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Lead—Medical research at a crossroads turns toward proteins

Now that scientists have determined the complete sequence of human DNA, research teams are preparing for a follow-up project many say will be even more ambitious.

The study of proteins, which proteins are in which cell and how they interact with each other, is heralded as the key to new medicines. “Genes are great, but they don’t directly determine disease,” said Stefan Unger, an analyst at Frost & Sullivan in San Jose. “In order to cure or detect most diseases, one needs to understand proteins, their interactions and biochemical pathways.”

Frost & Sullivan consults health care companies, among other industries.

Already a multimillion-dollar business, proteomics, or the study of proteins, is poised to become a billion-dollar business, experts say.

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In a recent report, Frost & Sullivan estimated the proteomics market will rise from $700 million in 1999 to $5.8 billion in 2005.

– Investors Already Have An Attraction

Some analysts predict the upside to be even greater, considering biotechs active in proteomics have already attracted investors.

Jean-Francois Formela, senior principal at Atlas Ventures in Boston, which manages a $1.6 billion fund, is among them.

“It (proteomics) is the latest wave in biotech after genomics,” Formela said.

Karl Handelsman, a general partner at CMEA Ventures in San Francisco, said San Diego is likely to become a major player in proteomics given its pool of talented scientists.

Local biotechs active in proteomics include Structural GenomiX, Syrrix Inc., GeneFormatics, Triad and Structural Bioinformatics Inc. These start-ups developed techniques they hope will draw biotechnology and pharmaceutical firms alike, Unger said.

Though, he said, it remains to be seen which of the competing technologies will triumph.

“Proteomics is still an embryonic-to-emergent market,” Unger said.

– Unprecedented Investment Level

Structural GenomiX, however, has already leaped to unprecedented heights. The biotech raised $85 million , the largest amount of money ever accumulated by an independent firm in 14 months, Formela said.

Atlas Ventures alone pumped $12.5 million into the firm.

This, without having made a sale.

Jay Knowles, Structural GenomiX vice president of business development, anticipates the biotech will enter into two to four significant partnerships by September 2001.

Formela is convinced the firm’s “X-ray crystallography” will be a great success with drugmakers, many of whom rely on outside firms to feed them information that helps them make drugs better, faster, and at a lower cost.

Think of it as a piece of music, Formela said in explaining the technology. For the layman, musical notes are meaningless. You won’t hear the music unless someone plays it for you.

– A Step Beyond Studying Genes

Genes, which make proteins, are meaningless unless you know what it looks like in space.

“If you know the structure, it will tell you the information you need,” Formela said.

Another local firm, Syrrx, also developed a technology to solve crystal structures of proteins.

So far, Syrrx raised $25 million in venture capital funding. Among its backers are Versant Ventures in Palo Alto and CMEA Ventures.

Jun Yoon, business development associate at Syrrx, said he’s not too worried about chief rival Structural GenomiX.

“We have more expertise, more resources and better technology,” he said, referring to Swiss drugmaker Novartis AG, from which Syrrx was spun off.

Karl Handelsman, general partner at CMEA Ventures, agreed, “Structural GenomiX will do very well, but we invested in Syrrx, because we felt their approach will be even more successful.”

He declined to say how much money CMEA Ventures invested in Syrrx.

Another firm, GeneFormatics, also specializes in X-ray crystallography, but also does some “nuclear magnetic resonance (NMR) spectrometry technology.”

– Firm Rapidly Raises Millions

The firm, founded in December 1999 by John Chiplin, has raised $4 million to date.

Chiplin, who is the president and CEO, said the firm is about to close a second round of financing, which he terms a “substantial” amount.

He said GeneFormatics has already struck deals with four major drugmakers: Schering- Plough Corp. in Madison, N.J., Bristol-Myers Squibb & Co. in New York, Hisamitsu in Japan and Astra Zeneca, Plc. in London.

Under the business model, clients pay GeneFormatics to analyze proteins they provide. A future source of income will be access to an enormous protein database, still in development, Chiplin said.

GeneFormatics will charge subscribers between $500,000 and $1 million per year, he said.

Another biotech, Triad, also hopes to draw drugmakers, but mainly those with a specific protein in mind.

The San Diego-based firm designed a library of molecules that fit specific protein targets , like a key that fits into a lock , to prevent it from carrying out its normal biological function, a company official said. Daniel Sem, vice president for biophysics at Triad, explains why this is important.

– Hundreds Of Drugs Targeted

“We’ve been going after 500 drug targets so far,” Sem said. “People estimate there are 5,000 drug targets now as a result of the human genome project.”

More drug targets, or genes, means more proteins to study.

It will cost drugmakers about $500,000 to get Triad to screen one drug target.

The firm’s strategy is to use NMR spectrometry to analyze a protein from and for drugmakers. Aside from providing a service for drugmakers, Triad also plans to do work on genes themselves.

To date, Triad received $12.5 million in funding. Backers include Lombard Ventures in Boston, Skyline Ventures in Palo Alto and GeneChem Technologies Venture Fund in Montreal, Sem said.

The firm hasn’t signed any deals, but Sem bets on the technology’s speed to draw clients.

Crystallizing proteins is taking the long way, Coutts said about his local rivals Syrrx and Structural GenomiX. Triad produces a computerized virtual protein so fast, he said, that clients get results in just four weeks.

Others, including Atlas Ventures’ Formela, however, contend that virtual proteins can be made faster, but ultimately don’t measure up to the “real structure.”

At this point it’s too early to say who will win the proteomics’ race, Unger said.

The job that lies ahead for research teams is enormous. There are up to 20 million different proteins. By contrast, the human genome comprises an estimated 100,000 genes.

Although the study of proteins is nothing new, scientists modified old techniques and developed new ones to speed up the process and analyze many more proteins at one time.

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