Given the pressure on R&D budgets and the

variable demand for resources in discovery proj-

ect advancement, the management of this key

process is also being considered for outsourcing

for overflow projects.

Contractual technology providersThe point about lead optimization and ex-

ploratory development being a niche for a new

company is that such a company can operate

though the integration of the activities of a

number of contractual technology providers

(Figure 2). This again is a new development.

There are increasing numbers of companies that

provide chemistry and biology services on a con-

tract basis, sufficient for the identification of

optimized lead compounds by a virtual approach

to drug discovery. These companies operate both

traditional and automated techniques of chem-

istry and biology; for example, the increasing

prevalence of combinatorial chemistry has

steered this technology into a contractual

setting as it has become more of a commodity

than a specialist expertise.

The strategy of virtual discovery is analogous

to the approach to drug development typified

by companies such as Vanguard Medica. In the

first place it is a strategy that involves risk and

is based, in part, on expertise in target selection

that aims to minimize this risk. It is a strategy

that is required to improve the efficiency of

commercialization of intellectual property from

academic, and even pharmaceutical-industry,

backgrounds, and one that is possible because

of the broader range of services available by

contract. Indeed, it is also a strategy that has

some advantage over virtual development, in-

sofar as there is a wider range of potential com-

pounds that present opportunities for commer-

cialization. One of the problems for virtual

development companies is the negotiation of

in-licence candidates with a suitable price tag,

given the intense interest shown by major com-

panies in early development opportunities and

the hunger from biopharmaceutical companies

for front-loaded deals that capture headlines

and satisfy the investor community.

Cost–benefit argumentsFinally, from an operational viewpoint, is a

virtual strategy likely to improve the efficiency

of the product-innovation process? Andersen

Consulting and McKinsey recently concluded

that substantial savings may accrue from this

mode of operation1,2. The consensus is re-

inforced by the earlier Lehman Brothers report3

that suggested that development costs for a

new chemical entity could be $205 million,

whereas the cost for a totally outsourced devel-

opment programme is $40 million. Virtual dis-

covery has the potential to improve efficiency,

the ability to tap into the latest technology and

scientific experts in the field, to reduce costs

(particularly infrastructure and capital costs),

and the ability, through reduced costs, to offer

profitability for niche products.

New approachThe practical realization of these theoretical

arguments will require a form of managerial ex-

pertise not commonplace in an industry that is

more used to largely intramural activities. One

of the major problems of external work is the

lack of sufficient internal resource allocated to

its management. One needs to compare the in-

ternal vs. external resource ratios in activities

that are more traditionally performed exter-

nally, such as clinical trials, and ensure that

sufficient training is given to the personnel

allocated the responsibility of coordinating

the work. In spite of these misgivings, there

is a growing argument for more extensive

outsourcing in pharmaceutical discovery: the

current evidence points to a substantial case

for discovering the virtues of virtuality now.

References01 Banerjee, P.K. and Rosofsky, M. (1997) Scrip

Magazine November, 35–38

02 Berggren, R. et al. (1996) InVivo May, 11

03 Lehman Brothers London (1996) Pharma

Pipelines

update news PSTT Vol. 1, No. 3 June 1998

92

A new bioscience company, Phogen, is celebrat-

ing the success of a novel proprietary drug de-

livery technology, which has the potential for

wide application in gene therapy. Formed in

February 1997, Phogen was established by

Cantab Pharmaceuticals plc (Cambridge, UK)

and the Marie Curie Cancer Care charity

[(MCCC), Oxted, UK] to develop and commercial-

ize drug delivery and gene therapy technology,

based on the remarkable cellular trafficking

properties of the VP22 protein. VP22 is a 34 kilo-

dalton (kd) protein component of the herpes

simplex virus particle, which, together with an-

other structural protein, VP16, comprises the

major part of the tegument (a layer of protein

that lies between the outer lipid membrane [en-

velope] of the virus and its inner nucleocapsid

core). The protein is being developed by Phogen

Figure 2. Virtual integration at Arachnova.

Virtualintegration

Pharmacology

Toxicology

Clinical

Chemistry Developmentalproducts

Targetselection

Novel protein delivers powerful intercellulartransport technologyAdrian Smith, Pharmaceutical Science & Technology Today, tel: +44 1223 315961, fax: +44 1223 464430, e-mail: pstt@elsevier.co.uk

Copyright ©1998 Elsevier Science Ltd. All rights reserved. 1461-5347/98/$19.00. PII: S1461-5347(98)00027-3

scientists as a delivery vehicle for the introduc-

tion of molecules into cell nuclei.

Discovering VP22The exceptional properties of VP22 were discov-

ered in 1996 by Gill Elliot and Peter O’Hare at the

Marie Curie Research Institute [(MCRI), Oxted,

UK]. They discovered, as part of their research into

understanding the function of tegument pro-

teins, that the VP22 protein has the ability to

move from the cell in which it is made into the

nuclei of hundreds or even thousands of neigh-

bouring cells. O’Hare’s team found that, following

expression of the UL49 gene (the gene encoding

VP22) in a subpopulation of cultured cells, VP22

protein was exported from those cells and im-

ported into surrounding cells, where it accumu-

lated in the nuclei. Accumulation is extremely

rapid. In cultures of cells in which only a small

fraction actually carry the gene, the team can

show that virtually all of the cells take up the pro-

tein within 30 h. The addition of extracts contain-

ing soluble VP22 to the medium of cultured cells

also results in the importation of VP22 into the

nuclei of target cells in a matter of minutes.

Phogen claim than the ability of VP22 to enter

and exit cells, together with its DNA-binding

properties, mean that the protein has tremendous

potential as a drug delivery vehicle for molecules

that are intended to function in cell nuclei.

According to O’Hare, VP22 has the potential to

overcome the inadequacies of alternative drug

delivery systems to maximize possible therapeutic

effect. O’Hare says, ‘So far, we have been able to

successfully transport all of the molecules that

we have tested, and we will shortly be in a pos-

ition to move into in vivo animal studies'.

Partnership for efficient deliveryTo build upon this important discovery, in 1997

O’Hare and colleagues at MCCC formed a part-

nership with Cantab, which has an R&D pipeline

that is focused on therapies for infectious dis-

eases and cancer. According to O’Hare, the deal

with Cantab came at a crucial time in the long-

term development of VP22 as a novel delivery

technology. O’Hare explains, ‘Having made this

discovery in our basic research programme, we

had several options open to us. The partnership

with Cantab, in which we formed the company

Phogen, was particularly attractive in that it

meant we weren’t faced with the complications

of trying to find funding or releasing our rights to

this technology'.

Cantab shares equal ownership in Phogen with

MCCC and under the terms of the agreement will

fund the project for two years in return for exclu-

sive rights to VP22 for use in the field of im-

munotherapy. This technology will be used in

conjunction with Cantab’s existing technologies

of human papillomavirus (HPV) and disabled in-

fectious single cycle (DISC) virus technology and

also represents a third platform technology.

Phogen retains worldwide rights in all other areas

of VP22 technology. Stephen Inglis, Research

Director at Cantab, underlines how MCCC brings

the technology and research expertise to the rela-

tionship, and Cantab brings its work in the area of

herpes, its research technologies and its commer-

ical and intellectual property experience. ‘The

genesis of Phogen was exciting’, he says. ‘Cantab

has broad interests in immunotherapy, but also in

gene delivery. With MCCC we share an interest in

herpes simplex virus and, in particular, MCCC has

had a long-term interest in herpes simplex and its

virus transcription factors'.

Future developmentsPhogen’s potential to deliver success with VP22

technology was provided in the recent agreement

with Invitrogen, a US-based company that spe-

cializes in the manufacture and marketing of

specialist research tools and services. Under the

terms of this agreement, Invitrogen will have

a global licence to sell Phogen’s VP22-based

reagents to the research market and, according to

Inglis, the collaboration presents Phogen with an

opportunity to progress the commercial develop-

ment of the VP22 technology. ‘We believe that

this collaboration will generate very useful infor-

mation on VP22 and its potential uses, which we

expect to add significantly to the value of the

technology.' says Inglis, ‘The collaboration will

help expand and accelerate VP22’s development

while broadening its applications.'

Further evidence of the potential of VP22 in

delivery has been achieved with the publication

of results showing that VP22 can be used to de-

liver p53, a tumour-suppressor protein, which

malfunctions in approximately 50% of human

cancers. VP22 was used to deliver normal p53 to

human tumour cells, where it spread between the

cells and caused them to stop dividing or die.

Phogen scientists believe that these observations

augur well for the ability of VP22 to transport

other large molecules that will retain function.

Phogen is now actively seeking to licence-out

applications of the VP22 technology in the fields

of animal health, reagent use and diagnostics. The

architects of this collaboration anticipate the es-

tablishment of further commercial ventures and

ultimately the commercialization of an effective

delivery system offering real therapeutic benefit

to the patient.

PSTT Vol. 1, No. 3 June 1998 update news

93

Immunofluorescence image showing the binding of VP22 (green) to condensing chromatin

(red) in a cell that has imported the protein and which is undergoing mitosis.