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Ambrx at Turning Point Because of Big-Pharma Deal?

Ambrx Inc. has scored its third and largest big-pharma collaboration, and executives hope that partnering with one of the world’s largest drug companies will quell questions about its technology raised by its top executive’s quiet departure in January.

The evolving 60-employee company, which uses man-made amino acids to boost proteins such as human growth hormone, and potentially insulin, to help them last longer in the body, is at a turning point.

Ho Sung Cho, vice president of technology and process development, said since the collaboration announcement late last month with Merck Serono, an affiliate of Germany’s Merck KGaA, Ambrx has been getting numerous inquiries on the business development front.

Door Left Open

He said Ambrx is entertaining the idea of being acquired or going public, and that the company is leaving the door open for interested parties.

“This is the multimillion-dollar question at this point,” Cho said. “Given the amount of interest, we will see how the business evolves over time. We are open to both possibilities.”

The Merck collaboration , for which financial terms were not disclosed , focuses on developing ARX201 to garner a slice of the $2 billion human growth hormone market. ARX201 is an optimized version of human growth hormone, used to treat growth hormone deficiencies and genetic disorders. It is also used to treat Turner Syndrome, which is a chromosomal disorder that affects only females, and causes them to be short statured with no ovarian development. The therapeutic candidate is Ambrx’s most advanced product.

But the firm is applying its Recode technology, for which it received patents last year, to several promising markets, including hepatitis C, multiple sclerosis, stimulation of white blood cells and possibly diabetes.

The advantage of re-engineered proteins, the company’s executives say, is that patients could reduce needle injections to one per week instead of every day. That’s why investors have pumped in more than $96 million since Ambrx’s inception in 2003.

Ambrx’s rapid progress has been impressive, but still unsettling is why former chief executive Martin Mattingly left after just more than a year , especially considering Mattingly’s vocal enthusiasm for the firm’s technology when he joined in September 2005.

Mattingly, who couldn’t be reached for comment, had balked at the prodding of folks like San Diego biotech pioneer Ivor Royston, who said at the time that he wondered why Mattingly, who has managerial experience at Pfizer Inc. and Eli Lilly and Co., would go to a then preclinical startup. Mattingly’s move to Ambrx generated buzz at the JP Morgan Health Care Conference in early 2006, Royston had said, where the company was among a select few small firms asked to present.

Mattingly had told the Business Journal he had strong faith in Ambrx’s technology, saying he believed the market for optimized protein drugs could be about $40 billion per year.

No Press Release

Privately held Ambrx did not issue a press release when Mattingly exited, and those in the industry, including executives at Ambrx, officials at the life sciences trade association Biocom and nonprofit Connect, as well as Royston, said they don’t know where Mattingly went or why he left.

The last time Mattingly left a company, bad news followed: His departure from CancerVax Corp. came just a month before the company announced plans to discontinue trials for its lead compound, cancer vaccine Canvaxin, in October 2005. The firm subsequently laid off more than 100 workers, and the Germany-based Micromet AG acquired the leftovers.

Bruce Kimmel, vice president of therapeutic applications at Ambrx, said Mattingly is still serving as a consultant to Ambrx and that he is still an investor, though he did not know what percentage Mattingly owned.

Concerns or doubts about Ambrx’s technology are “not the basis for his leaving,” Cho said.

“That’s something you’ll have to ask him,” Cho said. “The ability of Ambrx to attract big pharma partners speaks to its ability.”

Ambrx expects to fill the CEO position within a month. James Young, who has served as a partner at 5AM Ventures, which funded Ambrx at its founding, is the interim CEO.

Ambrx executives declined to disclose cash on hand, but said the firm has enough money to last until the end of 2009. Cho, the fifth employee hired at Ambrx, said the company is relying on both money from collaborations and venture capital.

Cho said the Merck Serono collaboration gives Ambrx the option for co-promotion in the U.S. market if Ambrx funds some of the cost of development in phase three , the last of three testing phases required by the Food and Drug Administration. ARX201 is currently in phase one/two trials.

Ambrx licensed its Recode technology from Peter Schultz’s lab at The Scripps Research Institute. The company has quickly garnered the interest of pharmaceutical giants like Roche, with which it partnered in 2005 to develop a treatment for hepatitis C. Ambrx has another unnamed big-pharma partnership, executives said.

Kimmel said Ambrx focused first on the human growth hormones application because the hormones have a well-substantiated history of being safe and effective.

Predictive Tests

“Tests in rats with human growth hormones are very predictive of what it will do in humans,” he said. “These factors reduce the risk of development.”

Rahul Jasuja, a Santa Monica-based analyst with MDB Capital Group, covers one of Ambrx’s main competitors, Redwood City-based Maxygen.

Maxygen shuffles DNA in proteins to improve their properties, while Ambrx attaches man-made amino acids. He said the biggest obstacle for protein optimization companies like Ambrx and Maxygen is to prove that the product is better than what is already out there.

“Is it different enough?” Jasuja said. “Will these bring any value compared to other proteins? They have to have clear (intellectual property) and prove it is better than what exists.”


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