BUSINESS
OUR COMPANY
We have developed a broadly applicable, platform technology that identifies
drug candidates more efficiently than traditional drug discovery techniques. Our
proprietary CART technology allows us to develop novel biochemical assays to
discover drug candidates that target GPCRs, an important class of receptors.
Additionally, we believe that CART is applicable to other human receptor
classes, such as tyrosine kinase receptors, or TKRs, as well as to non-human
receptors for the discovery of animal therapeutics and agricultural products.
In the recent past, the pharmaceutical and biotechnology industries have
increasingly focused on receptor-based drug targets due to their potential for
increased specificity and reduced side effects. Of the leading 100
pharmaceutical products, based on 1998 revenues, 33 target receptors as their
primary mechanism of action. Of these 33 receptor-based drugs, 25 wholly or in
part act on GPCRs. In 1998, these GPCR-based pharmaceutical products represented
over $23 billion in sales, and included Claritin(RM) for allergies, Zantac(RM)
for gastric ulcers, Imitrex(RM) for migraines and Cozaar(RM) for hypertension.
We use our CART technology to discover drug candidates by genetically
altering, or CART-activating, receptors to mimic the biological response that
occurs when the native ligand binds to the receptor. These CART-activated
receptors are then used as a screening tool to identify chemical compounds that
alter this biological response and that are the basis for drug candidates. Using
CART technology, we have discovered drug candidates that have demonstrated
pharmacological activity in pre-clinical, or animal, studies through our own
internal research and drug development efforts, as well as through those of our
collaborators. We have entered into collaborative relationships with a number of
pharmaceutical and biotechnology companies, including Eli Lilly, Fujisawa,
Lexicon Genetics and Neurocrine Biosciences.
THE DRUG DISCOVERY PROBLEM
Diseases in humans are caused by the abnormal function of cells. Both
normal and abnormal cellular function is principally the result of communication
between cells. This cellular communication occurs when a ligand is released from
a cell and binds to a receptor on the surface of that cell or another cell. This
binding triggers the initiation of various signals within that cell, resulting
in changes in cellular function. By interacting with the receptor to mimic or
block ligand-receptor binding, drugs affect abnormal cellular function and
thereby regulate the disease process.
Receptors are classified into categories based upon similarities in their
biochemical and structural properties. They are located in various tissues
throughout the body and affect a variety of cellular functions. There are four
principal classes of human receptors: GPCRs; TKRs; ligand-gated ion channel
receptors; and intracellular receptors. Although we believe CART technology is
applicable to all of the principal classes of receptors, we focus on GPCRs
because they are the predominant class of receptors involved in cellular
function.
The ligand that naturally binds to a receptor and activates or inhibits a
biological response is referred to as a receptor's native ligand. A receptor for
which the native ligand has been discovered is called a known receptor, while a
receptor for which the native ligand has not been identified is called an orphan
receptor. There are believed to be approximately 2,000 GPCRs within the human
genome which are potential targets for drug development. Approximately 1,900 of
these are orphan GPCRs.
Advances in genomics research have enabled researchers, including us, to
directly identify the genetic sequence of previously unidentified receptors,
including GPCRs, from basic genetic information. As more GPCRs are made
available, the opportunity to use this information for drug discovery efforts
should increase. However, although hundreds of new, orphan GPCRs are being made
publicly available through genomics research, traditional drug discovery
techniques to find new drug candidates cannot be applied to orphan GPCRs until
the native ligands for these orphan GPCRs are identified.
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The process of identifying native ligands is very uncertain, generally
involving many stages of tissue extraction and extensive purification. To our
knowledge, only eight definitive examples exist where a novel native ligand has
been discovered by intentionally targeting an orphan GPCR. Even when successful,
identifying the native ligand typically requires four to five years and costs
millions of dollars per GPCR. For example, a GPCR called GPR 14 was discovered
in 1995, but its native ligand, urotensin II, was not identified until 1999. The
process of identifying native ligands is typically the step that limits the rate
at which drugs are discovered at receptor targets.
OUR SOLUTION -- CART TECHNOLOGY
We do not use, and therefore do not need to identify, the receptor's native
ligand for our drug discovery efforts. We use our CART technology to discover
drug candidates by CART-activating receptors to mimic the biological response
that occurs when the native ligand binds to the receptor. Therefore, CART
technology avoids a major bottleneck in drug discovery efforts at orphan
receptors.
CART technology can be applied broadly to GPCRs because all GPCRs have
highly similar structural elements, consisting of:
- three extracellular loops on the outside of the cell
- three intracellular loops on the inside of the cell
- seven regions that cross through the cell surface, or membrane, and
connect the extracellular and intracellular loops
When a ligand binds to the extracellular portion of the GPCR, changes occur
to the intracellular portion of the GPCR that permit a signaling molecule
located within the cell, called a G protein, to bind to the intracellular
portion of the GPCR. This leads to further intracellular changes, resulting in a
biological response within the cell.
[DIAGRAM DEPICTING GPCR-MEDIATED BIOLOGICAL RESPONSE]
Under normal physiological conditions, a GPCR exists in equilibrium between
two different states: an inactive state and an active state. When the GPCR's
equilibrium shifts to an active state, the GPCR is able to link to a G protein,
thus producing a biological response. When the GPCR's equilibrium shifts to an
inactive state, the receptor is typically unable to link to a G protein, and
therefore unable to produce a biological response. When a native ligand binds to
the GPCR, the GPCR's equilibrium shifts and the GPCR is stabilized in the active
state.
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[DIAGRAM DEPICTING LIGAND-DEPENDENT GPCR ACTIVATION]
By altering the genetic structure of a GPCR, our CART technology stabilizes
the GPCR in the active state in the absence of the native ligand.
[DIAGRAM DEPICTING CART-ACTIVATED GPCR]
Drug screening and discovery targeting GPCRs using CART technology is
comprised of four stages:
- altering the molecular structure of an intracellular loop or
intracellular portion of the GPCR to generate a CART-activated form of
the GPCR
- introducing the CART-activated form of the receptor into mammalian cells,
which, in turn, manufacture the CART-activated form of these receptors at
the cell surface
- analyzing the cells containing the CART-activated GPCR to detect
biological responses that result from the linking of the CART-activated
GPCR to a G protein
- screening chemical libraries of small molecule compounds against the cell
membranes containing the CART-activated GPCR to identify compounds that
interact with the GPCR
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Screening using CART technology allows us to simultaneously identify
compounds that act as receptor inhibitors to decrease the detected biological
responses, or act as receptor activators to increase the detected responses.
Therefore, our CART technology allows us to discover drugs that either inhibit
or enhance biological activity.
CART technology is also useful for identifying drug candidates that reduce
cellular responses resulting from ligand-independent activity of receptors.
These drugs are termed inverse agonists and are the preferred drugs for treating
diseases in which ligand-independent receptor activity may be important, such as
schizophrenia. In general, traditional ligand-based drug screening techniques
can only be used to identify neutral antagonists, which do not affect the
ligand-independent activity of the receptor. We can directly identify inverse
agonists using our CART technology by screening for ligand-independent receptor
activity. We believe the inverse agonists that we identify will possess improved
properties over neutral antagonists because they inhibit both ligand-induced as
well as ligand-independent activity.
In addition, because CART does not require the use of the native ligand, we
are not limited to finding drug candidates that bind to a receptor at the
receptor's ligand binding site. Instead, CART technology exposes the entire
receptor surface to drug candidates, allowing for the detection of drug
candidates which bind at any point on the receptor surface. We believe that this
feature of CART technology is important not only with respect to orphan
receptors, but known receptors as well, because it provides us with the ability
to discover new drugs with unique mechanisms of action.
In summary, we believe that our platform CART technology offers several key
advantages for drug discovery over other screening techniques. Screening
CART-activated receptors:
- does not require prior identification of the native ligand for an orphan
receptor
- enhances the detection of, and simultaneously identifies, both receptor
inhibitor and receptor activator compounds
- provides the ability to discover novel and improved therapeutics at known
receptor targets
- allows for the identification of compounds or drug candidates that
inhibit both ligand-induced and ligand-independent activity
OUR STRATEGY
Our strategy is to become a leader in the development of novel
receptor-based screening assays by using our proprietary CART technology to
rapidly discover drug candidates. The major elements of our strategy are to:
Apply our CART technology to orphan GPCR targets to leverage available
genomics information. Recent advances in genomics research have provided gene
sequence information on an unprecedented number of receptor drug targets,
including numerous previously unidentified GPCRs. CART technology can be applied
to these orphan GPCR targets to discover drug candidates. This can be done more
quickly and efficiently using CART technology than with traditional drug
discovery screening techniques because drug discovery using CART does not
require the identification and characterization of a receptor's native ligand, a
process which typically requires several years and costs millions of dollars per
receptor.
Discover new drug candidates that have unique mechanisms of action for
known GPCRs. We believe that CART provides us with the ability to discover new
drug candidates with unique mechanisms of action at known receptor targets,
which may be more effective and may have fewer side effects than existing drugs.
Unlike traditional drug discovery methods, we are not limited to finding drug
candidates that bind to a receptor at the receptor's ligand binding site.
Because CART technology exposes the entire GPCR surface to drug candidates, we
can discover drug candidates that act upon any part of the receptor surface.
Develop multiple pharmaceutical product candidates for GPCR targets. CART
technology allows us to identify drug candidates that act as receptor inhibitors
to reduce biological activity, or receptor activators to increase biological
activity. Therefore, CART provides the opportunity to simultaneously
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discover multiple different drug candidates with unique mechanisms of action for
each receptor target, any of which may ultimately become successful commercial
pharmaceutical products.
Enter into strategic collaborations to discover and develop novel drug
candidates. We intend to enter into a number of strategic collaborations to
discover and develop novel drug candidates using our CART technology. We believe
that the broad applicability of our CART technology will allow us to enter into
collaborations that focus on a variety of diseases and target a large number of
orphan and known GPCRs. We have recently entered into collaborations with Eli
Lilly and Fujisawa under which we will CART-activate a significant number of
GPCR targets and may receive revenues in the form of development fees, milestone
payments and royalties on products, if any, developed to target these GPCRs.
Apply our CART technology to other human receptors and non-human receptors
for human therapeutic, agricultural and other applications. CART technology can
also be applied to other types of human receptors, such as TKRs, which are often
implicated as important factors in various diseases, such as breast cancer. We
are also applying our CART technology to non-human receptors for a variety of
applications including plant receptors to discover chemical growth factors,
insect receptors to discover insect control agents and viral receptors to
discover novel anti-viral drug candidates. We have CART-activated a number of
these other types of receptors and intend to pursue opportunities developed from
these receptors.
Continue to protect and expand our intellectual property rights. We have
filed 96 independent patent applications with the United States Patent and
Trademark Office, and are filing some of these patent applications worldwide.
Although no patents have been issued to us, we believe that we can obtain
patents on our CART technology and that we can obtain patents on our
CART-activated receptors because our technology genetically modifies these
receptors and changes their function. We intend to continually seek ways to
vigorously protect and enforce our rights with respect to our intellectual
property.
APPLICATIONS OF OUR CART TECHNOLOGY
Over the past three years, we have obtained the full-length genetic
sequences of 235 GPCRs and made them available for CART-activation and
screening. Of these, 120 are human orphan GPCRs and 110 are human known GPCRs.
The remaining five are non-human receptors, including plant, viral and insect
receptors. Through the use of our proprietary CART technology, we have
successfully identified drug compounds that inhibit or activate a number of
known and orphan receptor targets.
Orphan GPCRs
An important element of our CART technology involves using the genetic
sequences of orphan GPCRs to understand and define the tissue and cellular
distribution of these GPCRs. The genetic sequences provide us with the necessary
tools to locate the orphan receptors in tissues. Once we have identified the
location of an orphan receptor in tissues, we can determine the normal function
of the orphan receptor and compare that function to the function of the orphan
GPCR in diseased tissues. We then use our CART technology to screen the targeted
receptor for drug candidates that can be employed to verify the proposed
receptor function.
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We have prioritized and applied our CART technology to 15 orphan GPCRs,
identified below by our code names, as having high potential value as drug
discovery targets against specific diseases or indications, based upon the
distribution of the GPCR in specified tissues. These GPCRs and their intended
disease targets are:
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INDICATION ORPHAN GPCRS TISSUE DISTRIBUTION
Obesity 18F Hypothalamus
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19U Hypothalamus
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19X Forebrain
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19NY Hypothalamus
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Cancer:
Ovarian 18A Adrenal/ovary
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Colorectal 18AI Intestine
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Osteosarcoma 19AG Bone/pancreas
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Leiomyoma 19Y Uterus
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Breast 18AD Breast
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Cardiovascular disease 18C Blood vessels
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18D Heart/other
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Diabetes 19AJ Pancreas
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Inflammation 18AF Spleen/lymph nodes/brain
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19W T cells
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Alzheimer's Disease 18L Hippocampus
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Obesity. National Institutes of Health statistics indicate that
approximately 100 million adults in the United States are overweight and that
25% of these are considered clinically obese. The few currently approved drugs
for the treatment of obesity in the United States act either as appetite
suppressants or blockers of fat absorption. However, cardiovascular or
gastrointestinal side effects may limit the long-term effectiveness of these
drugs. Consequently, more effective therapeutics are urgently needed for this
major public health problem.
We have an ongoing program directed towards the development of novel
anti-obesity drugs. We have identified a number of orphan GPCRs on brain cells
related to the control of feeding and metabolism, including the 18F, 19U, 19X
and 19NY GPCRs. For example, we have discovered an over-abundance of the 18F
GPCR in the brain metabolism centers of genetically obese rats. We believe that
this discovery indicates that overactivity of this GPCR may be associated with
obesity.
We are using our CART technology to identify drug candidates that inhibit
the activity of the 18F GPCR. Repeated administration of the drug candidates we
have identified has resulted in reduced food intake and sustained weight loss in
normal laboratory animals. Similar results were also obtained in a diet-induced
animal model of human obesity. In this diet-induced animal model, these drug
candidates also acted to increase fat metabolism and resulted specifically in a
loss of fat mass. We have found that the 18F GPCR is also located on human fat
cells. Therefore, we believe that these drug candidates may provide the basis
for a novel approach to the treatment of human obesity by simultaneously
reducing food intake and increasing fat metabolism. Additionally, our animal
data indicate that our drug candidates may not have the same side effects that
are associated with currently available anti-obesity drugs.
Our anti-obesity drug program demonstrates the advantages of CART
technology for rapid drug candidate discovery. The process of discovering
promising drug candidates took approximately 18 months from our initial
discovery of the over-abundance of the 18F GPCR in genetically obese animals to
the animal testing of the drug candidates that we discovered using our CART
technology. We intend to enter into one or more collaborations to further expand
our anti-obesity drug program with the ultimate goal of
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selecting one or more of our novel anti-obesity drug candidates that target
orphan GPCRs, such as the 18F GPCR, for future clinical development.
Cancer. We have identified several orphan GPCRs, including the 18A, 18AI,
19AG and 19Y GPCRs, which we believe represent therapeutic targets for the
treatment of a variety of cancers. These orphan GPCRs are attractive therapeutic
targets because they have been shown to be present at abnormally high levels in
ovarian, colorectal, gastrointestinal and uterine cancer cells and cause
unwanted proliferation of cells in laboratory experiments. Additionally, we have
identified another orphan GPCR, the 18AD GPCR, which potentially suppresses the
growth of tumor cells. We determined that there are high levels of the 18AD GPCR
present in tissues adjacent to cancerous breast tissue. We tested a CART-
activated form of the 18AD GPCR in a non-animal, or in vitro, cancer model and
showed that this GPCR suppressed cell proliferation. This suggests to us that
drug candidates that activate the function of the 18AD GPCR should inhibit tumor
growth, providing a potential new treatment approach for breast and other
cancers.
Cardiovascular disease. We have identified several orphan GPCRs, including
the 18C and 18D GPCRs, that are located within the cardiovascular system, such
as on heart tissues and blood vessel walls. Blood pressure is regulated by
constriction or relaxation of blood vessels which is effected by GPCRs located
on blood vessel walls. We believe that some of the drug candidates that we have
identified using CART technology that target these GPCRs have potential to
regulate blood pressure and treat diseases such as hypertension. According to
the National Institutes of Health, hypertension affects approximately 50 million
people in the United States, and can lead to heart disease and stroke, which are
among the leading causes of death in the United States.
Diabetes. One of the orphan GPCRs that we discovered, the 19AJ GPCR, is
specifically located on pancreatic, insulin producing, beta cells. Normally,
glucose stimulates the beta cell to produce insulin, but in diabetes the beta
cell often becomes less sensitive to glucose and the ability of the beta cell to
produce insulin is impaired. The 19AJ GPCR appears to make the beta cells more
responsive to glucose concentrations, resulting in enhanced insulin release. By
applying CART technology to the 19AJ GPCR we will seek to discover drug
candidates to treat diabetes, which, according to the National Institutes of
Health, affected approximately 15.7 million people in the United States in 1997.
Inflammation. We have identified several orphan GPCRs, including the 18AF
and 19W GPCRs, that may mediate inflammatory responses in various locations of
the body. Our preliminary data suggest that the 18AF GPCR may regulate brain
cells related to inflammation. Based upon its sequence structure, the 18AF GPCR
appears to be related to a group of GPCRs called chemokine receptors. Chemokine
receptors are known to be involved in the inflammation process, and brain
inflammation is involved in a number of neurodegenerative disorders, including
stroke. The number of 19W GPCRs is increased in dying cells during inflammation,
suggesting that the 19W GPCR may be involved in controlling the process of cell
death. We have CART-activated the 19W GPCR and have developed an assay for
screening of chemical compounds against this GPCR. Drug candidates that modulate
the activity of these GPCRs may provide a unique therapeutic approach to the
treatment or mediation of inflammatory responses. According to the National
Institutes of Health, diseases involving inflammation afflict over 25 million
people in the United States.
Alzheimer's Disease. Several of our orphan GPCR targets are located on
cells within the central nervous system, including the 18L GPCR. The 18L GPCR is
located on nerve cells in an area of the brain called the hippocampus, which is
responsible for controlling memory function. In Alzheimer's Disease, normal
memory processes in the hippocampus are severely impaired. We believe drugs that
modulate the 18L GPCR could be useful for controlling memory function and for
the treatment of symptoms of Alzheimer's Disease, which, according to the
National Institutes of Health, affects four million people in the United States.
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Known GPCRs
Although we primarily focus on orphan GPCRs, we also apply our CART
technology to known GPCRs. We believe that the application of our CART
technology to known GPCRs will identify novel classes of drug candidates that
may be more effective and may have fewer side effects than existing drugs that
target known GPCRs.
Our principal advantage in applying CART technology to known GPCRs is our
ability to directly identify drug candidates that act as inverse agonists, which
cannot be directly identified using traditional ligand-based screening
techniques. Inverse agonists are particularly relevant in treating diseases in
which ligand-independent GPCR activity, or overactivity, is implicated. Diseases
in which we believe overactive known GPCRs are implicated include:
DISEASE OVERACTIVE KNOWN GPCRS
Schizophrenia 5HT(2A), D(4)
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Depression 5HT(2A)
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Hyperthyroidism Thyrotropin
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Hypertension Angiotensin AT(1A)
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Asthma Adenosine A(1)
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Melanoma MC-1
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Retinitis Pigmentosa Rhodopsin
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We have identified drug candidates that are capable of inhibiting both
ligand-independent and ligand-dependent activity at selected known GPCR targets.
We are currently developing drug candidates that target these overactive known
GPCRs to treat the related diseases. Our most advanced program targets the
serotonin 5HT(2A) GPCR for potential treatment of schizophrenia and other
psychotic disorders.
Psychosis. According to the National Institutes of Health, approximately
2.7 million people in the United States suffer from schizophrenia. We have
tested currently available anti-psychotic drugs and have found that they act as
inverse agonists at a known GPCR, referred to as the 5HT(2A) GPCR. Using our
CART technology, we have discovered and are developing a number of new drug
candidates that act as inverse agonists at the 5HT(2A) GPCR. These drug
candidates displayed activities in tests involving laboratory animals indicating
that they would be useful in treating psychiatric disorders such as
schizophrenia. Moreover, our CART-identified 5HT(2A) inverse agonists possess a
higher degree of receptor selectivity than currently marketed anti-psychotics,
which suggests our inverse agonists may be more effective. To date, these drug
candidates exhibit no evidence of side effects in laboratory animals.
Our anti-psychotic drug program also demonstrates the advantages of CART
technology for rapid drug candidate discovery. The process of discovering
promising drug candidates took approximately 18 months from the application of
our CART technology to the 5HT(2A) GPCR to the animal testing of the drug
candidates that we discovered using CART technology. We intend to enter into a
collaboration to further expand our anti-psychotic drug program with the goal of
selecting one or more of our novel anti-psychotic drug candidates that target
the 5HT(2A) GPCR, for future clinical development.
Other areas of CART application
Olfactory and taste GPCRs. A specialized multigene family of GPCRs has been
identified in the nasal membrane and is responsible for the sense of smell.
Another family of GPCRs has recently been discovered in the tongue and is
believed to be responsible for the perception of taste. We are applying our CART
technology to a number of olfactory and taste GPCRs to identify novel compounds
that we believe will be of potential commercial value in the fragrance and food
additive industries.
Plant GPCRs. Plants respond to a variety of environmental and internal
signals that regulate aspects of their growth and development. GPCRs have
recently been identified in a variety of plants and have
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been implicated in the action of a variety of plant hormones. We are presently
applying our CART technology to plant GPCRs in an attempt to identify novel
regulators of the life cycle of plants that may affect crop growth and
development.
Viral GPCRs. GPCRs are involved in either replication or infection in a
number of viruses. Some herpes viruses, including the Kaposi's
sarcoma-associated virus, have GPCRs within their genome which are important for
replication. Other GPCRs appear necessary for primary infection. For example,
HIV infects cells by binding to a GPCR that transports the virus into cells. A
number of orphan GPCRs have been identified which appear to act in a similar
manner for other viruses. Our goal is to identify novel anti-viral drugs using
CART technology.
Insect GPCRs. Insect genomes also include GPCRs, and we have begun the
process of applying CART technology to insect GPCRs in an attempt to identify
compounds that may offer the potential for improved and environmentally safer
insect control agents. Our goal is to use CART-activated insect GPCRs to find
compounds that selectively reduce pest reproduction and feeding behavior.
Tyrosine kinase receptors. In addition to applying our CART technology to
orphan GPCRs, we are also applying our CART technology to other human receptor
classes, including orphan TKRs. A number of orphan TKRs have been located on
cancerous tissues and may be involved in excessive cell proliferation and
growth. As with GPCRs, our CART technology allows us to activate orphan TKRs in
the absence of native ligands and screen the activated TKRs to identify novel
inhibitors of TKR activity. We are currently evaluating nine orphan TKRs for
drug screening.
In vivo genetic "knock-in" models. We are collaborating with Lexicon
Genetics to develop mice that produce CART-activated GPCRs, or GPCR knock-ins,
by using state-of-the-art molecular genetic techniques. By producing
CART-activated orphan GPCRs in animals, we believe that we will gain valuable
insight into the functionality of individual GPCRs, as well as indications of
human disease for which drugs that target these GPCRs may be useful. In
addition, we expect that these knock-in animals will provide an animal model
that can be used to test the in vivo potency of drug candidates discovered using
CART-activated GPCRs.
OUR GPCR COLLABORATORS
Our success will depend in large part upon our ability to enter into
successful collaborations with other pharmaceutical and biotechnology companies.
We are active in the scientific community and within the industry and regularly
make presentations regarding our research and development programs and the
applications of our CART technology at scientific conferences and industry
conventions. We believe that our participation at these events has led, and will
continue to lead, to contacts with existing and potential collaborators. We have
entered into a number of strategic collaborations in the recent past to discover
novel drug candidates using our CART technology, and we expect to enter into
additional collaborations and expand our existing collaborations in the future.
Eli Lilly
In April 2000, we entered into a research alliance with Eli Lilly, one of
the world's leading pharmaceutical companies. Our collaboration with Eli Lilly
will principally focus on the central nervous system and endocrine therapeutic
fields. We will also focus on the cardiovascular field and may expand our
collaboration to other therapy classes, including cancer.
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During our collaboration, we will pursue an agreed upon research plan with
Eli Lilly that has several objectives. During the term of our collaboration, we
will mutually review and select GPCRs that will become subject to the
collaboration. These GPCRs may be provided either by us or by Eli Lilly. All of
our existing CART-activated GPCRs are excluded from the collaboration. We and
Eli Lilly will each share our respective knowledge of the GPCRs that become
subject to the collaboration to validate and CART-activate selected receptors.
We will jointly select a number of proprietary central nervous system, endocrine
and cardiovascular GPCRs for CART-activation, and we will then provide Eli Lilly
with enabled high-throughput screens for use at their screening facilities. We
will receive research funding from Eli Lilly for our internal resources
committed to these tasks, which will be augmented by substantial resource
commitments by Eli Lilly. Eli Lilly will be responsible for screening of its
chemical compound library using selected CART-activated receptors, for
identifying drug candidates and for the pre-clinical and clinical testing and
development of drug candidates. We will receive a technology access fee, and, if
various milestones are achieved, we are entitled to receive development fees per
GPCR assay provided to Eli Lilly, development milestone payments per drug
discovered and advanced into clinical trials, if any, and royalties depending on
the sales levels of drugs, if any.
Once the assay development fee has been paid for a CART-activated GPCR, Eli
Lilly will have exclusive rights to screen chemical libraries, discover drug
candidates that target that GPCR, and to develop, register and sell any
resulting products worldwide. We retain rights to partner or independently
develop GPCRs that do not become subject to the collaboration.
The term of our collaboration agreement with Eli Lilly is five years
beginning on the effective date of the agreement. Eli Lilly can terminate the
agreement with or without cause by giving us written notice during the first
nine months after the date of the agreement, and this termination would be
effective one year after the date of the agreement. If Eli Lilly terminates the
agreement without cause during this time, it must pay us a termination fee.
Either Eli Lilly or we can terminate the agreement with or without cause
effective three years after the date of the agreement by giving written notice
prior to the conclusion of the 33rd month after the effective date of the
agreement. In addition, either party can terminate the agreement at any time if
the other party commits a material breach, and Eli Lilly can terminate the
agreement at any time if, among other reasons, key staff leave our employ. The
parties will continue to have various rights and obligations under the agreement
after the agreement is terminated. The extent of these continuing rights and
obligations depends on many factors, such as when the agreement is terminated,
by which party and for what reason. These continuing obligations may include
further research and development efforts by us and a variety of payments by Eli
Lilly.
Fujisawa
In January 2000, we entered into a collaborative agreement with Fujisawa, a
leading Japan-based pharmaceutical company with significant drug discovery
research efforts. During the collaboration, we will jointly validate up to 13
orphan GPCRs as drug screening targets. We will be responsible for receptor
identification, location and regulation, and will apply our CART technology to
GPCRs selected by Fujisawa. We will also seek to validate screening assays based
on the selected GPCRs. Fujisawa will be entitled to screen selected assays
against its chemical compound library to identify drug candidates. Fujisawa will
also be responsible for the pre-clinical and clinical development of any drug
candidates that we or Fujisawa discover. We may also screen the selected GPCRs
using our in-house chemical library. If we or Fujisawa achieve various
milestones, we will receive research and development fees, including milestone
payments per drug candidate discovered and advanced into clinical trials, and
royalties depending on drug sales, if any.
Our collaborative agreement with Fujisawa will terminate upon the
expiration of Fujisawa's obligation to make royalty payments under the
agreement, if any. Fujisawa may terminate the agreement at any time by providing
us with written notice of their intention to do so and by returning any
proprietary rights they have acquired under the agreement. Additionally, either
party may terminate the agreement for a material breach of the agreement by the
other party. The termination or expiration of the agreement will not affect any
rights that have accrued to the benefit of either party prior to the termination
or expiration.
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Lexicon Genetics
In April 2000, we signed a binding letter of intent and memorandum of
agreement with Lexicon Genetics, a genomics company that uses a proprietary
technology to clone mice, enabling the large-scale definition of gene function.
The agreement establishes a research collaboration with Lexicon Genetics using
their proprietary technology to clone gene-targeted mice whose genomes have been
altered using specified CART-activated orphan GPCRs. Our collaboration with
Lexicon Genetics consists of a feasibility phase to determine both the utility
of this novel approach and the scope of any resulting licensing alliance. If we
proceed beyond the feasibility stage, the agreement establishes a licensing
alliance in which we and Lexicon Genetics will each contribute up to ten unique
GPCRs to clone mice containing CART-activated GPCRs for use as drug discovery
tools, and to discover drug candidates using these GPCRs. We will share equally
in the fees, milestones and royalties generated from any licensing agreement
with a third-party involving GPCRs developed through our licensing alliance.
Neurocrine Biosciences
In September 1999, we entered into an agreement with Neurocrine
Biosciences, a biotechnology company focused on the discovery and development of
novel therapeutics to treat diseases and disorders of the central nervous system
and immune system. Neurocrine Biosciences has the right, prior to September
2000, to provide us with up to three orphan GPCRs obtained by them to which we
will apply our CART technology. We will not receive any payment for
CART-activating these GPCRs. We may also screen the activated orphan GPCRs using
our in-house chemical library, or using Neurocrine Biosciences' in-house
chemical library, for which we will receive payments. Neurocrine Biosciences
will retain the rights to the CART-activated GPCRs and any drug candidates that
are discovered using these GPCRs.
OTHER ELEMENTS OF OUR BUSINESS
T-82
In 1998, we licensed the rights from SSP to develop T-82, a novel drug
candidate to treat Alzheimer's Disease. We believe T-82 possesses a unique
pharmacological profile that will translate into enhanced therapeutic activity
over currently available drugs for Alzheimer's Disease. We have completed three
Phase I clinical trials of T-82, involving single and multiple dose studies, as
well as a study to evaluate the possible interaction of T-82 with food. We
intend to begin Phase II clinical testing of T-82 in 2000 and to enter into a
collaborative relationship with a third-party to further develop T-82.
Currently available drugs to treat Alzheimer's Disease inhibit the enzyme
acetylcholinesterase. Acetylcholinesterase breaks down acetylcholine, an
important chemical for normal memory and cognitive function. By inhibiting the
enzyme acetylcholinesterase, currently available drugs prevent the breakdown of
acetylcholine. T-82 also acts to prevent the breakdown of acetylcholine by
inhibiting acetylcholinesterase, but unlike existing drugs which have limited
clinical effectiveness, we believe T-82 may cause the release of additional
acetylcholine from nerve terminals. This additional mechanism results from the
ability of T-82 to block a serotonin receptor, 5HT(3), which normally acts to
inhibit the release of acetylcholine from nerve terminals. Moreover, the
side-effects of currently-approved Alzheimer's Disease drugs include drug-
induced nausea and vomiting, which may cause some patients to reduce or
discontinue their use of the drugs. We believe T-82 possesses a pharmacological
advantage over current Alzheimer's drugs because of evidence that inhibition of
the 5HT(3) receptor not only enhances acetylcholine release, but also reduces
vomiting by inhibiting certain neural pathways.
We have worldwide rights to clinically develop and market T-82, except in
Japan. We share rights with SSP to license and market T-82 in ten Asian
countries. We will share data related to pre-clinical studies, clinical studies
and the manufacturing of T-82 with SSP, and SSP will share similar data
developed by SSP with us. SSP has agreed to manufacture and supply T-82 to us
for all clinical trials, at no cost to us. Our license requires us to make
milestone payments to SSP upon the successful completion of Phase II clinical
studies, after successful completion of Phase III clinical studies and, if
applicable, after
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receiving marketing approval by the FDA and European regulatory agencies. In
addition, we will pay SSP escalating royalties based upon net sales of T-82, if
any.
Aressa
In August 1999, we formed Aressa, a wholly-owned subsidiary, to take
advantage of opportunities to in-license and develop niche products from other
pharmaceutical or biotechnology companies. In November 1999, Aressa entered into
a licensing agreement with SSP with respect to a patented anti-fungal compound
discovered by SSP, called SS750. Aressa is currently supervising pre-clinical
studies of SS750, which are funded by SSP. Aressa may explore other
opportunities to in-license niche products.
ChemNavigator.com
In early 1999, we developed an Internet-based search engine that allows
scientists to search for chemical compounds based primarily on the similarity of
chemical structures. We believe this is important for drug discovery purposes
because chemical similarity can be used as an indicator of biological activity.
ChemNavigator.com was formed in May 1999 and subsequently obtained independent
third-party financing. We licensed the search engine's underlying technology and
related intellectual property to ChemNavigator.com in exchange for stock. We
currently beneficially own approximately 46% of the outstanding common stock of
ChemNavigator.com.
INTELLECTUAL PROPERTY
Our success depends in large part on our ability to protect our proprietary
technology and information, and operate without infringing on the proprietary
rights of third parties. We rely on a combination of patent, trade secret,
copyright and trademark laws, as well as confidentiality agreements, licensing
agreements and other agreements, to establish and protect our proprietary
rights. Since our inception, we have filed 96 patent applications in the United
States regarding our:
- CART technology
- orphan receptors and CART-activated orphan receptors
- CART-activated known receptors
- small molecule chemical compounds
- acetylcholine enhancers
- web-based search engine technologies
The term of all of our patents, if any are issued, will commence on the date of
issuance and terminate 20 years from the earliest effective filing date of the
patent application. Because the time from filing to issuance of biotechnology
patent applications is often more than three years, our patent protection, if
any, on our products and technologies may be substantially less than 20 years.
We seek patent protection for all of our key inventions, including our CART
technology, new receptors that we discover, genetically-altered receptors, and
drug candidates identified by our CART technology. It has been possible to
obtain broad, composition-of-matter patents on novel chemical compounds, such as
the drug candidates that we identify using our CART technology. It has also been
possible to obtain broad method patents for techniques and procedures for
screening and drug-identification technologies, such as those embodied by our
CART technology. It has generally not been possible to obtain broad
composition-of-matter patents for nucleic acid and amino acid sequences.
However, it has been possible to obtain patents that protect specific sequences
and functional equivalents of those sequences. Furthermore, intellectual
property law allows for separate and distinct patents for altered genetic
sequences over previously disclosed sequences. We believe that we can obtain
patents on our CART-activated receptor sequences because they are not functional
equivalents of the receptor that exists in nature. We have filed and will
continue to file patent applications on these types of technologies. We believe
that our CART technology does not infringe on third-party claims related to any
aspect of our proprietary technology.
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As a general matter, obtaining patents in the biotechnology and
pharmaceutical fields is highly uncertain and involves complex legal, scientific
and factual matters. Obtaining a patent in the United States in the
biotechnology and pharmaceutical fields can be expensive and can, and often
does, require several years to complete. Our patent filings in the United States
may be subject to interference or reexamination proceedings. The defense and
prosecution of interference and reexamination proceedings and related legal and
administrative proceedings in the United States involve complex legal and
factual questions. We also file patent applications outside of the United
States. The laws of some foreign countries may not protect our proprietary
rights to the same extent as do the laws of the United States. Third parties may
attempt to oppose the issuance of our patents in foreign countries by way of
opposition proceedings. Additionally, if an opposition proceeding is initiated
against any of our patent filings in a foreign country, that proceeding could
have an adverse effect on the corresponding patents that are issued or pending
in the United States. If we become involved in any interference, reexamination,
opposition or litigation proceedings in the United States or foreign countries
regarding patent or other proprietary rights, those proceedings may result in
substantial cost to us, regardless of the outcome, and may have a material
adverse affect on our ability to develop, manufacture, market or license our
technologies or products, or to maintain or form strategic alliances.
Although we plan to aggressively prosecute our patent applications and
defend our patents against third-party infringement, we cannot assure you that
any of our patent applications will result in the issuance of patents or that,
if issued, such patents will not be challenged, invalidated or circumvented.
Moreover, we cannot assure you that our patents, if any, will provide us
protection against competitors with other technologies. Our technologies and
potential products may conflict with patents that have been or may be granted to
competitors, universities or others. As the biotechnology industry expands and
more patents are issued, the risk increases that our technologies and potential
products may give rise to claims that they infringe the patents of others. Third
parties claiming infringement of their proprietary rights could bring legal
actions against us claiming damages and seeking to enjoin our use or
commercialization of a product or our use of a technology. In particular, patent
applications or patents for innovative and broadly applicable technologies, such
as our CART technology, are sometimes challenged by third parties as obvious, or
as obvious extensions of technologies previously developed by those third
parties. We cannot assure you that such claims will not be brought against us in
the future. If any actions based on these claims are successful, in addition to
any potential liability for damages, we could be required to obtain a license in
order to continue to use a technology or to manufacture or market a product, or
could be required to cease using those products or technologies. Any claim, with
or without merit, could result in costly litigation and divert the efforts and
attention of our scientific and management personnel. We cannot assure you that
we would prevail in any action or that any license required under any patent
would be made available or would be made available on acceptable terms.
All of our employees are required to enter into and adhere to an
employment-confidentiality and invention-assignment agreement, laboratory
notebook policy, and invention disclosure protocol, as a condition of
employment. Additionally, our employment-confidentiality and
invention-assignment agreement requires that our employees do not bring to
Arena, or use without proper authorization, any third-party proprietary
technology. We also require all of our consultants and collaborators that have
access to proprietary property to execute confidentiality and invention rights
agreements in our favor before beginning their relationship with us. While such
arrangements are intended to enable us to better control the use and disclosure
of our proprietary property and provide for our ownership of proprietary
technology developed on its behalf, they may not provide us with meaningful
protection for such property and technology in the event of unauthorized use or
disclosure.
We have obtained a worldwide license from SSP, except for Japan, to issued
and pending patents with claims directed to the chemical composition of T-82,
and Aressa has obtained a similar license to issued and pending patents with
claims directed to the chemical composition of SS750. We have also obtained an
exclusive, worldwide license from Albany Medical College to a pending patent
application with claims directed to mutations to several known GPCRs. In
addition, we have entered into a research agreement with the University of
Glasgow to jointly develop screening strategies using our CART-
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activated GPCRs, combined with techniques claimed in a patent application owned
by the University. Under this agreement, we have an option to take an exclusive
license to this patent application, as well as techniques that are developed
during the course of the research agreement. Although neither we nor Aressa are
currently in default under any of these agreements, we cannot assure you that we
or Aressa will not default under these agreements in the future. Should such a
default occur, our licenses could be terminated and we could lose the right to
continue to develop T-82, SS750, or our other products or technologies that are
subject to these agreements. The loss of our rights to develop T-82, SS750 or
our other licensed products or technologies could harm our business.