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Looking To Lasso A Partner, But on the Ride to Market, Who Will Hold the Reins? Monday, March 2, 1998; Page F15 Richard Garr, president and CEO of NeuralStem Biopharmaceuticals Ltd., thinks he has a drug that could ease the suffering of the millions of Americans with Parkinson's disease and other degenerative disorders. Now all he has to do is get it to market. That's easier said than done. As every biotech company knows, the road to market is fraught with failed research, clinical trials that go awry and cash that vanishes faster than you can count it. After years of hard work, a company can still end up with nothing to sell. Garr's plan -- and it's one shared by virtually all biotech executives -- is to hook up with a drug giant. The idea is to find someone with the know-how to run clinical trials, the savvy to navigate the regulatory process and the sales force to take the drug beyond the laboratory walls -- all without losing control of the drug that is his company's brainchild. "Nobody cares as much about your product as you do," Garr said. "That's our single most important consideration, that we keep control of our own destiny, our technology." But when it comes to corporate alliances, his two-year-old College Park company is a wide-eyed innocent. Part of the University of Maryland's technology incubator program, NeuralStem has lots of promise but no profit. It's got blockbuster technology but no major investors. To make a go of it, NeuralStem has to find a dance partner. "If you're an unknown biotech and you can do a deal with Glaxo Wellcome or someone, it's going to do a lot to your credibility," said Erik Rule, a partner at Coopers & Lybrand Consulting in Toronto. "You're just going to get the halo effect. It's going to make it easier for you to do other deals, raise capital, do an IPO." Garr said NeuralStem is in discussions with several big-name drug companies for rights to develop its potential gene therapy treatment for symptoms of Parkinson's disease, which affects about 2 million Americans. The company is looking for a deal that could bring in about $200 million before the drug reaches market. NeuralStem's treatment is based on technology developed at the National Institutes of Health by scientist Karl Johe. Essentially, the technology enables scientists to grow neurons in a laboratory and then surgically put those cells into the brain of a patient suffering from a wide array of degenerative diseases, including Huntington's disease, Alzheimer's disease and spinal cord injuries. (NeuralStem is initially concentrating on the Parkinson's treatment, which is being tested in rodents.) The cells, which would be put in a syringe and injected as liquid into the brain, would replace the cells that are lost or damaged by the disease, the company believes. A sense of urgency drives Garr, a 45-year-old lawyer by training. He knows the pain that a brain illness can cause; a few years ago, his 4-year-old son had surgery to remove a brain tumor. The treatment and rehabilitation process was long and hard, although his son has now fully recovered. "It's a labor of love; fighting for what we believe we have is very easy," he said. Johe and Garr met several years ago when their sons were classmates in Potomac. Garr persuaded Johe to leave NIH and bring his technology with him to start a company. Garr raised several million dollars from investors and when NIH agreed to let Johe have the rights to commercialize his technology, NeuralStem was born. Today, the company has no revenue and a dozen employees, all of whom are scientists except for Garr. NeuralStem began shopping around for a pharmaceutical partner not long after the company was formed in 1996. It was hard getting noticed at first. "I knocked on every door till they opened; I literally cornered people in elevators," he recalled. The patent for NeuralStem's technology was approved in January and since then the pace of its discussions with the drug companies has picked up considerably, Garr said. In all this negotiating and deal-making, Garr has one major concern: how to keep enough control of the product so that 10 years from now, if it actually makes it to market, his company isn't left with a sea of regrets and no profit. Which is why NeuralStem is waiting for the right deal. "We could have already done several deals," Garr said. But he's holding out for an arrangement that gives his company half of any sales that may result from its technology. Biotech companies rarely have the upper hand in negotiating these partnerships, warns Harvard Business School professor Josh Lerner. He said alliances with drug firms have become the single largest source of financing for biotech companies in recent years. The alliances are an alternative to the stock market for biotech companies seeking capital. Biotech shares are notoriously volatile. Garr said he realizes the 50-50 split isn't the norm, but he's confident NeuralStem will be able to secure the control it wants. "Our real leverage comes from the actual substance of our science," he said. "We have the actual drug, the actual therapy. No one else is in our playing field in terms of the science." Still, Garr admits it is tough not to give in to the lure of easy cash. "We're at the point where we really need the money," he said. Garr said he is prepared to pound the pavement for more money, perhaps seeking out venture capital, if he can't forge the kind of deal he wants. He estimates that the company needs $30 million to cover the cost of initial tests on human patients, which could start next year. Experts said that the optimism felt by Garr and other first-time deal seekers is typical. It quickly turns to pragmatism. "They start out saying, 'The world's my oyster,' " said Mark Edwards, managing director of Recombinant Capital, a San Francisco consulting firm specializing in biotech alliances and capitalization. "Later they say, 'The world's the world and I may be an oyster in it.' " Copyright 1998 The Washington Post Company janet paterson 50-9 / sinemet-selegiline-prozac almonte-ontario-canada / [log in to unmask]