A gold mine drug for macular degeneration grew from a CU lab, shedding its founders along the way

By Rachel Brand, Rocky Mountain News
February 19, 2005

The 37-year-old graduate student sat on a stool in a molecular biology lab one late night in 1989 and stared at a gel.

Craig Tuerk was tired and had been running experiments for 18 hours straight, and with growing excitement scribbled down chemical sequences.

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If what he saw were true, his experiment reproduced a result that nature had taken thousands of years to produce. By sifting and resifting molecules, he found a sequence of molecules that fit a protein like a hand in a glove, stopping DNA from replicating. He also found several unexpected sequences out of 56,000 possibilities that could equally fit the protein like a key in a lock.

The result was totally surprising, and Tuerk had an astounding insight. Using this process, he thought, he could find nucleic acids that can bind very tightly to any protein, and maybe he could find a way to intercept proteins that cause disease.

It was a sublime moment, the high point of a gifted scientist's career. It dared a cautious man to imagine a cure for AIDS, cancer, any of the scourges of mankind. Alone in the University of Colorado at Boulder lab, his mind racing, Tuerk exulted about his discovery to the Laotian janitor, who spoke no English. She smiled nervously.

"I had this feeling I was seeing something that no one had ever seen before," Tuerk recalls. "It was like looking into the mind of God."

Sixteen long years after the aha moment, the first drug spawned from that method is helping patients. Along the way, a Colorado biotech was born, grown and ultimately broken and sold for parts. The process rattled and nearly broke a friendship between the technology's inventors.

Macugen, marketed by New York-based Eyetech, slows the progress of macular degeneration, which causes blindness by the growth of blood vessels in the eye. The drug - projected to earn $1 billion in sales - could bring CU as much as $25 million in licensing fees, making it the most lucrative offspring in the history of the university's tech transfer program.

"Patients are extremely excited about the potential impact of this drug," said Dr. Naresh Mandava, a clinical investigator at the Rocky Mountain Lions Eye Institute who conducted Macugen trials.

Success, though, is easy to chart in retrospect. This drug could have been dropped a dozen times.

Having a brilliant insight is supposed to be the hard part. Next comes unimaginable wealth, scientific prestige and philanthropic glory. In truth, scientists are challenged by keeping a company afloat, solving scientific problems and pushing drug candidates through clinical trials. In biotechnology, there's a well-worn highway to the graveyard of good ideas.

The aha moment - like many aspects of the evolution of Macugen - is subject to disagreement. And that wouldn't matter, except that someone could conceivably win a Nobel Prize for the discovery.

Larry Gold, Tuerk's graduate adviser, remembers his student explaining the lab results the next day and the mental fireworks mutually cascading. Together they shared the insight that Tuerk's experimental process - later called the "Tuerk-o-matic" - could generate thousands of potential drug candidates.

The system, also called systematic evolution of ligands by exponential enrichment, or SELEX, replicates evolution in a test tube. Over three weeks of sifting and resifting nucleic acids, the result is a sequence that can intercept any protein. They fought over a magic marker to sketch ideas on a 12-foot white board. Jottings filled it to the edges, as Gold tells it.

"When Craig did his experiment, we had one of those epiphany moments. We went from one to the world to infinity, really," Gold said.

Gold & Tuerk

Gold is a short, intense man with wire-rimmed glasses and snowy hair. He loves vast theories and enjoys journeying intellectually from one experiment to its infinite meanings. For that, he's been called a genius. For that, he's made mistakes.

Entrepreneurship was the natural outgrowth of his imaginative mind.

"I like the idea of making sand castles in the sky and dreaming, and entrepreneurship and dreaming are similar," he said.

In 1981 he founded Synergen, Colorado's first biotech firm. And as a graduate adviser to CU students in molecular biology, he gave students plenty of freedom.

That suited Tuerk, an independent spirit, who had already had careers as a chef and carpenter and started a family before returning to graduate school. Tuerk relished technically difficult experiments, planned his own work, took his own notes and worked like a demon in the lab - alone. Tuerk wanted to graduate quickly with a useful degree in agricultural biotech, to better the world.

He knew little of Wall Street and disliked Gold's "one to infinity" logic.

"Better to prove ideas with results. Ideas are ideas and work is work," Tuerk would say.

They were an unlikely pair, thrown together by accident.

Gold led them through the year following the discovery. At his urging, they applied for and won a thick patent dossier on every possible use of nucleic acid sequences, otherwise known as aptamers.

Using Gold's Synergen contacts, they traveled to San Francisco and pitched SELEX to Genentech, which did a parallel experiment that failed. Tuerk turned down his dream job at Monsanto, certain he was on the cusp of a big deal.

But even as they hawked the concept, they differed. Gold thought the nucleic acid sequences could be the basis of computer models to develop traditional chemical pharmaceuticals. Tuerk disagreed, saying that notion was unproven.

"It was Larry hyping the technology," said Tuerk. "I was more guarded in saying where we could take a leap from one thing to the next."

Then came the turning point. Tuerk contacted DuPont, but when the appointment surfaced, he remembers, Gold argued he should make the trip alone. In one light, it might have made sense - the senior scientist acting as diplomat. But Tuerk felt excluded and ripped off, and feared he'd be cut out of the deal. "It was so infuriating," he recalls.

It was their first fight.

Again, the exact memories of their disagreements have faded and diverged over the years. Rumors circulate about Gold throwing a telephone at Tuerk's head and about Gold being afraid to come to work because of Tuerk's temper.

Many times after the initial argument, Tuerk wanted to abandon the partnership. But Gold convinced him he was the only person who could conduct the key experiment.

After all, Gold needed Tuerk for his next bold move. If nobody wanted to partner, then he'd start a company on his own. He'd done it before with Synergen, after all. And venture capitalists were hungry for interesting science. The new firm would be called NeXagen.

Tuerk had one condition of joining.

"I said, 'I don't want to talk to that man,' " he recalls.

Drug problems

NeXagen was founded in 1991, and in its early days the company resembled a university research lab cut free from National Institutes of Health funding.

"I thought, even if it's only going to be two years, this is going to be so much fun, I don't care," said Nebojsa Janjic, a young Serbian scientist plucked from San Diego's Scripps Research Institute to join the company.

In all, the atmosphere resembled a newly funded dot-com. It wasn't decadent - employees worked at laminate desks, and nobody had a grand corner office. Still, when it came to science, the word "no" wasn't uttered.

"I don't think anybody didn't do a project because there wasn't money," remembers Joe Alper, the company spokesman. "Any legitimate intellectual pursuit was granted."

Twenty-five jeans-and-T-shirt-clad scientists crowded the small lab. They bumped into each other, forcing collaboration. Every week, guest speakers were flown in to deliver lectures on physiology, biology and anatomy, in an effort not to overlook any opportunity.

Even the bookkeeper and purchasing agent sat in on those lectures. The entire staff ate lunch together. They shot hoops at the basketball court out back. Gold knew that if he was asking people to work 14 hours a day, they had to enjoy it.

The business plan called for finding short nucleic acid sequences, or aptamers, that would interfere with the action of proteins involved in AIDS, cancer and other diseases. Gold had both a professional and personal interest in cancer. His wife had suffered a scare with melanoma, and they both feared she might die.

"Anybody with an IQ over 100 wants to do something for cancer. It's the leading killer in the U.S.," Gold said. He encouraged his scientists to pursue this direction.

Like all biotechs, NeXagen dreamed of first licensing out its discoveries, then developing a few in-house. The enthusiastic company gospel preached that once aptamers were identified, pharmaceutical companies would jump at licensing them for fat fees.

But the aptamers themselves had problems.

The problems were easy to explain, difficult to solve. Sometimes scientists found an aptamer that would bind to a protein, but its length made it too costly to manufacture. When less expensive manufacturing methods were found, scientists learned that the human body degraded nucleic acids, a glitch that called for months of chemical engineering to make nucleic acids that remained stable in the body.

That hurdle solved, aptamers had yet to reach and remain near their target long enough to work. That's because the human body would quickly clear them through the kidneys. All that said, it still cost too much to make an affordable and effective drug.

"Science never goes as fast as you may like it to - or it rarely does," said Pat Mahaffy, the young, business-savvy CEO hired to keep an eye on the scientists. "In this case, it certainly did not."

By contrast, Genentech was among the firms working on antibodies, building on 35 years of academic and commercial research. Unlike the tightly patent-protected aptamer intellectual property, the antibody work was relatively out in the open. The difference resembled that of open-source and closed-source software, the war between Linux and Microsoft. Mahaffy likened NeXagen to a "wee band of brothers" fighting an antibody army.

"At the time, there were hundreds of organizations trying to figure out how to make monoclonal antibodies work as therapeutics," Mahaffy recalls. "Paper after paper that in each instance showed some incremental improvement that others could learn from and build on. We didn't benefit from that.

"The 'wee band of brothers' approach, if you will, it wasn't always something we sought to do. But we limited the exploration of this brand new technology to a small group of scientists."

As a result, Mahaffy said, whenever NeXagen would make a scientific advance, the pharmaceutical companies would compare it to antibody work, constantly raising the bar.

" 'OK, you showed us that, but now we need to see this,' " Mahaffy recalls the pharmaceutical companies saying.

Meanwhile, the money was running out and the board of directors - stacked with venture capitalists from Warburg Pincus - was growing nervous over the company's lack of focus.

Without one good aptamer and a champion to drive it to completion, Tuerk and Gold's great idea was doomed for the graveyard.

Practicalities

In every biotech company, there's a creative tension between discovery and development. The discovery-oriented scientists want to explore a technology's limits. The developers focus on the most promising candidate and try to bring it to market. NeXagen was stacked with drug discoverers, the dreamers of the biotech world. Except for a handful of practical men such Janjic, a 31-year old Ph.D. scientist who was employee No. 8.

Janjic resolved that tension. He knew his job was to develop drugs.

At first he concentrated on cancer. But in the course of research and voracious reading, he made an intellectual leap.

It would require enormous, fabulously expensive doses of aptamers to treat cancer tumor growth. But blood vessel growth also played a role in macular degeneration, the leading cause of blindness in people older than 50, a disease that claims 200,000 new victims a year. The disease progresses as blood vessels grow under part of the retina, leak and cause scarring.

Why not interfere with proteins that tell these blood vessels to grow? The doses would be lower than for cancer treatments, solving the production cost problem. And because the eye is relatively isolated from blood circulation, aptamers could remain near the target long enough to work.

But the idea had many naysayers. Macular degeneration was a low-profile disease compared to cancer. At that time no drugs were on the market to treat it, nor were drug companies chasing it. And finally, any drug would be delivered through a needle in the patient's eye.

Dr. Tony Adamis, an opthalmologist researching blood vessel growth along with angiogenesis pioneer Dr. Judah Folkman at Harvard University, remembers the frustration he felt in the mid-1990s.

"We had been begging big pharmas to look at this for years. They dismissed it. They thought of (macular degeneration) as a boutique indication and a boutique disease," Adamis said.

Nobody agrees on the story, but Janjic remembers being called onto the carpet by the board of directors and asked why he insisted on pursuing macular degeneration. This was a cancer company, they said. His idea didn't fit into the story being presented to Wall Street. Plus, Janjic was chasing an unproven technology against an untreated disease.

"The board of directors would say, 'Is that not equivalent to being struck by lightning with a winning lottery ticket in your pocket?' " Janjic said.

Gold remembers it differently. "What probably happened is that paid lackeys for Warburg Pincus had a private conversation with Nebojsa," he said. "Never, in my remembrance, would they call the best scientist in the company onto the carpet. They were incapable of that kind of insight. They were useless."

Either way, the company's reaction was disappointing. Still, saying "no" wasn't part of the culture.

Unsupported, possibly heretical, the next year Janjic flew to Boston to share his macular degeneration idea with Adamis and his colleague Dr. David Guyer, chairman of the ophthalmology department at the New York University School of Medicine.

"I was convinced it would work. I couldn't think of a single reason it wouldn't work," Janjic said.

He was met with equal enthusiasm. Quickly, the group saw the business case: Macular degeneration was an unmet medical need in a big and growing market.

By 1997, Guyer and Adamis had formally joined the company as scientific advisers, and the next year, the drug - NX-1838 - was put into a Phase I clinical trial to test its safety. That makes it the only aptamer, to date, to enter clinical trials.

It should have been good news for a company that broke its back looking for aptamers. It should have been considered a miracle they found a compound that might work. But it was too little, too late.

The money game

Like most research scientists, Gold made a career of selling his ideas.

After all, he had survived as an academic by extracting grant money from the federal government. And when he - like any scientist - found a promising idea, he felt compelled to work on it.

"When you see something that you think is going to work," he said, "you must do that work, because you think you can do something good for the world."

In 1991 Gold approached New York-based Warburg Pincus, then among the largest venture capital firms in the U.S.

"I think I got an idea that's better than Synergen," Gold told Warburg Pincus' Rod Moorehead. "After all, when we started that, we didn't have any ideas."

The venture capital firm invested several million dollars in what would be called NeXagen.

Pat Mahaffy, a 29-year-old Warburg Pincus venture capitalist, would act as CEO. His job was to ensure scientists stuck to their timelines so he could raise money and cut licensing deals. As to whether the science was valid - someone else would have to explain it to him. Mahaffy had majored in international relations.

People today call quick-thinking, terse Mahaffy the smartest man they've ever met. Learning from the mistakes at NeXagen, he went on to found Pharmion, a Boulder-based biotech firm with a market capitalization of $1 billion and two marketed products. But back then, the chestnut-haired young man couldn't help but be outmatched by Gold's charisma, age and scientific expertise.

Mahaffy struggled to sell NeXagen's technology. Between 1991 and 1995, he cut deals with Eli Lilly, Schering AG and Becton Dickenson, whose total investment amounted to $13 million. Not pot-of-gold deals, but enough to keep limping along.

The company went public in 1994 and raised $23 million, an almost laughably small sum today.

By then it had began to dawn on Mahaffy that scientific progress would take longer than planned. It worried him.

"At some level, when you become aware of the timing of this may be longer, and the costs will be greater, you find alternative paths to build your organization," he said.

He couldn't control the science, nor the potential partners. Forced into a corner, he decided to buy the revenue they needed, in the form of a publicly-traded company called Vestar.

In a bold move, NeXagen bought the California company with a $40 million-a-year drug - AmBisome, a treatment for fungal infections - on the market, in a 1995 stock swap.

Mahaffy's move was genius. It created a cash-generating engine to keep the merged firm, NeXstar, alive. NeXstar scientists took to calling the revenue the "AmBisome annuity," a stream of revenue that underwrote their basic research.

"There was a good CEO and manufacturing people and good scientists. Squish it all together and let Pat run it," said James Thomas, a Warburg Pincus venture capitalist and NeXstar board member.

With Wall Street breathing down his neck, Mahaffy had to keep moving. He set about resurrecting AmBisome, building a sales organization, and pushing the drug to the top of the market outside the U.S. Within the next five years, AmBisome sales grew from $40 million in 1995 to $140 million in 1999.

The move should have been enough to support what was now a 500-employee venture, fund lots of clinical trials and keep the increasingly restless board of directors happy. But they had something else on their minds.

Almost every scientific idea was once in Wall Street's vogue: angiogenesis, gene therapy, monoclonal antibodies, to name a few.

And in 1999, Wall Street favored either pure play research firms or product-driven sales machines. A company selling AmBisome alone would sell for more on Wall Street than one combined with with an aptamer research organization, the board believed. In short, the board wanted to break up and sell the company.

"They said, 'We're tired,' " recalls Gold. "Something like that.

"I hated it. I thought it was a terrible, terrible choice."

And as Mahaffy tells it, he quit because he so strongly disagreed with the board's direction.

That suited the board even better. A headless company is easier to chop up and sell for parts.

In 2000, with the NX-1838 clinical trial in progress, Gilead Sciences Inc. bought NeXstar for the stock equivalent of $550 million, or one-third of a Gilead share for one of NeXstar.

Gilead had no intention of pursuing macular degeneration or NX-1838.

The light at the end

Here's the real fairy tale. Not for Tuerk, Gold, Janjic or Mahaffy. But for the two East Coast eye doctors who served as company consultants, princes who kissed the frog and found a princess.

While NeXstar was falling apart, Guyer and Adamis had seen the early Phase I data and were optimistic about NX-1838's prospects. They set about putting together their own company.

"We all got together around the idea of purchasing it and continuing it," recalls Adamis.

Nine months after the purchase, Gilead licensed NX-1838 to Eyetech at a garage sale price, a mere $7 million - and milestone payments of $25 million. The upfront payment was less than 0.1 percent of the drug's projected sales today.

"I had some insider knowledge in that I had been working on this idea for over 10 years. I really had a strong sense it would work," Adamis said. And even in the early clinical trials "we got really clear signals of efficacy," he said.

The story unfolds beautifully. NX-1838 succeeded at Phase I, II and III clinical trials. In concert, Eyetech raised $35 million in 2000 and $108 million in 2001; in 2002 Pfizer agreed to pay $100 million and as much as $645 million later for the rights to NX-1838.

On Dec. 17, Macugen was approved by the Food and Drug Administration for the treatment of age-related macular degeneration, and Eyetech priced Macugen at $995 per injection, one per six weeks.

"Surprisingly, patients are very receptive" to a needle in the eye, said clinical researcher Mandava. And while the drug is expensive at $8,000 a year, any increase in patients' vision can allow them to read, pay bills, and maintain independence.

Adamis happened to carry the baton to the finish line. It could have been someone else, or no one.

"Yes, I have been fortunate," said Adamis. "It was a lot of hard work and good luck."

Does NeXstar's board of directors have regrets?

"It's a funny funny thing," said Thomas, the venture capitalist. "Life is full of trains that got away, pitches that were swung on and missed. That's the business.

"NX-1838, it's great. Sure, you wish you owned it today."

Gold, Mahaffy, Janjic and Tuerk tell themselves they didn't lose out. NeXstar shareholders who held on to their Gilead stock have seen a 240 percent price appreciation, and NeXstar senior executives had hundreds of thousands of stock options. Gold and Mahaffy became millionaires.

Gold heads SomaLogic, a Boulder firm working on aptamers. Mahaffy runs Pharmion, and Janjic heads research and development at Louisville-based Replidyne, a biotech specializing in anti-bacterials.

"We're all thrilled," said Janjic, who saw the drug he championed slip through his fingers. "The chance of going from discovery to approval is so small. No better than one in 1,000."

Tuerk, who left NeXagen in 1994, now teaches biochemistry and genetics at Morehead State University in Kentucky. Does he wish it had been him, not the white knights, who capitalized on the dream he saw so clearly 16 years ago?

"You can't let those things bother you. Life beats us all up a bit," he said.

He still has a gift bottle of French wine from Larry Gold named Folie 'a Deux - loosely translated as "the folly of two." Perhaps it was an apology. It remains unopened, a decade later.

About Macugen

. What it does: Slows or halts the progress of wet macular degeneration, the leading cause of blindness in people older than 50. Macugen blocks the formation of a protein called vascular endotheliel growth factor, which stimulates abnormal blood vessel growth behind the eye. These unwelcome blood vessels leak fluid and blood, damaging the macula with scar tissue and causing blurry vision.

. Market potential: Approximately 1.6 million people have been diagnosed with wet macular degeneration, and 200,000 new cases are diagnosed each year.

. FDA approval: Dec. 17, 2004

. Launch date: Jan. 20

. Cost: $995 a dose, administered once every six weeks

. Estimated sales: $1 billion

. Who sells it: Pfizer and Eyetech Pharmaceuticals