| BUSINESSWEEK ONLINE : SEPTEMBER 13, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
Trawling for Cancer Cures Pharma Mar could net big profits from poisonous creatures Just off the Spanish Mediterranean island of Formentera, a colony of sea squirts hangs from a submerged wire frame. Light purple and squishy, they resemble bunches of anemic grapes. Zeltia, a small pharmaceutical company based in Madrid, is breeding the sea squirts for their toxic secretions, whose novel molecular structure is the basis of a promising poison pill against cancer. Already, the lowly sea squirt has stirred a tidal wave in Spain's stock market. In the past 12 months, Zeltia's stock value has more than tripled, to $13, or more than 100 times earnings. That's quite a feat in a market dominated by safe-bet utilities such as Telefonica and Endesa. Driving Zeltia's stock is the company's biotech startup, Pharma Mar, which develops anticancer drugs from exotic marine organisms gathered across five oceans. "It's chemical warfare down there, and poisons kill cancerous cells," says David Newman, head of marine collections at the National Cancer Institute in Bethesda, Md. Zeltia--with a 67% stake in Pharma Mar--is now Europe's No. 1 biotech stock, easily outperforming Bloomberg's biotech index. Net profits in 1998 were $4 million, on sales of $50 million. FAMILY FISHERIES. Pharma Mar is emerging as the global leader in marine anticancer drug development. The sea squirt is the source of two of its most promising compounds--Esteinascidin 743, commonly called ET743, and Aplidine. Last year, ET743 surprised the biotech world by shrinking sarcoma soft-tissue and melanoma skin-cancer tumors in humans during Phase I clinical trials. "Phase I trials are just to test toxicity [not effectiveness], so to get positive results like these is really very unusual," says Chris Twelves, the scientist running ET743 trials in Glasgow. In January, Aplidine, which shrinks gastric, prostate, and bladder tumors, was accepted for human testing. Zeltia stock soared, with more than $40 million worth of shares trading in one day. Other new compounds are in the pipeline. Kahalide F, extracted from a Hawaiian marine mollusk, is proving effective in animal trials on prostate cancers. Microorganisms found in coral off the coast of Mozambique show even greater market potential, with positive results on breast cancer tumors in animals. "Pharma Mar has such a wealth of marine compounds, more than any other company I know," says Linda Pullman, a scientist at Amgen Inc., a leading U.S. biotech company. Jose Maria Fernandez, the 54-year-old president of Zeltia, has been waiting 12 years for this moment. Born into the Sousa-Faro family, which controls Pescanova, Europe's biggest fishery, he was trained as a biochemist. In 1985, he became chief executive of Zeltia, which makes insecticides and industrial paints. With the benefit of his family background, Fernandez was one of the first to realize that a fleet of refrigerated trawlers and a global network of fisheries could be used for scientific research. "We're running out of earth-based anticancer agents, but the sea still has huge possibilities," he says. In 1987, Fernandez set up Pharma Mar. Soon after, the company's researchers hopped rides on Pescanova's trawlers to collect samples of marine invertebrates accidentally fished up in the nets. Back in Madrid, and at Pharma Mar's labs in Cambridge, Mass., scientists studied the toxic substances that protect such marine animals as mollusks, sponges, and sea squirts from predators. They isolated novel chemical structures, which they are using in the drugs. Pharma Mar is attracting top-class scientific talent. Ruben Henriquez, a PhD from Rockefeller University in New York, left Novartis to take over drug discovery at Pharma Mar. He says he prefers the high-risk environment in Madrid. "We respond much faster to problems here because everyone knows they would be personally hit if a compound fails," he says. FDA TRIALS. Despite its research successes, Pharma Mar has yet to get any of its products on the market. Only 1 in 10 products that begin clinical trials makes it all the way to approval from regulators such as the U.S. Food & Drug Administration, says Newman. "ET743 has come a long way, but it can still die," he warns. If ET743 fails at the final hurdle, Zeltia's share price will go into free fall, warn Madrid market analysts. That was the fate of British Biotech PLC, another great European hope. Its stock price has plummeted almost 100% since trials showed that its much-hyped drug Marimastat was no better at fighting pancreatic cancer than rival products. Some potential licensees are concerned about production costs. ET743 is a powerful compound, 200 times more potent than Bristol-Myers Squibb Co.'s star anticancer drug, Taxol. Total production of just 2.5 kilograms would be enough to satisfy a world market the size of Taxol's, reckons Pharma Mar management. But at least one ton of sea squirts is needed to make one gram of ET743. If Pharma Mar's Formentera farm fails to yield a big enough harvest, the demands on natural stocks of the sea squirt would be enormous. Nobel prize-winning biochemist E.J. Corey has synthesized production of ET743 at his Harvard University laboratory for Pharma Mar, but the process is complicated and could be costly. Still, ET743 needs only to repeat its exceptional initial trial results for skin and sarcoma tumors to be on the fast track to the market. Pharma Mar also hopes that ET743 will gain approval for treatment of breast and lung cancer, where results so far have been promising, if less dramatic. If ET743 proves effective for more common cancers, world sales could reach $1 billion, says Nick L. Woolf, a biotech analyst at London-based investment bank BancBoston Robertson Stephens International ltd. Fernandez says he is "confident but not complacent" that ET743 will be on the market in the U.S. and Europe by the end of next year. He has rejected offers of up to $100 million for the license, hoping to notch up the price once Phase II has been successfully negotiated. If it is, Fernandez plans to spin off Pharma Mar from Zeltia and list it on NASDAQ. Both cancer patients and Spain's new class of risk-loving biotech investors are hoping that happens. By Andy Robinson in Madrid _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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