D&MD: It might be a good idea if you could outline the progress of the company since it was formed, giving the highlights so as to put the interview in context.

DG: The company was formed and started operating in 1990 and, at that stage, there were a handful of scientists working in a rather run-down laboratory on the outskirts of Cambridge (England). The company spent the first four years developing the phage-display technology to display active fragments on a phage, and building libraries of these phage antibodies, developing selection techniques to pull out the antibodies that were of interest.

At the time I joined the company, which was late 1994, there was a feeling that this technology would not just yield research reagents, like antibodies, but could yield therapeutic antibody candidates. The big question was: “Which therapeutic antibodies should we develop, for which diseases should we develop them and how should we develop them?,” for there was nobody in the company at the time who had the slightest idea of how to go about drug development. The company at that time was more or less entirely molecular biologists.

From my perspective, when I was recruited to the company, it marked the first signal that the company was going to try to move into discovering and developing antibodies as drugs, rather than just using them as research reagents and collaborating with academics or even pharmaceutical companies.

Since that time, the company has made enormous progress in a number of different ways. Where we are today, six or seven years later, is that there are now six candidates in clinical trials using the company’s technology and there are many more candidates to come in the future. Of the six candidates in clinical trials, we ourselves have taken three into trials and our pharmaceutical and biotech partners have taken the other three into clinical trials. We’ve made great progress in progressing candidates and also in building our own capability.

We’ve added a lot to the company in those seven years. We’ve added a lot of people, we’ve added a lot of expertise—completely different from the team that started the company, who were mainly molecular biologists—and the company has achieved a number of milestones, so that it is of a completely different kind. For example, we’ve taken the company to the Stock Exchange, with the first offering in April 1997 and a very successful second offering of shares in March 2000, just under two years ago. Those two fund-raisings, together with equity investments from pharmaceutical and biotech companies, and revenues that we’ve achieved from collaborations have put the company on a completely different standing from when I joined. Now, we are a well-funded biopharmaceutical company and the direction of the company as set out is in antibody drug discovery and development.

D&MD: One of the claims that I’ve seen is that you’re a world leader in phage-display technology. How to you come to be able to make that sort of claim, since, presumably, there are other companies that are in this business?

DG: World leading! World’s best! Some of the factors that lead us to believe that we are world leading—and it’s not just us that we believe it, but pharmaceutical and biotech companies back our technology, and the analysts all believe that we are world leading as well—it’s just that we pioneered the whole field in the first place. We did the very first experiments that showed that you could express monoclonal antibody on the surface of phage. So we’re pioneers, that’s the first thing. Secondly, we’re leading from the point of view that we have more candidates in trials than any other company using phage-display technology. In fact, we’ve got more than all the rest of them put together in the whole world.

When I spoke at a conference in December, I said that when I joined this company we didn’t have any drug candidates at all. Now our libraries are bigger than any other, including academic groups, and more powerful. As a result, we’ve got more phage-display antibody candidates in clinical trials. That was the situation last December, when I spoke. Not only are we the pioneers, we’re further ahead with a leading candidate that has completed Phase III clinical trials, and very shortly we expect approval from the FDA (US Food and Drug Administration) and the European Medicines Evaluation Agency for marketing. That’s in the hands of Abbott and their target is to file in the second quarter of this year, and that’s not very far away.

World leading—from the point of view of pioneering, the biggest library of phage-display antibody candidates, the most candidates in clinical trials, the most advanced clinical trials. We’re also leading from the point of view of having more scientists working on this.

Also, although it’s not so much in the public eye, we’re also leading because we had the first experiments and we’ve been going longer, we hold the granted patents, so we hold the important intellectual property (IP) in this area. Others that have come since have either had to develop variations on phage display to try and avoid falling under our IP. As you may be aware, there are some companies that are infringing our intellectual property. Those companies have not got IP that we need to operate, but we’ve got IP that they need to operate. So, we’re world leading from the point of view of IP as well.

As we’ve been doing it longer with more people, we’ve got a longer track record of success.

D&MD: Going on from the patent position, the latest news is that, in the dispute with MorphoSys, the judge had ruled in favor of MorphoSys.

DG: Don’t read the headline. Read the detail. This is a multifaceted dispute and he’s ruled on one particular point—they don’t appear to infringe one of our several patents that have been granted in a particular way. That’s all he’s ruled on—and he hasn’t actually ruled on that. All he’s said is that he’s minded to rule that. He hasn’t indicated that the patent’s invalid. He’s only said that he’s minded to rule that, in this particular incidence, they don’t infringe.

D&MD: So, even if he did rule in that direction, it wouldn’t undermine CAT’s patent position. Is that right?

DG: Yes, that’s correct. It would just mean that they are not infringing our patent in one of several ways, although we believe that they have been. This is just a minor—sniping in the hills—not the end of the war! You need to understand here that we hold the granted patents in the US and Europe. They need to establish their own platform on which to operate, so they need to carve out a phage display that they can own so that they’re not infringing our position. We’re not infringing anything of theirs. If you look at the lawsuits, they’ve never alleged that we’re infringing any of their patents. Ours were all granted before theirs.

D&MD: The other thing that I wanted to ask on patents was how significant to CAT’s scope for operation was the recent granting of the second European “McCafferty” patent?

DG: Behind the original patents, there are vast filings of other patents, and generally they enlarge the portfolio of patents. In time, the patent base broadens. It’s often difficult to judge how important a particular patent is going to be. Sometimes the ones that you don’t think are particularly useful turn out to be the most important of all. We’ve been building on the initial patents all the time and not just in one country, but in other territories, on both sides of the Atlantic and all around the world. The patent estate is growing all the time.

D&MD: Sometimes, a company will say that it wants to devote a certain proportion of its resources to developing its own drug pipeline and another proportion to working with partners. Do you have a “rule of thumb” like that in terms of how much you are devoting to your own drug pipeline and how much to working with partners?

DG: No, we don’t have a “rule of thumb.” Historically, all the initial product candidates were developed with partners. It was on the basis of that and, in particular, the learning experience of working on product candidates with BASF that encouraged us to start trying to develop our own. Then, the initial balance was entirely payments, when we employed the people almost on a contract basis. As time has gone on, we have got some programs that we own entirely. And, in the last 18 months or so, we’ve made the decision to work with other companies where the programs are shared 50:50. We’ll share costs 50:50, then, as we go forward, hopefully, we’ll share profits 50:50. So, we’ve moved from a situation where we’re doing things entirely for somebody else to a situation where we’ve got a balance between products in trials with partners doing all the development on which we have no expenditure, but we will receive revenues in the form of royalties, on one extreme, the other extreme being where we do it all ourselves. In the middle, there are programs, where we’re sharing costs 50:50, profits 50:50, and the business 50:50.

The balance between those programs has been shifting. If you look at what’s in clinical trials at the moment, of the six candidates, CAT-152 and CAT-213 are entirely our own, DE27, J695, and LymphoStat-B are paid for entirely by the partner, and CAT-192 is 50:50 with Genzyme, so the balance has shifted. At one stage, the emphasis was entirely on things being done for partners. We’ve shifted it towards owning them entirely or 50:50. Last year, we made agreements with Elan and Immunex, and the previous year with Genzyme and also with Human Genome Sciences, all of which had an element of co-development, whereas the agreements in the past with BASF, Genetics Institute, Pharmacia, the initial Wyeth-Ayerst, and so on, were all about working to contract—they specify what they wanted and we make it. The new agreements are jointly agreed with the partner—what we are going to make together—and share the costs. But, for CAT-152 and CAT-213, we haven’t got a partner, as they’re entirely our own idea.

The balance has shifted and what the analysts say is that we have a lower than average risk profile for our programs because (a) we’ve got several programs—we’re not a one-program company, and (b) we’ve got some programs that are proceeding at no cost to us but are going to bring in revenue. But obviously the royalties we get are going to be much less than for projects that are 50:50 or where it is entirely owned. So there’s a spread of the risk between projects where we’re entirely on our own and those where we have no risk at all and where, hopefully, we get dollars or pounds coming through the door. But there’s no prescribed ratio.

One of the difficulties is that, when you have contractual arrangements with companies, you are obliged to put seven scientists on a program, and so on, and you have a limited pool of scientists available to work on a program, so we have to put more effort into satisfying the contracts than into work for ourselves. That was restricting and was the main reason why mad the bid for money two years ago. The main first line of the fund-raising document was that we were going to use the proceeds to facilitate our own product development.

D&MD: One of the things that interests me was the way that you first of all said: “We’re now a biopharmaceutical company” but then, later on, in describing projects, you said that you may have to use actual pharmaceutical companies to market the products you develop. If you’re considered a biopharmaceutical company, are you not expected to have your own sales force?

DG: When we get to that stage, we’re not prescriptive about things. We don’t have to say: “We’re going to build our own marketing force worldwide.” We want to have the flexibility to bring in a partner to market the products. We don’t need help in doing the clinical trials. We have more than enough expertise to take things forward. But, if you want to market on a worldwide basis, the chances are that the best way to do that is to partly hold onto someone else’s sales force, rather than trying to create your own from the beginning.

The world has changed in terms of marketing of products. You no longer have to own your own sales force. You can rent one—a contract one. You can borrow one—a pharmaceutical company sales force that has spare time, and so on. You can acquire a sales force. We don’t need to be prescriptive about how we’re going to sell in the future. It’s almost certainly best to tap into somebody else’s sales force in one or more continents.

D&MD: I once asked this question of Serono, and they were quite confident that they were going to have a sales force everywhere in the world. They were putting that forward as how they were going to become a biopharmaceutical company

DG: That may be the way to go in time, but on the basis of what we’ve got at the moment there is not sufficient critical mass in terms of product. If you ask me the same question in five years’ time, when we have more product coming through, then we may have a completely different answer.

D&MD: It might be a good idea to look at your lead product, D2E7 (adalimumab) and how successful it’s been. You mentioned the Phase III clinical trials had been completed, but I haven’t seen any results from that. When are they going to be announced?

DG: The position of the Phase III clinical trials of D2E7 is that Abbott confirmed that they completed enrollment in the Phase III trials about six months ago and they are expecting to be presenting Phase III data at the two major rheumatology conferences this year—the main European one, I believe, is going to be in June, the EULAR conference—and then the biggest rheumatology conference in the world—the American College of Rheumatology, which is held in November. Abbott will be targeting presenting data at both these meetings.

It’s true that the Phase III data isn’t ours, but all the (available) information is that it’s very encouraging.

D&MD: You mentioned about applying for marketing approval. Can they do that in advance of publishing the Phase III results?

DG: Publishing the data and when it’s filed with the regulator are completely separate. Basically, the company must make a judgment about whether they’ve got sufficiently comprehensive, robust files that satisfy what the regulatory authority is looking for.

D&MD: Given that this is the first phage-derived product to come through to the market, is that going to cause the regulatory authorities any concern in giving approval or is it simply one approach among many others?

DG: I don’t think so. The way the antibodies are actually derived is not of any major regulatory concern, because, having derived the product candidate, the actual manufacture is via a conventional route by mammalian cell, then expression and fermentation. There’s nothing unusual about that. The other thing to bear in mind is that there are already drugs approved that block TNF-α, so D2E7 will be judged in that context. I think that the phage derivation is unlikely to pose any regulatory issues. There’s no phage in the final product. It’s purely the way the antibody has been isolated.

D&MD: One of the questions that people worried about last year was the whole issue of production capacity of final product. Is that something that will concern you, given that you’ll then have marketing approval?

DG: That’s a very hot topic. My position is that there are some real issues, but they’re not as reported. BASF (Pharma), before they were acquired by Abbott, invested in their Worcester, Massachusetts, facility with enough production capacity with a view to satisfying worldwide demand. That was announced at the same time that Immunex was having difficulty satisfying demand for Enbrel. I think that the information that Abbott put out when they acquired BASF (Pharma) suggests that they are comfortable that they can satisfy demand of patients so that there is not a waiting list to get onto the drug. I think they’re talking about being able to produce 100 kg a year all together.

Beyond that, BASF, three or four years ago now, had the foresight to look into the possibility of using transgenic goats, so they struck a deal with Genzyme Transgenics. Now, material produced by the transgenic route would pose regulatory issues, but it will not be the route of manufacture when we bring the product to market, but, long term, transgenically produced material may replace more conventionally produced material, particularly when you get to the kind of quantities that could be required if the product is very successful. We’re confident that our partners have the right things in place for meeting the demand.

If you look further into the company’s pipeline, our main concern here at CAT is to ensure that we can get our products manufactured in sufficient quantities for the clinical trials, and we don’t manufacture—we use contract manufacturers in doing trials or we use our partners to manufacture for trials—and, in order to make sure that we can satisfy the basic needs for trials in the next few years, we made an agreement with Lonza Biologics at the end of last year, to ensure that we have sufficient manufacturing slots to meet our needs for trials. I can’t speak for the other antibody companies—how they’re going to make sure that they have sufficient antibodies for trials in sufficient quantities in the quality that they want them—but we’ve got a batch of (a) partners and (b) contract manufacturers to make us feel comfortable in the medium-term.

D&MD: Is there anything else to say about D2E7 at this stage?

DG: Probably not. There’s been a lot about the analysis of Phase II data. It clearly has some advantages over products already on the market in terms of dosages, convenience, the patient has less injections, less visits to hospital, plus more flexibility. From my perspective—and I’m like an independent observer because we’re not involved in the clinical trials—the issue is a marketing one. The clinical trials data are going to be bullets, if you like, that are going to be fired in the war. It’s perfectly possible for the third product to the market to become the market leader, but it won’t do so in the absence of huge marketing effort. You may have the best clinical base, with the best properties, but it won’t make to be the biggest product without a huge marketing effort. That’s where I see the battle being fought.

D&MD: Is Abbott in a position to put in that kind of marketing effort?

DG: They are very committed to making the product a success. D2E7 is basically the reason that they acquired BASF (Pharma), so we’re feeling quite comfortable now. We were less comfortable when BASF were in sole charge, not that they were incompetent in doing clinical trials—they did clinical trials very well—but clearly they did not have sufficient sales and marketing muscle, particularly in the US, particularly in comparison with Immunex and Johnson & Johnson, that are marketing Remicade. With Abbott behind it, we’re more comfortable now. I don’t think that you can ever have enough. The battleground is the marketplace and it depends who has the most and the smartest sales and marketing effort behind the product.

D&MD: I picked up that CAT-152 was recommended for Orphan Drug Status in Europe last April. Has there been any progress with it since then?

DG: The progress since then is that we’ve started on a large European trial involving 350 patients—multicenter, multinational. I’m calling it a Phase II/III because it is a very conservative study confirming that CAT-152 is effective. But it isn’t the only study we’re going to do. So we’re not putting all our eggs in one basket, that one study. We’re actually debating announcing further clinical trials that would form part of the registration package. We’ve been asked if the Phase I/II that we’ve already done and this new Phase II/III study would be sufficient to file with. My position has always been that we need additional data and that will come from an additional trial or trials.

D&MD: It strikes me that, in comparison with D2E7, the potential market for this drug (CAT-152) is a lot smaller.

DG: Yes, it is. It’s smaller in terms of potential sales. D2E7 could be a billion-dollar product. CAT-152 could never aspire to be a billion-dollar product. It’s also quite different in as much as it’s to be used in a situation where there are no approved products and where there’s precious little competition in development. So, although it’s a smaller market—a niche—it’s also very different from the point of view that D2E7 will require literally thousands of sales representatives calling on doctors. CAT-152 only requires us to visit eye surgeons, particularly those specializing in glaucoma. That’s much smaller. Generally, these operations are only done in a small number of hospitals—it’s definitely a niche product.

On CAT-152, there will be some additional data presented at the world’s biggest ophthalmology meeting in May.

D&MD: For J695, you don’t just have one partner, as it involves Abbott Laboratories and Wyeth Genetics Institute.

DG: The reason for that was that BASF and the Genetics Institute became joint partners on the basis that BASF had the idea and the Genetics Institute had the intellectual property of the target molecule. A three-way agreement was made.

D&MD: Is Abbott as keen on this product as they are on D2E7?

DG: There’s a lot less public information about J695 available for a variety of reasons—partly because all the data was double-blinded in trials—so there is no data about whether it’s working. We do expect clinical data to be made available this year, but as to when, I don’t know at this stage. I can say that it is the most potent candidate that we have ever made. It is very potent in terms of its neutralization of IL12, which is essential if it’s going to be used in vivo, but also from the point of view of keeping the dose, the cost, and so on (down). We made a very potent candidate—much more potent than any other candidate that we’ve ever made—low picomoles. It’s in the low picomolar potency.

D&MD: Abbott is very prominent in this field (autoimmune diseases).

DG: Yes. I think that they see it as one of the areas that they want to major on.

D&MD: And what about the others (in the drugs pipeline)?

DG: LymphoStat-B has started being involved in clinical trials. This is a rare indication (systemic lupus erythematosus), so there’s no data on how it’s going, as we’re just starting.

CAT-213 is out of its Phase I study and we’re now at Phase II, when we’re challenging patients who have hay fever with ground pollen, and we’re looking to see whether CAT-213 modifies the allergic response. The data from that is going to be available next month (April 2002). We will have completed the study by the end of April, before pollen in the atmosphere starts to cause problems.

CAT-192 is in a Phase I/II study for patients with scleroderma. This program is shared with Genzyme. In terms of the responsibility of the two companies in that program, we jointly make decisions on the clinical program with them, but they are managing the program. The patient involvement (has) been under way for a few months now in that trial. There are further indications beyond that, and there are further candidates beyond this one with Genzyme, as part of the broad agreement that we have with them.

D&MD: LymphoStat-B is described as the first antibody to a genomics-derived target—how significant is that?

DG: Human Genome Sciences are putting themselves forward as the genomics company, capitalizing most on discoveries from genomics. The BlyS protein is itself has also gone into clinical trials, and they said that was the first protein from genomics to go into clinical trials. LymphoStat-B is the first antibody to be based on a genomics target.

My impression is that there is obviously a lot of work going on in genomics companies around the world. My impression is that their huge promise of new drug targets from genomics is actually going to take a long time to come to fruition. And there isn’t going to be this huge explosion that people were predicting two or three years ago. I think that we can envisage other targets, genomics targets which antibodies will be made against and clinical trials will be starting in the next year or two, perhaps. HGS may be about to announce that they have a second and a third . . .

The field of genomics and proteomics has been rather slower to yield new targets, against which antibodies have to be made, than had been envisaged. On the other hand, there are a number of big companies working in these fields, so, if there is going to be any capitalization to come out of genomics, we really should be at the forefront. With HGS, we became a subscriber to the Incyte database at the start of this year, and some of the other partners that we have, while not genomics companies, such as Pharmacia and Wyeth-Ayerst, are working on genomics targets as well. It is a potential source for new drugs for the future, but perhaps not the thousands and thousands of new drugs that people were talking about.

The problem is that the world takes a long time to validate the targets—a lot longer than we were envisaging. And the chances that your target will turn out to be really good are turning out to be rather lower than expected.

D&MD: Is that where your technology comes in terms of validating targets?

DG: The antibodies and research reagents can help sort out which targets are worth pursuing to the next step. That’s why some of our remits are related to sorting out when the targets are working better.

D&MD: Are you on course with the 12 antibody projects that were mentioned in the 2001 CAT Annual Report for?

DG: We have drug-discovery teams that are working on our own, our partners’ or shared programs. The 12 is a measure of how many active projects there are. That is not a prediction or a projection of how many will actually make clinical trials. If a project turns out not to be as interesting as we thought then that team can move onto another project.

We’ve learned over the years not to talk too much about these targets, for a variety of reasons. Number one is because the number of targets is commercially confidential. Our partners don’t want their competition to know which antibody is being developed against which target. Secondly, if you talk about these things too soon, it raises people’s hopes.

Over the past couple of years, we’ve tended to announce only when a program is about to move into preclinical (development), and 12 is the number for this year but my crystal ball doesn’t allow me to predict which ones or when. It’s a measure of the activity going on.

D&MD: With respect to the acquisition of Drug Royalty Corporation, from the press release, it wasn’t really clear whether this was important for the financial future of the company (CAT).

DG: I’d just like to make a couple of points about it. The first one is that we haven’t yet acquired Drug Royalty. We’ve made an offer. That offer hasn’t closed yet—that’s next week. Don’t count on it as a certainty. However, if we were to acquire Drug Royalty, what that does for us is to provide us with some cash, a cash flow, because they have an on-going royalty stream from the products that they have royalties from, and the third thing that it does is that it removes our obligation to pay Drug Royalty a proportion of our revenues, as agreed in 1994. Drug Royalty is entirely a financial vehicle. However, it is interesting to note that they own a proportion of one of our competitors—they own a share of Remicade.

D&MD: What is David Chiswell going to do next?

DG: I don’t know, as he hasn’t announced either publicly or privately what he’s going to do next.

D&MD: Is he going to remain with CAT in some role?

DG: He’s going to be available in a consultancy capacity, I believe. As far as we’re aware, he’s not going to head up a rival company, or anything like that.

D&MD: All our talk has been about the phage technology and the opportunities for that. What about other potential technologies for developing drugs? Are you involved in taking any forward?

DG: The company made quite a significant move about three years ago when we acquired a company and its patent estate. The company was called Aptein and its technology related to ribosomes for antibody display—a cell-free system. Essentially, we acquired the patents, which are valid on both sides of the Atlantic—in the US and Europe—and they survived interference in the US.

We’ve incorporated that into our drug-discovery programs and we are using it increasingly as a way of driving candidates in parallel with phage display. All our current candidates derive from phage display, but, if you ask me in five years’ time, the candidates will probably come from ribosome display, rather than phage display. The expectation is that it will happen and this will be based not only on the know-how that we’re developing, but also on the libraries we’re developing—the libraries that we can select from. They’re much larger than from phage display, so potentially, there’s more to choose from in terms of finding a candidate that has the characteristics that you’re looking for.

D&MD: So, instead of 100 billion with phage display, you’re looking for . . .?

DG: At least 1,000 times that.

D&MD: So, you’re looking at lots of computing power?

DG: Yes, one reason why we have our own bioinformatics group in-house is to have the computing power so we can deal with the mass of information that we produce. We’ve had to put a number of things in place. We’re not absolutely complete, but we’ve come quite a long way—certainly a very long way from the company that I described to you when I joined seven years ago.

D&MD: Thank you very much for that. Is there anything else that you would like to add?

DG: Well as you may know, our new financial year starts in April. It might be worth saying that our new chief executive is not expected to change the strategic direction of the company that the company’s been following in the last couple of years, at least in the short term. In the long term, he will, absolutely.

This interview was conducted by D&MD contributor Alex Crawford on March 6, 2002.

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