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Area Biotech Company Hopes to Find Cures By Isolating Specific Genes

Posted on: Saturday, 16 July 2005, 00:00 CDT

Jul. 16--Tucked away in the piney woods of Montgomery County is a secluded and pristine laboratory complex that is home to roughly 300,000 mice.

But these are no ordinary rodents.

They're custom-made super mice specifically created so that they may one day lead to the discovery of breakthrough drugs to treat deadly illnesses -- from cancer to diabetes to Alzheimer's disease.

They're also the main reason why Lexicon Genetics has been dubbed one of the fastest-growing biotechnology companies in the nation -- and now may be close to starting human clinical trials of the drugs its mice helped discover.

"We are headed for one of our best years ever, in my opinion," said Dr. Arthur Sands, co-founder and chief executive of Lexicon, whose patented gene "knockout" technology is the backbone of the nearly 10-year-old biopharmaceuticals firm.

Through a series of licensing and collaborative agreements with big pharmaceutical firms like Bristol-Myers Squibb and Genentech, Lexicon's revenues have nearly doubled in the last few years, from $35 million in 2002 to $62 million in 2004. And with the ink barely dry on another big agreement struck with Netherlands-based Organon in May, Sands predicts revenues to pass $70 million this year, possibly reaching $75 million.

"Now more than ever we are poised for a very powerful move into the clinic, not only with our own internal programs, but also with our partners," Sands said.

Analysts like what they see at Lexicon, named by Deloitte & Touche last year as one of the nation's fastest-growing technology firms. And they predict that sometime this year the company will file its first application with the U.S. Food and Drug Administration to begin its own clinical trials of its drugs on humans.

"We are excited about this company," said Edward Tenthoff, senior research analyst with Piper Jaffray in New York. "Now is when it gets really exciting because we are going to see what these drugs are going to do."

The heart of Lexicon's business is its Genome5000 project, which unlocks the traits of some 5,000 human genes by studying the removal of those same genes in mice. Although the human genome consists of about 20,000 genes, researchers believe that diseases are associated with just 5,000 of them.

The process is highly complicated, but generally Lexicon scientists using mouse embryonic stem cells create genetically engineered mice that are each missing a particular gene. Then, they study those mice against normal mice that still contain the missing gene.

Some of the "knockout" mice may age twice as fast as the normal ones, others may fight tumors more effectively, some may get fat while others are exceptionally smart, for example.

To fully understand the effects of the missing genes, scientists put the mice through a battery of tests -- CT scans, magnetic resonance imaging, blood and urine analyses -- all using mouse-sized equipment, said Brain Zambrowicz, executive vice president of research for Lexicon.

"This is a very highly orchestrated process because there are large numbers of animals working their way through," Zambrowicz said while watching a technician carefully measure the bone density of an anesthetized mouse.

To date, Lexicon has completed the analyses of more than 2,500 mouse genes and expects to complete those of all 5,000 in its genome project by 2008.

Through those analyses, the company has developed more than 60 drug programs in the areas of immunology, cancer, diabetes and obesity, cardiovascular disease, ophthalmic disease, and psychiatric and neurological disorders. And it now stores more than 270,000 mouse embryonic stem cell lines in 35 liquid nitrogen freezers collectively called the Lexicon OmniBank.

Among Lexicon's most exciting mice are the LG-617s. After having a specific neurological gene knocked out, these mice scored twice as well on a battery of learning and memory tests than normal ones who were not missing the same gene, Sands said.

"These are mice of superior cognitive abilities," said Sands, adding that the discovery of this target gene's functions has huge implications for the treatment of Alzheimer's disease.

After conducting the physiological and behavioral tests on the "knockout" mice, Lexicon scientists then determine which genes have potential value for drug development. Then they come up with chemical compounds that are directed at those gene targets and enhance or block their functions.

Because Lexicon doesn't have the resources to develop drugs on its own for all of the gene targets it identifies, it has struck a number of collaboration agreements with big pharmaceutical firms with deep pockets.

One was struck in December 2002 with Genetech, which agreed to pay Lexicon $35 million in return for some of the company's gene research.

The following year the company reached a $66 million deal with Bristol Myers-Squibb, which received exclusive rights to all the neurology gene targets except the LG-617, which Lexicon kept for itself.

Last summer, Takeda agreed to pay Lexicon $12 million for exclusive rights to all hypertension targets except one.

And Organon agreed to pay $72 million in exchange for two of Lexicon's advanced preclinical programs for asthma and breast cancer drugs, as well as for an additional 300 genes to be knocked out in the Genome5000 program.

"We can say this all sounds really cool that they are knocking out mice, but the real validation comes when a Bristol-Myers Squibb comes and knocks on your door and says we'll pay you $66 million," Tenthoff said.

But he warned that the company, which still has not turned a profit and posted a net loss of $47 million last year, only has enough to fund its expensive operations for another two years. For that reason, Lexicon must continue to strike new collaborative agreements to fund its own drug development business, Tenthoff said.please don't cut the previous graph. thanks.

A map for the future

None of that fazes Sands, who is giddy at his company's prospects.

"People will see the future of medicine unfold before them because of the kinds of research that biotech companies and Lexicon are doing," he said.

"Why this is so profoundly important for medicine is that, for the first time in history, we have access to the sequence of the human genome," he added. "It is a map we are going to use to journey into this new land. But it is just a map. The value to society will be to find products that have real importance on human health and the health care economy."

LEXICON GENETICS:

--President and CEO: Dr. Arthur Sands

--Headquarters: The Woodlands

--Employees: 730

--Founded: 1995

--Initial public offering: 2000

--Stock close Friday: $6.09, up 56 cents

REVENUES: (in millions)

--2000: $14.46

--2001: $30.58

--2002: $35.20

--2003: $42.84

--2004: $61.74

Source: Bloomberg News, company

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LEXG, DNA, BMY,

Source: Houston Chronicle

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