Is This `Fat Gene' Worth Its Fat Tab?

Signing bonuses are usually reserved for sports stars and high-flying chief executives. But the words entered the lexicon of biotechnology on Feb. 28, when Amgen Inc. announced it would pay a $20 million "signing" fee to Rockefeller University to obtain access to a gene that appears to be successful in treating obesity--so far, only in mice. If the Thousand Oaks (Calif.) biotech powerhouse hits certain development milestones with this "OB" gene, Amgen eventually could pay Rockefeller more than $100 million.

As with most signing bonuses, a fair question is: Can such sums be worth it? Certainly the price seems high for a gene that has not yet been proven to be relevant to human obesity. But Amgen's purchase shows how intense the race is--among academic labs, "genomic" startups, and big drugmakers--to stake a claim in genes that cause disease or control the body's response to it. Human Genome Sciences (HGS), Millennium, Myriad, Sequana, and InCyte Pharmaceuticals are among more than a dozen startups that insist controlling disease genes such as OB will be the new currency for drug research and development in the 21st Century.

A number of major drugmakers seem to agree: SmithKline Beecham PLC, for instance, has committed $125 million to HGS in Gaithersburg, Md., for equity and first dibs on promising genes. Last March, Hoffmann-LaRoche pledged $70 million to Millennium in Cambridge, Mass., to work on genes for diabetes and obesity. Says William A. Haseltine, chairman and CEO of HGS: "I'm pleased to see that Amgen recognizes the intrinsic value of a human gene for the creation of important medical products."

Haseltine has good reason to see it that way: His company has a huge database of genes, or DNA sequences, that he would like to get top dollar for, too. But you can also argue that the battle for OB says little about the intrinsic value of genes. Amgen paid big dollars because it could. And ultimately, a gene is worth whatever a buyer will pay for it. That value can be influenced by negotiating, patent position, competition, strategy, commitment, and many other factors.

NO MINI-MOUSE. Consider that, in recent years, studies have attributed about 70% of obesity to genetic factors. With more than 100 million medically obese people worldwide, it's no wonder that drug companies are interested. For years, Rockefeller scientist Jeffrey Friedman has been zeroing in on a mutant gene in one strain of genetically obese mice. Friedman showed that in normal mice, without the mutation, the healthy gene makes a protein that seems to discourage overeating. He also found what appears to be an equivalent gene in people. If obese people have this mutation, they might be given a genetically engineered version of the protein as an appetite suppressant.

In 1993, Friedman co-founded genomics player Millennium to commercialize some of those findings. Usually, researchers starting companies do so with rights in hand. But a unique setup at Rockefeller and the Howard Hughes Medical Institute, which pays Friedman's salary, required an open bidding process. Rockefeller knew Friedman's work would be published in December, 1994. In November, the university began calling and weighing interest among a wide group of companies.

A dozen drugmakers, including Amgen, Eli Lilly, and Bristol-Myers Squibb, according to sources close to the negotiations, were involved in two months of intense bidding. Senior company executives met with high-level university representatives in January and February, massaging proposals. "This was an auction, and many people wanted it. Competition drove the price up," acknowledges Frank D. Collins, senior director of neuroscience at Amgen. Notes a losing bidder: "This was the hottest property to come out of biotech in years."

But how hot is hot? On one hand, genomics companies may claim that Amgen's big check underscores the value of genes. Not to appear to be aced out, they also note that obesity is a "polygenic" disorder, meaning that a number of genes cause and exacerbate the illness. Like a freeway with many on-ramps, they all feed the traffic problem. To alleviate it, you close the ramps. But closing just one won't work.

In genomics, different companies are staking out different ramps along the same roads. There's a whole chorus line of chunky lab mice with such embarrassing monikers as Tubby, Fat, and Puff, who are all overweight for different genetic reasons. San Diego's Sequana, for example, is combing the genetics of Tubby, explains CEO Kevin J. Kinsella. Tubby is a big eater, but he has metabolic problems, too, which Sequana feels may make his problem more similar to human obesity than Rockefeller's mouse is. Adds Randal W. Scott, the head of research and development at InCyte: "There may be 10 genes that cause obesity and probably 1,000 involved in the overall process." That Amgen would commit such dollars for rights to just one gene in that equation, Scott says, "is mind-boggling."

DICEY PRECEDENT. Of course, Amgen has a $700 million cash hoard, and $20 million is a drop in the beaker. Collins says Amgen was determined to get OB because it's cranking up a big effort in obesity and already has 35 people working on the project.

Nobel Laureate Walter Gilbert, co-founder of genomics company Myriad Pharmaceuticals, is among a few industry types worried that the auction precedent that Rockefeller has set could hurt smaller biotech companies. With the biotech industry facing tight capital markets, the OB deal may further swing the advantage to large players, "to the detriment of small companies" that can't afford these bidding wars, he says.

That's an interesting point, especially given Friedman's relationship to Millennium, which could not match the amount Amgen bid for the OB gene. Millennium chief business officer Steven H. Holtzman is keeping a stiff upper lip. "If you miss out on one technology, it's disappointing, but OB is only one of the many genes we're looking into [in obesity]," he says. He maintains that Friedman still has an "exclusive consulting" agreement with Millennium covering obesity.

Amgen's Collins, however, says that he expects to set up his own collaboration with Friedman and that he has been told by Rockefeller that nothing precludes that. Friedman, who will share about $7 million of the up-front fee from Amgen with several colleagues, was out of the country when the OB deal was announced and declined to comment for this story. Roche isn't talking either, although the company says its agreement with Millennium is intact.

The upshot is, according to David J. Luck, Rockefeller University's vice-president for academic affairs: "Amgen purchased a scientific concept." If the protein this gene makes becomes the ultimate, safe, easy-to-take appetite suppressant, it could turn out that Amgen has bought a license to print money. Or it may not work at all--a conclusion that could come in months, or not for a half-dozen years and hundreds of millions in investments. But so far, no one has even determined whether obese people have any more or less of the OB gene protein circulating in their blood than thin people.

Intrinsic value? Oppenheimer & Co. biotech analyst Matthew Geller doesn't buy that, and it's one reason he's not bullish on genomics. "This information is two levels of abstraction from having drugs on the market," he says. "I think it's a little bit of a fad." Stay tuned for another exciting and confusing chapter of As the Genes Multiply.

Amgen's Big Gamble

Buying the rights to an obesity gene from Rockefeller University is Amgen's high-stakes bet that genes hold the key to

curing a multitude of ills


Rights to a patent application for a gene that could create

diagnostic tests, a gene therapy, and/or a blockbuster drug to treat obesity


-- This gene, in fact, may not

affect human obesity

-- The gene may be just one of

many that control obesity

-- It may increase the under-

standing of obesity but not

lead to a treatment

-- Until a patent is issued, com-

petitors can exploit knowledge of the gene to develop their

own treatments

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