May 7, 2007

Volume 85, Number 19

p. 32

Funding Strategies

Using Satellite Companies, Isis Broadens Its Pipeline Without The Financial Risk

Lisa M. Jarvis

In a challenging environment for early-stage funding, even established biotechnology companies need to be creative in how they pay for their research efforts.

Isis Pharmaceuticals has used different strategies to fund its R&D, from corporate partnerships to drug licensing to major collaborative R&D pacts. But the Carlsbad, Calif.-based biotech recognized early on that it could never realize the full potential of its antisense technology and the related intellectual property through purely internal efforts. It would be far too expensive and would distract the firm's focus from the therapeutic areas where it has the most expertise.

So Isis came up with what it calls a satellite company strategy, where technology around a specific drug or therapeutic area is partnered with a start-up that has outside funding. "We were looking for ways we can leverage our technology so that we can get all the potential upside without drowning in financial obligation," says Chief Financial Officer B. Lynne Parshall.

The partnerships are structured in one of two ways. Isis provides companies access to its intellectual property (IP) for application to a specific target or therapeutic modality, or it grants firms the rights to a drug candidate that it has discovered but does not fit with its therapeutic focus on cardiovascular and metabolic diseases.

Isis clearly benefits if a drug from one of the satellite companies reaches the market, but start-up firms also gain an edge when trying to attract investors because Isis' antisense technology has already been shown to work. Isis has amassed a great deal of validating clinical data from its own pipeline. And for those smaller companies with limited cash, Isis can be flexible: It takes a private equity stake in the company rather than charge licensing fees for the use of its technology.

"An awful lot of companies want to use their IP position to stop people from competing with them," Parshall says. Isis takes a different view, she says. "We view the best way to create value from our portfolio is to make it available."

The end result is a pipeline of 17 drugs, only six of which are being funded by Isis. "There's a large and growing number of drugs out there that, if and when they're commercialized, will all result in cash flows," Parshall adds.

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