A Really Near-Term Application for Discovery Technology: Momenta and Sandoz Attempt a Biogeneric

The press release was foggy; Sandoz Inc., the generics unit of Novartis AG, was teaming up with a biotech, Momenta Pharmaceuticals Inc. to commercialize "complex pharmaceutical products." Upon closer examination, the deal in fact has wide-ranging implications, representing the very real near-term possibility of a true generic biologic,

The press release was foggy.

Sandoz Inc., the generics unit of Novartis AG formerly known as Geneva Pharmaceuticals, was teaming up with a biotech, Momenta Pharmaceuticals Inc. (not too long ago known as Mimeon Inc.) to commercialize "complex pharmaceutical products"—though what such products might be (and indeed nearly all other details of the alliance, other than its existence) went unspecified. [See Deal]

The deal was accordingly not much remarked; the newsletters briefly recasting the press release in terms as murky as the release.

In fact, however, the deal has wide-ranging implications, representing the very real near-term possibility of a true generic biologic, the identity of which Momenta's chairman and CEO, Alan Crane wouldn't disclose.

Biogenerics, it has been endlessly argued, are virtually impossible to create because, unlike small molecules, no one has yet been able to prove that they can be exactly recreated. How they're made affects their basic identity; their identity affects how they work, and indeed their basic identity has been undefinable—up to now. Thus, the brand-name biologicals companies argue, no generic can be approved without going through the same extensive efficacy trials their brand-name predecessors went through. And because such trials are very expensive (as is all the process development and manufacturing which must also be done and approved before an approval application can be submitted), biological generics will be rare as hens' teeth.

But Momenta claims that its glycobiology technology allows it to precisely characterize proteins by characterizing the sugars which decorate them—the protein's glycosylation pattern, which most biologicals companies see as a key point of identity differentiation.

Crane says that his company has narrowly defined the batch-to-batch variation of the target protein and, using its glycosylation technology, can exactly reproduce it. In fact, he says, it's this understanding of variability that gives Momenta and Sandoz a path to generic equivalency: "We understand the [product's sugar variability] better than the innovator so we know the goalposts we've got to reach. We're very confident we've got a biogeneric and we'll pursue the chemical equivalency argument."

In any event, Crane and his team were able to convince Sandoz, which is paying the costs of the development program. It isn't apparently paying much up front, or in milestones, reflecting, perhaps, the uncertainties behind using any biogeneric process. Indeed, any biotech innovator will fight the generic interloper tooth-and-nail—a fight in which it will be supported by plenty of other biotechs. Which side the Biotechnology Industry Organization will take on the issue—it will have members on both sides—is an open question.

Whatever the rationale behind the deal's ultimate economics, Crane says he preferred to trade off immediate dollars for a bigger chunk of the upside. He says he's got the generic version of a billion-dollar product, and the deal gives him a share of the profits, equivalent to the very highest royalty rates paid for a Phase III product. Indeed, he argues that the generic biologic gives Momenta the equivalent of a Phase III product—one reason he's been visiting investment banks and investors. Should an IPO window open, he figures that with a late-stage product, he's got as good a shot at a public offering as any biotech. The net present value of such profit sharing will be increased by the generic's relatively high profit margins--generics typically have low marketing costs and Crane doesn't expect any other generic competitors to jump in and drive down the price of the product--and generics' tendency to reach peak sales within a year or two (vs. the 5-10 years of most new molecular entities).

Momenta isn't planning to become a biogenerics player. Some biologics are more complicated than others, says Crane, and "I don't know if we can do all of them." The generic is instead the first, and potentially highly remunerative stage of what Crane calls Momenta's "reverse pipeline" strategy. He'll start with the generic—creating the compound and the data that convinced Sandoz took only about a year, he says. Then Momenta will move towards improving existing large molecules by modifying their glycosylation. The company's most advanced project is a reversible, monitorable heparin.

Modifying glycosylation patterns also allows the company to attack drug delivery problems, likewise a relatively near-term project. It's working on modifying proteins so they can be inhaled into the upper airway and from there efficiently delivered into the bloodstream. By doing so, a Momenta protein won't need the complicated inhalation devices that proteins targeting the deep lung require and should avoid the side-effect issues of large-molecule interaction with deep-lung tissue. Momenta co-founder Robert Langer, PhD, knows the area well: he co-founded—with money from Momenta investor Polaris Ventures--pulmonary technology player Advanced Inhalation Research Inc. , that was acquired by Alkermes Inc. [See Deal] (which has an alliance with Eli Lilly & Co. to develop pulmonary insulin [See Deal], [See Deal]).

Momenta's drug delivery ideas go beyond pulmonary routes. The company intends to modify drugs that now must be delivered via intravenous infusion into subcutaneous injectables.

Still further back: the drug-discovery implications of glycobiology. Crane says that the company's oncology program has shown that different glycosylation patterns can trigger apoptosis or cell proliferation and thus sugars play a fundamental role in creating oncology therapeutics. Sugars, he says, are every bit as important as DNA in determining biological function—but the sequencing tools to understand them haven't existed before Momenta came along. Indeed, he says, that's one of the main reasons the first generation of glycobiology companies—like Cytel (transformed via acquisition into vaccine player Epimmune Inc. [See Deal]) and Glycomed Inc. (acquired in 1995 by Ligand Pharmaceuticals Inc. [See Deal])—failed to deliver on their initial promise. They simply didn't have the tools to do so. Crane says Momenta still struggles with the fall-out of those early failures. But by attacking the near-term opportunities first, the company hopes to gain the credibility and financing to exploit the discovery possibilities of its platform.