Chasing Blockbuster Drugs, Using Chinese Help

Small biotech Curis couldn't afford to develop entirely new drugs in the U.S. So like many others, it outsourced its R&D to China

by Pete Engardio

When Curis (CRIS) went public eight years ago, it symbolized the unbound optimism of biotechnology. Its stock rose fast, to 25, and it possessed promising technologies. Ever since, Curis has illustrated the risks of investing in biotech startups. There have been heartbreaking setbacks in clinical testing, failed partnerships with Wyeth (WYE) and Procter & Gamble (PG), and collaboration with Genentech (DNA) that has seemingly dragged on forever. Curis's stock has crashed, rebounded, and crashed again, hitting just 91¢ in November.

But the tiny Cambridge (Mass.) biotech has hardly abandoned its dreams of producing blockbuster treatments for everything from colon cancer to neurological diseases. And if it succeeds, Curis could prove to be a valuable case study in the merits of research and development partnerships between the U.S. and China.

For more than two years, Curis has been outsourcing sophisticated chemistry work to Shanghai ChemPartners, a fast-growing contract research organization in an industrial park in Shanghai's Pudong district. The 25 Chinese chemists assigned to Curis help the biotech work on problems around the clock. At $50,000 to $80,000 a year including benefits, they also cost around one-fifth less than U.S.-based scientists performing similar work.

The low-cost Chinese help is pivotal to Curis' two-pronged strategy for success, says CEO Daniel P. Passeri. On the one hand, Curis has its continuing tie-up with Genentech to develop drugs targeting Hedgehog, a complex pathway of proteins and cells believed to influence growth of cancerous tumors in the stomach, pancreas, lungs, and other tissues (BusinessWeek.com, 5/16/05). The project finally is producing promising results. Genentech has reported that several cancer patients taking its Hedgehog drug in clinical trials have shown dramatic improvement. It has recently begun Phase II human trials involving 150 patients. If a commercial drug results, which would still be several years from now, Curis stands to receive hefty milestone payments and royalties if it results in a commercial drug that could be worth hundreds of millions of dollars.

Aiming at Many Targets

At the same time, Curis is trying to develop a broad portfolio of its own cancer drugs, the funding for which is mainly from payments from corporate partners such as P&G and Genentech. Rather than trying to discover new biological targets, Curis is developing single-dose drugs aimed at hitting a number of targets simultaneously. It says it believes it is the only company attacking both the surface and the nucleus of the cell. The goal is to make treatments that are easier to use, more affordable, and more effective not only in attacking cancer cells but also in keeping them from reappearing.

That is where China comes in. These days, it can cost anywhere from $20 million to $100 million to develop a new drug in the U.S. from the time a promising compound is identified in a lab to the point where it is ready for clinical testing and, ultimately, to when it is lucratively licensed to a big pharmaceutical company. Every R&D program requires six to eight full-time chemists, each of whom can cost $350,000 a year in the U.S. including benefits, says Curis CFO Michael Gray. And even then, the odds the drug will ever win Food & Drug Administration approval are about 1 in 10.