in a similar move. "Different skills are needed at different times. And the skills of building a company are a lot different than being a scientist."

Rosen said: "For me at HGS, do I think the company can succeed? Yes. Do I really see that they are using my skills on anything new? No."

As he grew bored, HGS got Rosen an executive coach to help engage him again. The coach offered him brochures for training programs at Harvard Business School. Rosen wouldn't look at them. "They were probably trying to convince me -- it was just personal -- that I should be more interested in the development end of things," Rosen said. "But it wasn't me. I was more in early-stage and research."

Rosen's decision to leave, while reflective of the industry's inevitable maturation process, also says something about a topic perhaps more complicated than the biotech business. It is a window into what makes a top scientist -- Haseltine called Rosen's brain "first-class" -- interested in the things he is interested in, and how those interests can drive the eventual commercialization of science. In Rosen's case, his drive may be the avoidance of boredom, but it really is a desire to not do things that everyone else is doing.

"There is a lot of that in me," Rosen said. "That's probably my driving force."

In fact, Rosen's decision to leave HGS is almost identical to the decision he made 14 years ago to help start HGS.

He had been chairman of the Department of Gene Regulation at the Roche Institute of Molecular Biology when venture capitalists asked him to help Haseltine, whom he had worked with on HIV/AIDS research at Harvard, start Human Genome Sciences. The novelty of HGS would be its pursuit of sequencing human genes to rapidly find better drug targets.

To keep him at the scientific institute, Roche offered to bring Rosen into its drug company and make him the head of worldwide cancer research. Rosen went home and told his wife that Roche had made him incredible offer. But he was still leaving.

"There was nothing new to it," Rosen said. "It was essentially running an oncology group using the science of the past 20 years."

Now, Rosen is no longer working at a company on the front lines of genomic research. Instead of renowned scientists, one of the firm's key hires recently was given this title: chief commercial officer. "I feel I had a few more years in me to discover drugs but nobody wanted to do that at HGS anymore," Rosen said.

At first, Rosen thought he could find a way to stay at HGS. Rosen and Mayer persuaded the HGS board to make the research group a separate division, but when they produced a budget of $20 million for the first year of operations, they said, HGS management balked. Finally, one day Rosen said to Mayer, if HGS doesn't want to fund the operation, "Let's buy it and design a whole new company around it."

HGS made the deal, announced last December, in return for a 13 percent equity stake in the company and the rights to develop some of the CoGenesys drugs and secure some revenue-sharing rights. HGS chief executive H. Thomas Watkins has said the deal was a "have-your-cake-and-eat-it-too" strategy. "Moving all of our clinical compounds forward is a costly priority for us, a challenge that requires every ounce of funding and energy we have," he said.

But the deal was contingent upon CoGenesys raising enough money to run the new company. Mayer and Rosen set off for dozens of meetings with venture capital firms. Last month, they announced they raised $55 million from several groups, including the largest investor, New Enterprise Associates in Baltimore, which pumped in $24.5 million. Having the HGS technology, as well as 70 of its scientists, gives the new company a significant head start on other biotech start-ups.

CoGenesys "can be self-sustaining in three to four years," said James Barrett, general partner of New Enterprise. "If they can develop projects and do them serially, the cash flow will make the company essentially self-sufficient. That makes it a profitable enterprise much sooner than is typical in the biotech business."

The idea is to spend, say, $10 million working on a drug and then flip it to a big drug company for several hundred million dollars. The way Rosen sees it, the newness is a business model that lets him discover and quickly develop drugs over and over again. He's the chief scientific officer of CoGenesys. Mayer is the chief executive.

There is also newness in the kinds of drugs he wants to develop -- that is, looking at a variety of old drugs and using new technology to help the drug linger in the body longer. For instance, the lead product at CoGenesys is Cardeva, a long-acting version of a treatment that typically can be given for only short periods of time to hospitalized heart-failure patients. CoGenesys wants its version to be used on an outpatient basis.

Rosen has settled into his new -- and much smaller -- office with barely enough room for his old desk from HGS, which he negotiated for when he left the company. He said, "When this thing started, I told a few people here 'I'm finally excited. This is the first time in three years that I have been excited.' "

He also said, "I do hope I'm not bored soon."

2006 The Washington Post Company


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