In the past, biotechnology has been a high-stakes horse race where companies and investors bet heavily on a single steed. If the compound or molecule they were researching became the basis for a drug that survived regulatory review and turned into a big seller, they hit the jackpot. If not, their money was wasted.
Morris Laster, 41, has a different idea for how to approach biotech. To improve his odds, the chief executive officer of Jerusalem's BioLineRX is betting on the entire field. By spreading risk he figures to improve his overall return on investment. "Our strategy is not to focus on one drug or disease like most startups do, but instead build a large pipeline of compounds for treating a wide variety of medical conditions," Laster says.
Crucial to BioLine's plan is taking advantage of the rich resources of Israeli academic institutions. Hundreds of promising compounds are discovered in university and government labs, but few ever succeed because of the enormous cost and tortuous timeline of drug development. It can take 10 or more years and cost $200 million for a new drug to reach market.
Ambitious Beauty Contest
Laster and a team of doctors have spent the last three years scouring Israeli labs looking for potential blockbusters. Out of more than 800 compounds already screened, they have targeted 80 for further scrutiny and have signed licensing agreements for 17. Ten of those compounds are now being developed in BioLineRX's labs. They include drugs for treating cardiovascular, central nervous system, inflammatory, and oncological diseases and conditions.
To fund this ambitious beauty contest, BioLineRX has raised more than $100 million via several rounds of venture capital and government funding, and an initial public offering on Feb. 7. The heavily oversubscribed IPO was the largest ever for a biotech on the Tel Aviv exchange and netted the company $50 million.
"It's doubtful whether they could have pulled off this kind of IPO a year ago, but things have changed dramatically and investors are far more willing nowadays to consider putting their money in biotech," says Yoav Burgan, pharmaceutical and biotech analyst at Leader & Co., a Tel Aviv investment bank.
Tapping the Academics
BioLineRX impressed investors in part with its stellar credentials. A doctor-turned-drug developer, Laster was previously involved in founding, and taking public, two Israeli biotechs, XTL Biopharmaceuticals (XTLB) and Keryx Biopharmaceuticals (KERX). BioLineRX's scientific advisory board is headed by a Nobel laureate in chemistry, Aaron Ciechanover. And its initial backers included Israeli generics giant Teva Pharmaceuticals Industries (TEVA).
Investors also were attracted by the novel approach of spreading a wider net for drug candidates and tapping Israel's universities for unexploited gems. Though the country boasts world-class life sciences institutions, only a few drug success stories have emerged to date, mostly from research at the Weizmann Institute of Science and the Hebrew University. They include multiple sclerosis drugs Copaxone and Rebif, from Teva and Merck Serono (SRA), respectively, and Doxil, an ovarian cancer drug from Johnson & Johnson (JNJ) subsidiary Ortho Biotech.
To spur development of biosciences the Israeli government has decided to subsidize the local industry to the tune of $300 million over the next three years through the office of the chief scientist of the Industry & Trade Ministry. BioLineRX is on tap to get about $21 million of that government largesse. But the company's plan to unearth potential blockbusters could have an even bigger impact on Israeli's biotech sector—by speeding development of compounds that might otherwise have languished in labs.
Big Heart Market
The initial examination of Israel's major academic institutions by BioLineRX's medical team turned up 80 compounds for closer scrutiny. Dozens were dropped after further investigation. The final selection process was then conducted by the company's scientific advisory board, headed by Ciechanover. "We spend hours discussing each compound and based our decision on market potential and the promise of full-scale development," says the Nobel winner. The minimum requirements for approval are $100 million in potential annual sales and a patent of at least seven years after approval.
Of the 10 compounds that have so far made the final cut, the first one likely to be commercialized is BL-1040, a compound for tissue repair after heart attacks. It could be out in 2010 and has an estimated market in the U.S. alone of over $1.5 billion a year. An even larger potential blockbuster is a compound for schizophrenia that the company hopes to commercialize in 2012. Most BioLineRX drugs will likely be sold or licensed to major pharma companies after clearing Phase 2 trials, with the larger companies assuming responsibility for final testing and launch.
It's all very ambitious, but BioLine's investors are willing to wait for it. Aside from Teva and the government, the participants in its $23 million first round in 2004 were local groups Pitango Venture Capital and Giza Venture Capital. In January, right before the IPO, Toronto-based Pan Atlantic Bank & Trust invested $9 million.
BioLineRX isn't expecting to show revenues before 2009. But at this biotech, if any horse in the stable finishes the race, investors could still come out ahead.