On the Block: Interlink’s Treasure

Nasshorn’s New Job: Vanda Pharmaceuticals

Linguagen Takes Epigenesis’ Space

Corrections or additions?

These articles by Barbara Fox were prepared for the September 10,

2003 issue of U.S. 1 Newspaper. All rights reserved.

Tale of Two Companies: Epigenesis and Interlink

It’s a tale of two biotechs, in different fields but

with the same problem — finding capital in a tight market where

the big pharmas are cutting back and the private investors are feeling

poor.

One company, Interlink Biotechnologies LLC at Montgomery Commons,

had to resort to selling all its valuable assets.

The other company, Epigenesis, at Cedar Brook Corporate Center,

attracted

the eye of a group of venture capitalists — including Jan Leschly,

who has plenty of clout in the pharmaceutical arena. These investors

restructured and refocused the firm, and they also replaced most of

the management team, including the founder.

"The economics of Epigenesis did not work out for the prior

investors

as they had hoped, which is a recurring story in this market,"

says David Ramsay, a partner at Care Capital LLC, a life sciences

venture capital group on Hulfish Street that led the $23 million

financing

to reconstitute Epigenesis. "In a different time the former team

could have raised money both to support the development of the

compounds

and the development of the platform. In this environment investors

are very conservative."

Epigenesis was founded by Jonathan Nyce, who moved the company from

North Carolina to Princeton (U.S. 1, March 17, 1997). Nyce has left

the company and could not be contacted. He reportedly decided that

the new business plan, which focuses on developing one or two clinical

assets, would offer few opportunities for his skills and interests.

"He is more of a scientist and a discoverer," says Ramsay.

Though Nyce retains some ownership in the company, Ramsey says the

investors in the new $23 million financing round own the controlling

interest.

Two presidents who served under Nyce — Karen Giroux and Jim Manion

— have also left. Epigenesis is currently paying rent on 21,000

square feet of laboratory and office space and hopes to sublease part

of that and retain 7,000 square feet of office space, or lease it

all and move, according to Gerald Fennelly of NAI Fennelly.

To attract institutional investors, the company installed a new

management

team, and there are 11 employees now. Care Capital’s Jan Leschly named

his former GlaxoSmithKline colleague, Daniel Soland, as CEO, and

Joanne

Leonard as CFO. Cynthia Robinson, who had also been with

GlaxoSmithKline,

remains as vice president of clinical development. Dennis Segota,

at Morgan Lewis Bockius in the Carnegie Center, is the corporate

attorney.

Jan Leschly chairs the board, and Jerry Karabelas, who left a position

as CEO of Worldwide Pharmaceuticals at Novartis AG to join Leschly

at Care Capital, heads the scientific advisory board.

Soland, a graduate of the University of Iowa, was most recently a

vice president at GlaxoSmithKline in charge of the US pharmaceuticals

biological business unit and also of worldwide marketing for

biologicals.

He had also worked at Connaught Laboratories and Eli Lilly.

Leonard, an alumna of Montclair State, had worked for a biotech

company

co-founded by Mark Leschly, Jan Leschly’s son. She has more than 15

years of experience with emerging biopharmas. She took New York-based

VI Technologies public, and was CFO and treasurer of Memory

Pharmaceuticals

in Montvale. She raised a total of $270 million for those firms.

Cynthia Robinson MD, vice president of clinical

development,

is also a GlaxoSmithKline alumna. She had been in charge of clinical

drug discovery for respiratory and inflammation drug development at

that firm. On the faculty at the University of Pennsylvania, she is

associate director of its adult cystic fibrosis program, and she

joined

Epigenesis in January, 2002.

Leonard explains that Epigenesis had the misfortune to need money

in a difficult market. When it ran out of funds to pursue its drug

discovery work on respiratory vaccines and cancer, it had only a small

investor base — because most of its money was coming from a key

collaboration with a Japanese firm. Potential new investors were

unimpressed

with early stage drugs. "In this market place, investors want

to control the burn rate. They are looking for compounds in a later

stage of clinical development and with a narrow focus," she says.

"Now, with new financing, new management team, new board members,

and new scientific advisors, we are excited about the new direction

of the company," says Leonard. "We have a tight focus on

bringing

respiratory drugs to the marketplace. We are outsourcing a lot of

clinical development, and internal experts are managing that

process."

The new team eliminated any work on cancer and put the development

of Nyce’s platform technology on hold. For instance, an early product

that addressed the problem of too much adenosine in asthmatic lungs

had had disappointing results in Phase II clinical trials. It seemed

to be effective only in patients who were not already receiving doses

of inhaled steroids. And since most of the asthma population does

use the inhaled steroids, the product was shelved.

Instead, the company is developing a product unconnected with Nyce,

one that had been licensed from academe. EPI 12323, an inhaled

non-glucocorticoid

steroid for asthma and chronic obstructive pulmonary disease, is

expecting

to get the results of Phase IIA trials in October.

Leonard, who is consistently "on message," declines to discuss

methods and technologies: "We are not doing basic research. We

have a compound. We are in clinical development. Compounds do a

variety

of things and we are not going to talk about mechanisms of action

or pathways — we are not getting into that level of detail."

Nearly everyone in biotech has made the shift from platform

technologies

to specific products, says Ramsay. "There is a realization that

the promise from the genomics revolution is a longer term promise.

People who were raising capital to put into genomic or bioinformatic

tools have converted their business plans into `Here are some products

using those tools and these can make it to market.’ This

transformation

has been going on in the whole biotech area."

EpiGenesis Pharmaceuticals Inc., 7 Clarke Drive,

Cedar Brook Corporate Center, Cranbury 08512. Dan Soland, CEO.

609-409-6080;

fax, 609-409-6126. Home page: www.epigene.com

Top Of Page
On the Block: Interlink’s Treasure

When Interlink Biotechnologies went out looking for

money, the cupboard was bare. Unlike Epigenesis, which has a couple

of products, Interlink represents a much earlier stage in a biotech’s

lifecycle. Instead of products, it has a trousseau of raw materials

that could develop many new therapies.

But what a treasure chest it is — a library of natural-products

extracts and a supporting collection of 65,000 microbial isolates

and 33,000 environmental samples used as sources for the isolates.

This library has provided sources of new, interesting metabolites,

antibiotics, and anticancers.

To understand just how valuable these samples are, one must consider

the biotech convention in Rio De Janeiro, where nations promised to

pay licensing fees to developing nations where such samples were

found.

If a multimillion dollar drug were developed from a substance found

in the rainforests of Bolivia, for instance, Bolivia would get part

of the profits. Interlink’s samples, in contrast, were gathered from

all over the world before the Rio convention and are therefore exempt

from those rules.

Interlink’s initial strength, that it was self-funding, turned out

to be a detriment. It had investment from just one company, Des

Moines-based

Kemin Industries. "We were a real company with real revenues —

we didn’t work with other people’s money. But that model was not

successful,"

says Garcia. When pharmaceutical revenues decreased, it didn’t have

established relationships with other funding sources.

"We were in the process of raising more money and had an

investment

banker help us," says Garcia. "We were thinking a couple of

years of working capital, less than $5 million, would allow us to

grow the platform and go public."

"For venture capital money, $5 million is not a lot. We talked

to the venture group at New Jersey Technology Council, and they were

not interested in companies that could not identify products. We

identify

potential molecules that could be interesting drugs.

But now they are looking for companies almost in clinical trials,

whereas we do it all with collaborations."

Also, says Garcia, "any available venture capital money is going

to support the original investments that the venture capitalists had

made."

Interlink made plans to liquidate by August 31. The five-person

Montgomery

Commons office had already closed. A research facility in Auburn,

California is keeping the microbial samples in a deep freezer and

the environmental samples in a special heat-controlled room, and

these assets were to be auctioned to the highest bidders.

"We were very sad and disappointed," says Garcia. "It

was a good 13-year run. We had a very good group of people in

California

and Princeton, very committed, and it is exciting work."

Garcia got on the phone and frantically began networking with everyone

he knew. An alumnus of Catholic University in Chile, he came to the

United States in 1970 to earn master’s and PhD degrees from Iowa

State,

and worked for Allied Signal and Enichem before starting Interlink

with researcher Nicholas P. Everett.

Literally at the 11th hour, an offer to buy all the assets and hire

the staff in California came through. Garcia put a hold on the bids.

He has a letter of intent with September 30 as the deal’s deadline

and is the final negotiation stage. If the deal gets signed, the

technology

will have a home in a large company that will have the research and

will continue to develop it.

But Garcia has not told the bidders of a final decision "because

something might happen," he says. "I have been there before.

A letter of intent is a very good thing. Working on a contract is

a very good thing. But until we sign on the dotted line, we don’t

have anything."

Interlink Biotechnologies LLC, 11930 Heritage Oak

Place, Suite 4 Auburn, CA 95603. 530-889-8833; fax, 530-889-8824.

In Princeton, 609-252-0446. Ramon L. Garcia, president. Home page:

www.interlinkbiotech.com

Top Of Page
Nasshorn’s New Job: Vanda Pharmaceuticals

A Hulfish Street venture capital firm, Care Capital

LLC, is incubating Vanda Pharmaceuticals, a company that hopes to

use genomic profiling to reposition drugs that have run into trouble

in late stage development. Founded this year, Vanda is a 50/50 joint

venture between Care Capital (www.carecapital.com) with the Singapore

Economic Development Board.

"Singapore has an enormous fund to build an infrastructure for

biotechnology," says David Ramsay, a partner at Care Capital LLC.

The city is trying to compensate for the loss of jobs to China by

building Biopolis, a $286 million biomedical R&D complex and has

earmarked

$2.3 billion in biotech incentives. "They invested in our fund

as a window to biotech in the United States and Europe,"

Jerry Karabelas, the board chairman, tapped Pat Nasshorn as Vanda’s

vice president for business development. Nasshorn had worked in the

same Hulfish Street building for Unipath marketing, an innovative

woman’s pregnancy testing firm that was sold and moved to

Massachusetts.

Vanda has research centers in the United States and Singapore.

Nasshorn grew up in the Philadelphia suburbs, the second daughter

of three of an entrepreneur (U.S. 1, November 17, 1999). She majored

in business at Temple, Class of 1976, and earned a marketing and

finance

MBA at Temple. First she worked at Johnson & Johnson, then moved to

Bristol-Myers Squibb. In 1991 she joined Merck and did a deal —

a copromotion of Zocor — with Karabelas, then head of the U.S.

business of SmithKline Beecham.

She returned to J&J in 1994 as a vice president of marketing, where

she oversaw the development and marketing of Confide, the first

home-based

HIV testing service, and J&J’s pregnancy test kits. Unilever

approached

J&J about a partnership for its fertility monitor, but decided to

go it alone, and hired Nasshorn to create the U.S. division for

Unilever.

In 2002 that division was divested to Inverness Medical Innovations.

Then Nasshorn, who had worked for Leschly at Squibb, was hired as

the first employee of Vanda. She is in charge of business development.

She and her husband, a district justice, live in Newtownand have two

daughters.

Nasshorn says her company hopes to turn shelved or niche compounds

into marketable products, and also to find new indications for

existing

products. In particular it seeks drugs that passed Phase II clinical

tests, but not with flying colors. "That’s where we would put

our genomic engine behind it, to find the optimal patient populations

or disease areas on which the drug could have a positive impact,"

says Nasshorn.

Vanda pays to gain access to a compound. At a minimum the originator

of the compound gets the opportunity to opt back in — share in

the improved compound with Vanda. Otherwise Vanda takes it to market

alone.

Vanda has less than 20 employees, and most of them are in Rockville,

Maryland, where Mihael Polymeropoulos (pronounced Po-ly-mer-OP-a-los)

conducts a research team. "We use genomic, genetic, and proteomic

analysis along with knowledge management for the purpose of

redirecting

the development of pharmaceutical products and conduct the clinical

development programs," he says. "Our vision is to use advances

in biological sciences to develop more effective and safe drugs."

Polymeropoulos had worked for the National Institutes of Health and

Novartis and was involved with identifying the gene for Parkinson’s

disease.

"Vanda could be a potential employment opportunity for Rockville

and Princeton," Nasshorn says. "Our CEO will be based in New

Jersey, and so will our CFO. We will stay on Hulfish Street for the

near term."

"This will be a novel addition to the pharmaceutical industry.

We are not just going after a segment, we are doing product

development

and enhancement," says Nasshorn. "We feel we will carve out

our niche."

Vanda Pharmaceuticals Inc., 47 Hulfish Street,

Suite 310, Princeton 08542. Patricia Nasshorn, vice president business

development. 609-683-3678; fax, 609-683-5787.

Www.vandapharmaceuticals.com

Top Of Page
Linguagen Takes Epigenesis’ Space

When Epigenesis closed its labs, it vacated space that

was perfect for another company, Linguagen, which does research in

molecular biology of taste signaling for the flavor industries.

"Why we ended up here is because this space was fitted out,"

says Richard Lufkin, the vice president and CFO who may soon depart

to start yet another firm. The 10-person company moved from a sublease

in Paramus to 5,000 square feet at Eastpark at 8A.

Linguagen also has another Princeton connection — Bob Johnston,

the biotech venture capitalist. One of his associates, Robert

Stockman,

introduced Lufkin to Robert Margolskee in 1991, and together they

founded Linguagen, incorporating in 1995. "At first we subsisted

on SBIR grants and modest corporate sponsorship," says Lufkin.

When we felt the intellectual property had reached critical mass we

brought in a CEO."

Their first patent is for the first molecular compound that can block

bitter tastes in food and beverages. Called a "bitter

blocker,"

it will address just one of the 30 bitter taste receptors on the

tongue.

Linguagen has 20 bitter blockers so far and has patents for four of

them. Because all of them are found in foods, no approvals need be

sought from the Food and Drug Administration. Masking the bitter

tastes

could also let manufacturers cut fats and salt in processed foods,

or make a sugar substitute without a bitter after taste.

"Any number of foods, ranging from coffee to canned products to

international culinary dishes might benefit from ending the bitter

end," writes Donald E. Pszczola, senior associate editor of Food

Technology (July, 2003). He points to nutraceutical products

"which

may have off-notes caused by or associated with vitamins, mineral,

and other such components," and cancer-fighting vegetables, such

as broccoli, cauliflower, and brussel sprouts.

The R&D operations of Fortune 500 firms are potential competitors,

but Kraft Foods and a soy-food company owned by DuPont have said they

are interested in Linguagen’s research. Another free-standing

competitor,

San Diego-based Semonyx, has a similar approach to Linguagen’s

investigation

of the commercial potential for taste signals, and Semonyx has a

research

contract with Coca Cola.

Linguagen’s corporate counsel is David Sorin at Hale & Dorr. Chris

Olsen of CB Richard Ellis helped Linguagen locate to the park owned

by Eastern Properties.

Lufkin went to MIT, Class of 1968, and earned a Wharton MBA. After

serving in the Navy, he worked for Corning and Johnson & Johnson

before

starting a string of new companies, 10 so far, with two or three more

in the offing.

"Now that Linguagen has the level of maturity that professional

management can handle,I will probably start another one. I am more

of the serial entrepreneur," says Lufkin.

It takes confidence to always start over. Lufkin attributes that to

the MIT experience ("You work very very hard and you come out of it

with a sense of I can handle just about anything") and to driving

an aircraft carrier. "Also I have a high tolerance for

uncertainty.

I don’t need to know what is happening tomorrow." His wife, to

whom he has been married for 30 years, supports these endeavors.

"My sense is we are close to the stage at which professional

management

can and should take over," says Lufkin. "Beyond that I believe

we are truly offering a new set of tools to the flavor industry. The

industry represents an incredibly sophisticated art, and we think

we are delivering a new type of science that has the potential to

significantly change the way it delivers products.

"Whether the company will succeed as an IPO or an acquisition

— darned if I know," he says. "I think we have a

tremendous

chance and am excited at the long term potential. But I have other

ideas percolating in my head. I will let others realize the Linguagen

dream."

Linguagen, 2005 Eastpark Boulevard, Eastpark at

Exit 8A, Cranbury 08512. Shawn Marcell, acting CEO and COO.

609-860-1500;

fax, 609-860-5900. Home page: www.linguagen.com


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