Funded by Healthcare Ventures as Trophix

Bought by Allelix in Ontario

Move to Cedar Brook Corporate Center

Stanley Bell, Researcher

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Allelix: Probing the Mysteries of the Brain

This article by Tricia Fagan was published in U.S. 1 Newspaper on May 12, 1999. All rights reserved.

Arguably, one of the last great frontiers challenging

humanity today is the vast mystery of the brain. When the brain’s

chemical factory stops functioning efficiently, brain cells don’t

send the right messages, opening the body to variety of ailments such

as schizophrenia, depression, anxiety, and pain.

Allelix Neuroscience Inc. (ANI) hopes to mitigate the pain and begin

to treat the ailments. Allelix — formerly known as Trophix Pharmaceuticals

— has a 25-person laboratory at Exit 8A specializing in therapies

for the central nervous system and the brain. Recently purchased by

a Canadian firm, it moved from South Plainfield to the Cedar Brook

Corporate Center off of Route 130.

Schizophrenia is a major target for Allelix. As many as 1 percent

of the world’s population, 3 million people in the United States alone,

are affected by schizophrenia, and their care costs more than $40

billion annually. Current therapies do only a partial job of restoring

patients to their normal functions in society.

Allelix is also working on how to reduce neuropathic pain that occurs

when nerves are injured by cancer tumors, viral infections, or surgery.

Both the schizophrenia and neuropathic pain products are being developed

jointly with Janssen Pharmaceutica N.V. A third area of research:

Trying to reduce abnormal contractions that cause muscle spasms in

those suffering from spinal cord injury, multiple sclerosis, stroke,

or cerebral palsy.

"We’re a young company making strides in our area. We’re shooting

for dominance in the neuroscience field," says Bill O’Connor,

ANI’s vice president of finance.

How it works: brain cells (neurons) communicate with each other by

releasing chemical messengers called "neurotransmitters."

Some disorders of the brain are apparently caused when too few neurotransmitters

are present in the brain. "At Allelix, we design drugs that block

the removal of neurotransmitters from the brain," says Stanley

Bell, director of chemistry. "By increasing the number of neurotransmitters

we can help patients who have schizophrenia or who suffer from neuropathic

pain."

In today’s fast-changing competitive market, small companies

can often get products to market faster than the mega pharmaceuticals,

but because they need money, they sometimes sell off too many of the

product rights. Allelix hopes to survive in the R&D marketplace without

selling the company store or selling too many of the research treasures

on the shelves.

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Funded by Healthcare Ventures as Trophix

This firm had the good fortune to be backed by deep-pocketed venture

capitalists, who spotted its potential early and engineered its buyout

at a crucial moment. Healthcare Ventures, based on Nassau Street,

was the early funder for Trophix Pharmaceuticals aka Allelix. "The

central nervous system operations within Allelix are clearly doing

cutting edge research and development," says William W. Crouse,

general partner of Healthcare Ventures. "That is pretty obvious

by the blue ribbon panel of corporate partnerships that we have been

able to do, even though the company is young."

The company has accomplished an amazing amount in a short lifespan.

"Trophix was originally formed around the work coming out of the

laboratory of Ira Black, a scientist at the University of Medicine

and Dentistry of New Jersey," says O’Connor, the finance v.p.

"It was a significant agreement, a five-year deal, with the University

of Medicine & Dentistry of New Jersey. Significant support money for

the research was being paid to Ira and his lab."

"As things progressed, though, it seemed that Black’s research

was at such an early stage that it could not attract commercial partners.

There was a parting of the ways in 1996. We moved away from Black’s

lab to our own internal research, and that’s worked out for us."

Although the transition made sense for Trophix, market support for

biotech companies had significantly changed by 1996, says O’Connor:

"You had a period of euphoria for the start up of biotech companies

in the later ’80s, early ’90s. You could literally go out there with

just a story about something you wanted to develop, and raise money

at the drop of the hat — because the field was new, and people

didn’t understand the risks involved." The market learned quickly,

and by the mid to late ’90s it became very difficult to get public

money.

"At Trophix we were looking at raising public money, getting additional

investors, or the possibility of merger and acquisition. In 1997,

we started conversations with Allelix Biopharmaceuticals, a Toronto-based

biopharmaceutical company."

Healthcare Ventures was in the middle of arranging private financing

for Trophix when the opportunity to sell it to Allelix came up. Combining

the two companies could increase the critical mass and be good for

both firms: "We thought we would have the possibility of one plus

one equaling three," says Crouse of Healthcare Ventures. Allelix

acquired the financial expertise of Crouse and the scientific resources

of Trophix, and Trophix got to be a publicly traded firm.

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Bought by Allelix in Ontario

Allelix Biopharmaceuticals, an older firm formed in the early ’80s,

had been focusing on agricultural biotech. That focus changed significantly

in 1990. Today, Allelix Biopharmaceuticals has two divisions: protein

therapeutics, which has two programs (the osteoporosis treatment now

ready to go into phase three clinical trials and GLP-2, a therapy

for short bowel syndrome and other gastrointestinal disorders) and

the neuroscience division. Trophix’s emphasis was in neuroscience.

O’Connor says, "The synergy was pretty good, the fit was pretty

good. They were looking for a larger presence in the U.S."

In July, 1997, Trophix became a fully owned subsidiary of Allelix

Biopharmaceuticals and its name was officially changed to Allelix

Neuroscience Inc. Allelix acquired Trophix in exchange for common

shares of the company valued at $24.45 million paid to Trophix shareholders,

plus additional cash payments of $3.22 million that were used to extinguish

outstanding debt. Trophix shareholders have received the first million

of up to $4 million in Allelix common shares to be distributed by

July, 2001. (Allelix’s common stock is traded on the Toronto Stock

Exchange and the Montreal Exchange under the symbol AXB. No dividends

have been paid on the common stock to date.)

"Merging companies with synergistic programs builds interest in

the marketplace and builds analyst support, so it becomes easier to

go to the market and raise capital," says O’Connor.

Discussing company finances O’Connor explains, "As a biotech company,

we don’t have much in the way of income. We certainly don’t have any

product that we’re out there selling. We do have corporate relationships

whereby we’re getting reimbursed for work that we’re doing on their

behalf." Partnerships such as the two with Janssen Pharmaceutica

and others with Eli Lilly and Hoechst Marion Roussel typically provide

significant revenue from licensing fees, milestone payments, and reimbursement

of research and development expenditures. Additional revenues may

also be generated through royalty payments.

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Move to Cedar Brook Corporate Center

Last year, with its South Plainfield lease due to expire, ANI began

looking for new quarters and hoped to move into the new Technology

Center, built by the New Jersey Economic Development Authority (EDA)

at the intersection of Routes 1 and 130 in North Brunswick. But like

other smaller companies it was squeezed out by Merial, a joint venture

between Rhone Merieux and Merck. The EDA made a controversial decision

to lease to Merial rather than to several smaller tenants, and the

smaller ones were very disappointed.

"We were excited about the space and the location. We understood

from the original mandate for the Center that it was intended for

our type of company — start-up, biotech companies," says O’Connor.

"We had actually begun negotiating with the state, but then they

leased out the entire space to a joint venture of two major pharmaceutical

companies, rather than leasing out pieces of the space to smaller

companies. From a financial perspective I could see their point, but

we were pretty upset, because it was ideal for our purposes."

When the Tech Center fell through, ANI had a difficult

time locating an alternate site until O’Connor heard about Cedar Brook

Corporate Center. He has nothing but praise for it. "In central

New Jersey, aside from the Technology Center, this was the only facility

willing to contribute to the fit out. The owners, Eastern Properties,

were willing to fund a fairly significant piece of the building, so

it worked out for us. It’s a terrific location, it’s right off the

Turnpike." ANI shares its building with Enamelon, a toothpaste

company, and Systech, a computer systems company.

O’Connor, a Fairleigh Dickinson alumnus, Class of ’80, has lived in

West Windsor with his wife and four children for five years. "Tremendous

school districts are right near by, so getting people to relocate

was pretty easy. Plus we’re equidistant now between Rutgers and Princeton,

which is good for us because there’s a science-based talent pool for

us to draw upon. Plus, we’re still in New Jersey, the capital of pharmaceutical

development." ANI moved its operations to Cranbury in late December,

and the entire staff from South Plainfield moved also.

ANI currently employs 26 people (there are about 160 employees at

the Toronto headquarters). O’Connor anticipates a gradual expansion

of the staff , particularly on the science side. "We could go

as far as doubling our staff. I don’t see it happening this year,

but I do see us growing." Presently it has fitted out 17,000 square

feet of space, with an option to fit out an additional 4,000 feet.

About two thirds of the facility is used for laboratories.

Top Of Page
Stanley Bell, Researcher

Heading up the research on the biology side is Vivian Albert (Stanford,

Class of 1980, and Cornell) and on the chemistry side is Stanley Bell.

Bell is a quietly enthusiastic man who clearly loves the creativity

and experimentation involved in his job. "We try to keep him out

of the lab," laughs O’Connor as he makes the introductions. "If

we don’t watch him he’s always back there mixing up one thing or another."

Bell admits that, even as a child, he enjoyed mixing things, creating

something new. "Yes, I had a chemistry set when I was a kid. I

enjoyed that. As a matter of fact, I’ve always really enjoyed working

in the lab. I enjoy creating new things. That’s what we do in our

business. We create new things all the time. It’s a challenge, and

it’s interesting. You’re doing something different all the time."

Bell grew up in Philadelphia with his parents and one younger brother.

His parents had migrated to the United States from Russia — his

mother from the Ukraine, his father from Odessa. His father was in

the dry goods business, selling "all sorts of fabrics, laces,

things like that." Bell lives with his wife in Penn Valley, just

northwest of Philadelphia, and they have two grown daughters.

After graduating from the University of Pennsylvania and earning his

master’s degree in organic chemistry at Temple, Bell worked full time

at was then known as Merck, Sharp, and Dohme and simultaneously took

night classes, completing his doctorate in five years.

By 1962, Bell was well into his explorations of the mysteries of the

central nervous system and the human brain at Wyeth Labs in Radnor,

Pennsylvania. "While at Wyeth I worked primarily on anti-anxiety

agents," says Bell. "In fact, a few compounds I discovered

there are marketed now. Probably the most familiar in use today are

the anti-anxiety medications sold under the names Ativan and Serax,

and Restoril, a sleeping pill. As a matter of fact," he adds,

"my mother takes that. She says it works really well."

In 1982, after 23 years at Wyeth, Bell went to Ortho (later renamed

Johnson Pharmaceutical Research Institute) and headed up a chemistry

group that was involved in many different types of areas, including

the central nervous system, antibiotics, anti-inflammatory drugs.

In 1995, as Ortho underwent a major management reorganization. Bell

took advantage of a generous early retirement package, but quickly

realized that retirement was not for him. "I actually only retired

for a few months," he says, "I’m not a guy who likes to sit

around."

Bell joined ANI (still Trophix) in early 1996 — about the same

time as his colleague Vivian Albert, ANI director of biology, came

on board. Bell knew at once that he was at the right place. "Trophix

was an ideal opportunity. It’s a very nice company. Everyone here

interacts well together. Coming from Johnson & Johnson — just

a massive place with 80,000-90,000 employees — where I had been

the head of a group of about 100 people, what I really enjoy here

is the opportunity to work with a small group of chemists. I’m so

much closer to the science and I’m not involved with as much bureaucracy.

I had looked forward to that for quite a while."

Bell also enjoys the opportunity to work collaboratively on some cutting

edge treatments that address daunting problems and diseases affecting

the central nervous system. "Here we’re concentrating mostly in

the neuroscience area. There’s always something new."

A new treatment of schizophrenia would improve on drugs that have

bad side effects. "We use a new model (glycine transport or re-uptake

inhibitors) that potentially has less side effects and hopefully will

be more effective than some of the other drugs. We also have a similar

program using a different glycine transport inhibitors in the spine

which will block pain. We expect that the GRI-1 compound for schizophrenia

should be in Phase I testing within the year," says Bell.

When Bell compares how the glycine re-uptake inhibitors

work to how Prozac blocks the re-uptake of serotonin, he uses the

metaphor of a plug blocking a sink drain. "We have the plug for

the glycine sink, so more glycine is available to activate more neurons

in the brain. With schizophrenia, more glycine may be needed. Our

glycine re-uptake inhibitor (our sink plug if you will) helps to accumulate

glycine."

"Overall," says Bell, "we study ways to block the removal

of neurotransmitters from synapses. We look for plugs for different

sinks. I’m very excited about the schizophrenia drugs and the drugs

for pain. I think we’re working on really interesting compounds that

have a great deal of potential. It’s always exciting to come up with

things that will eventually go to market." Bell explains that

in addition to the three major program areas, ANI also has the capacity

to explore by testing compounds randomly against established targets

using ANI’s extensive library of "maybe a hundred thousand"

compounds discovered at ANI or purchased from other firms. More than

125 people in Canada plus the workers in New Jersey work to synthesize

and evaluate the compounds.

"Many of the compounds were prepared by combinatorial chemistry.

but we also prepare them in the traditional way," says Bell. "Our

competitive advantage is the way we can create cell systems for testing

our compound library." ANI can combine the chemistry (their novel

compounds) with the in vitro tests to rapidly screen these compounds.

"Our success will be due to a combination not only of the chemistry

but our ability to test compounds quickly," says Mike DeVivo,

group leader of molecular pharmacology at Allelix. Besides some of

the major pharmaceuticals, other companies already working in the

field include Cephalon in West Chester, Pennsylvania, and Neurocrine

and SIBIA Neuroscience, both based in San Diego, California.

Bell also interacts with the Canadian-based Allelix management team.

This requires relatively frequent trips to Toronto. "We want to

make certain that we’re all on the same wavelength — not going

in opposite directions, and not duplicating things," says Bell.

"They have a lot of expertise and capabilities that we don’t have,

and we have a lot that they’re lacking."

Both Bell and O’Connor indicate that although ANI is interested in

and aware of the work being done by other biotech companies working

in the neuroscience and central nervous system areas, the company

is confident about the novel treatments they are developing. Asked

about their competition, Bell says, "It’s certainly something

you think about, but it doesn’t affect or drive our work."

Even as ANI is still settling in to its new facility, it is looking

ahead to expanding. While tactful painters continue to wander the

building doing final touchups, and missing furniture is located, the

atmosphere is upbeat, professional, and the staff all seem excited

about their work, genuinely involved.

O’Connor explains: "It’s stimulating to watch the scientific process,

to work with such a diverse group of people. One of the things that’s

compelling about ANI is that — since we’re so small — people

end up doing a lot of different things. Here everyone has expertise

in a specific discipline, but they can do things in other disciplines

as well. It makes getting a project done a whole lot easier. And it

makes it a fun place."

"I think we work harder here," Bell agrees. "We work more

closely together, and each person feels that their individual contribution

is more important to the work we do. At many large pharmaceutical

companies you are just one of thousands of people. Here each employee

is an important person who very realistically could have a significant

impact on how things progress. It’s a good place to be."

Allelix Neuroscience Ltd., 7 Cedar Brook Drive,

Cranbury 08152. 609-860-6640; fax, 609-860-7996. Home page:

http://www.allelix.com


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