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Distracted By Merger, Pfizer Waffles on Future Of La Jolla Incubator

Two years ago, Pfizer Inc. dedicated a building on the campus of its La Jolla laboratories to fledgling life sciences companies where they could focus on research without worrying about raising money or buying expensive equipment.

One of eight buildings on its sprawling 33.5-acre La Jolla campus, The Pfizer Incubator was designed as a place where early stage ideas could grow in exchange for Pfizer’s rights to acquire any resulting products or technologies. The pharmaceutical giant committed to funding each company for roughly $2 million a year for two years.

It soon welcomed three San Diego startups — Fabrus LLC, Wintherix LLC and RGo Bioscience LLC — with promising new approaches to drug development and the potential for Pfizer to reinvigorate its product pipelines.

The first company to graduate the program this year, Fabrus, quietly walked away without a Pfizer contract.

“Pfizer has been caught up with the integration of Wyeth, and Fabrus will be spinning out as an independent entity,” Fabrus CEO Vaughn Smider wrote in an e-mail last week.

The small biotech was testing a technology for identifying antibodies that may one day lead to new drugs.

Smider did not say what led to Pfizer’s decision and calls made to Pfizer seeking more information were not returned by deadline.

Merger Drives Uncertainty

Pfizer spokeswoman Samantha Cummis said most of the details surrounding the incubator’s future are still being worked out as Pfizer merges operations with Wyeth Pharmaceuticals.

“Right now, it’s status quo,” she said.

But the pharmaceutical giant, which pledged in 2007 to invest $10 million a year over five years in the program, hasn’t made any new investments this year. In March, it put the 26,600-square-foot incubator building up for sale under a partial lease-back arrangement, causing some concern among occupants who feared Pfizer would place less emphasis on the program moving forward. The building remains for sale today, according to Cushman & Wakefield Inc. broker Steve Rosetta.

Since the incubator began, circumstances have changed dramatically for the pharmaceutical giant. Its $68 billion merger with rival drug maker Wyeth has resulted in thousands of job reductions and the closure of six of 20 research facilities worldwide.

Its La Jolla laboratories, which serve as a global hub for cancer research and employ roughly 1,000 people, were spared from the cuts. But the future of its incubator remains uncertain.

Looming Revenue Losses

The two remaining incubated companies, RGo and Wintherix, plan to submit their final research reports to Pfizer at the end of the year.

“It’s very hard for us to judge what their preference will be,” said Thomas Hermann, co-founder of RGo and an assistant professor at UC San Diego.

Like other Big Pharma companies, Pfizer faces major revenue losses when a blockbuster drug goes off patent next year.

In Pfizer’s case, it’s Lipitor, a cholesterol-lowering drug that accounted for roughly a quarter of the company’s $48.3 billion in revenues last year.

Its incubator program was hailed as a way for the company to support the kind of early stage ideas that don’t typically get funded, while also bolstering potential future revenue streams. But companies that walk away without Big Pharma’s interest face extreme challenges getting funded, according to Avalon Ventures partner Kevin Kinsella.

“An incubated deal tossed out of the pharma nest is a dead baby bird on the sidewalk,” he said.

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